INGREZZA Expansion And Aging Demographics Will Unlock New Markets

Key Takeaways

• Growth is driven by expanding flagship products into new patient segments, increased healthcare coverage, and strong adoption of new therapies for neurological disorders.
  
• Diversified late-stage pipeline and strategic investments in R&D, marketing, and business development support long-term revenue, margin, and portfolio growth.
  
• Heavy reliance on a single product, rising regulatory challenges, high R&D costs, and growing competitive pressures threaten future revenue growth and profit margins.

Catalysts

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

• The expansion of Neurocrine's flagship product INGREZZA into new patient segments and indications, combined with recently expanded Medicare Part D formulary access, is expected to unlock a significantly larger patient population at a time when broader healthcare coverage and improved diagnosis rates are increasing demand for neurological disorder treatments; this should drive substantial topline revenue growth in both the near and long term.
  
• Sustained record new patient starts for INGREZZA, alongside early strong adoption of CRENESSITY, are bolstered by an aging global population and increased societal focus on mental health, pointing to both rising diagnosis rates and a rapidly growing addressable market, which supports robust multi-year revenue and earnings expansion.
  
• A rapidly advancing and diversified late-stage pipeline, including multiple Phase III programs targeting high unmet needs in CNS diseases such as major depressive disorder and schizophrenia, provides Neurocrine with multiple “shots on goal,” creating the potential for several new blockbuster products and long-term growth in revenues and operating income.
  
• Significant investments in sales force expansion, marketing, and payer access for flagship and newly launched products, combined with operational discipline and greater economies of scale, are expected to enhance net margins and profitability over time as fixed costs are better leveraged across a broader portfolio.
  
• A strong balance sheet and consistent capital allocation towards both internal R&D and strategic business development positions Neurocrine to take advantage of external opportunities in a supportive regulatory and industry environment, enabling the company to further accelerate growth through pipeline expansion, licensing deals, or acquisitions that can bolster future revenues and cash flow.

Neurocrine Biosciences Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Neurocrine Biosciences compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Neurocrine Biosciences's revenue will grow by 16.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.7% today to 31.6% in 3 years time.
• The bullish analysts expect earnings to reach $1.2 billion (and earnings per share of $11.56) by about May 2028, up from $305.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.8x on those 2028 earnings, down from 38.5x today. This future PE is lower than the current PE for the US Biotechs industry at 18.3x.
• Analysts expect the number of shares outstanding to decline by 1.66% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Neurocrine Biosciences Future Earnings Per Share Growth

Risks

• Neurocrine remains heavily dependent on INGREZZA for the majority of its revenue, and upcoming Medicare formulary expansions and contracting could lower net pricing, while eventual patent expiries or future competition may lead to steep declines in revenue and net margins.
  
• Increasing regulatory scrutiny, particularly the impact of the Inflation Reduction Act and the broader trend toward stricter and more complex payer requirements, adds uncertainty to approvals and reimbursement for high-cost drugs, which could delay product launches or restrict market access, impacting future revenue growth.
  
• Ongoing investments in a large and expanding late-stage pipeline create significant R&D expenses, and if late-stage trials such as those for osavampator and NBI-'568 fail or are delayed, Neurocrine may face high expenses without offsetting revenue, putting downward pressure on earnings and free cash flow.
  
• The early launch success of CRENESSITY is largely based on exceptions processes rather than formal formulary reviews, and as insurers conduct more rigorous reviews, Neurocrine could face tougher reimbursement hurdles or unfavorable coverage criteria, limiting long-term product uptake and revenue growth.
  
• Heightened competition from generics, biosimilars, and alternative treatments in central nervous system disorders and movement disorders, along with potential value-based pricing, threatens to erode industry pricing power and Neurocrine’s future margins and net earnings, especially as the pipeline becomes more reliant on in-licensing and external partnerships.

Valuation

• The assumed bullish price target for Neurocrine Biosciences is $192.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Neurocrine Biosciences's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $192.0, and the most bearish reporting a price target of just $115.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $1.2 billion, and it would be trading on a PE ratio of 17.8x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $118.92, the bullish analyst price target of $192.0 is 38.1% 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.