Revitalizing Growth With Transformative Medicines And Critical Expansion

Key Takeaways

• Investing in INGREZZA and launching crinecerfont are key strategies for driving significant future revenue and earnings growth.
  
• Expanding high-value pipeline assets and pursuing strategic external opportunities aim to enhance long-term growth and diversify revenue streams.
  
• Extensive promotional efforts and reimbursement delays for new drugs may pressure net margins, while increased competition necessitates competitive pricing and expanded marketing efforts.

Catalysts

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

• Neurocrine Biosciences is prioritizing revenue growth by investing heavily in their existing product, INGREZZA, and preparing for the launch of crinecerfont, which are expected to be major revenue drivers. This focus on revenue growth aims to significantly impact future earnings.
  
• The company is aggressively developing high-value pipeline assets like NBI-845 and NBI-568 and accelerating early-stage programs to proof-of-concept. These R&D efforts are anticipated to drive long-term earnings growth and expansion of their product portfolio.
  
• Pursuing external opportunities to expand their portfolio with strategically aligned assets could diversify revenue streams and contribute positively to net margins by leveraging Neurocrine's existing R&D and commercial infrastructure.
  
• Neurocrine has authorization for a $300 million share repurchase plan, which may be used to enhance EPS (Earnings Per Share) by reducing the number of shares outstanding and reflecting confidence in their stock's value.
  
• Successful approvals and launches of first-in-class medicines like crinecerfont, especially within underserved therapeutic areas, are expected to create substantial revenue streams and improve net margins by establishing strong market positions in new indications.

Neurocrine Biosciences Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Neurocrine Biosciences's revenue will grow by 16.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 16.0% today to 31.2% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $9.85) by about October 2027, up from $339.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.3 billion in earnings, and the most bearish expecting $509 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.8x on those 2027 earnings, down from 34.6x today. This future PE is lower than the current PE for the US Biotechs industry at 20.1x.
• Analysts expect the number of shares outstanding to grow by 1.82% per year for the next 3 years.
• To value all of this in today's dollars, we will use a discount rate of 6.28%, as per the Simply Wall St company report.

Neurocrine Biosciences Future Earnings Per Share Growth

Risks

• The discontinuation of certain programs like luvadaxistat and NBI-104 reflects the inherent risk in drug development, which might impact future R&D investments and revenue growth prospects.
  
• Reimbursement delays for newly approved drugs like crinecerfont, particularly due to commercial payer policies, could affect revenue realization and cash flow in the early stages post-launch.
  
• Despite strong sales performance for INGREZZA, the extensive use of promotional efforts like disease state education and free drugs could pressure net margins and increase marketing expenses.
  
• Potential increased competition for INGREZZA in treating tardive dyskinesia and Huntington's disease could require competitive pricing or expanded marketing efforts, impacting revenue and profitability.
  
• The ongoing investment in expanding the sales force and the significant R&D commitments could lead to higher operational costs, which may affect net margins and overall profitability.

Valuation

• The analysts have a consensus price target of $163.69 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 $192.0, and the most bearish reporting a price target of just $114.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $3.4 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 19.8x, assuming you use a discount rate of 6.3%.
  
• Given the current share price of $116.19, the analyst's price target of $163.69 is 29.0% 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.