CNS Pipeline And Medicare Coverage Will Unlock Future Opportunities

Key Takeaways

• Leadership in key neurology products and expanded payer access are driving strong, sustained market share and future revenue growth prospects.
  
• Robust late-stage pipeline and active innovation position the company for long-term earnings visibility and expanded addressable markets.
  
• Portfolio concentration, payer pushback, pricing pressures, and rising costs threaten revenue growth, profit stability, and long-term competitiveness in an increasingly challenging neuroscience market.

Catalysts

Neurocrine Biosciences, Inc. discovers, develops, and markets pharmaceuticals for neurological, neuroendocrine, and neuropsychiatric disorders in the United States and internationally.

• Sustained strong volume growth of flagship product INGREZZA, driven by increased payer access initiatives, expanded sales force efforts, and ongoing under-diagnosis in the target population, positions the franchise for multi-year revenue and market share expansion.
  
• Rapid and consistent early adoption of CRENESSITY, with demonstrated high rates of reimbursement (>75%), robust clinical profile, and significant unmet need in CAH, indicates the likelihood of future blockbuster status, driving both top-line revenue growth and improved operating leverage.
  
• A broad, late-stage and diversified CNS pipeline-including multiple Phase III programs targeting major depressive disorder and schizophrenia-leverages advances in precision medicine and increases visibility for future earnings, supporting potential future valuation multiple expansion.
  
• Ongoing internal innovation in biologics (such as bispecifics, ADCs, peptides), and a strong preclinical pipeline, allows Neurocrine to capitalize on industry advancements in drug modalities, expanding the addressable market and supporting long-term revenue growth.
  
• Expansion of Medicare and insurance formulary coverage-combined with long exclusivity runway for INGREZZA-enables greater patient access and sustained product leadership, positively impacting both future revenue growth and net margins.

Neurocrine Biosciences Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Neurocrine Biosciences's revenue will grow by 14.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.9% today to 25.9% in 3 years time.
• Analysts expect earnings to reach $978.5 million (and earnings per share of $9.54) by about August 2028, up from $348.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.6 billion in earnings, and the most bearish expecting $375.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.4x on those 2028 earnings, down from 36.6x today. This future PE is greater than the current PE for the US Biotechs industry at 16.7x.
• Analysts expect the number of shares outstanding to decline by 1.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Neurocrine Biosciences Future Earnings Per Share Growth

Risks

• Neurocrine's aggressive Medicare contracting for INGREZZA, while expanding coverage, is causing a "negative 5% price decline" in 2025 and greater gross-to-net reductions; if pricing pressure or required rebates persist or intensify, especially as US drug-pricing reforms (e.g., IRA negotiations) roll out, this could depress long-term revenues and compress net margins.
  
• The company is experiencing growing payer scrutiny and health plan tightening, with increasing claim rejections and more complex access barriers industry-wide; such trends could limit uptake, slow future prescription growth, and increase compliance costs, negatively impacting revenue and earnings visibility.
  
• Overreliance on INGREZZA and now CRENESSITY poses portfolio concentration risks: if competitors (e.g., Teva's AUSTEDO or future generics) capture meaningful share, or if clinical/regulatory setbacks arise in late-stage pipeline candidates, Neurocrine could see volatile revenues and sharp profit fluctuations.
  
• Rising SG&A expenses, led by expanded commercial investments to support new product launches and sales force, may not be fully offset by operating leverage if top-line growth slows, thus putting pressure on net income and free cash flow longer-term.
  
• The CNS/neuroscience sector is facing increasing R&D costs and prolonged development times for new therapies; despite a robust reported pipeline, failure to achieve late-stage clinical success, diversify via M&A, or keep pace with growing innovation in precision medicine could limit Neurocrine's ability to sustain long-term revenue and earnings growth.

Valuation

• The analysts have a consensus price target of $167.867 for Neurocrine Biosciences based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $200.0, and the most bearish reporting a price target of just $124.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $978.5 million, and it would be trading on a PE ratio of 19.4x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $128.43, the analyst price target of $167.87 is 23.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.