New Launches Of INGREZZA And CRENESSITY Will Expand Future Prospects In Psychiatry And Neurology

Key Takeaways

• Neurocrine's growth is driven by the successful INGREZZA and CRENESSIA launches, with anticipated future success from its robust R&D pipeline.
  
• Strategic investments in sales force expansion and R&D bolster revenue growth and improve net margins, ensuring long-term profitability.
  
• Increased competitive pressure and challenges with payer dynamics may impede revenue growth and margins, while expansion into new areas carries significant execution risk.

Catalysts

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

• Neurocrine Biosciences is well-positioned for future growth with its differentiated INGREZZA product, benefiting from a newly expanded sales force and a significant untreated patient population, which is expected to drive revenue growth in the psychiatry, neurology, and long-term care segments.
  
• The launch of CRENESSITY, an innovative new treatment for congenital adrenal hyperplasia, is anticipated to become Neurocrine's second blockbuster therapy. While initial revenues are expected to be measured, growth is projected to accelerate over time due to its first-in-class status, driving long-term sales growth and diversifying the company’s revenue profile.
  
• Neurocrine is advancing its R&D pipeline with plans to initiate multiple Phase III clinical stage programs in 2025, such as osavampator for major depressive disorder and NBI-568 for schizophrenia. These programs have the potential to significantly transform the company and drive earnings growth towards the end of the decade.
  
• Neurocrine’s internal R&D engine is expected to improve productivity, delivering a new commercial launch every two years at a steady state. This ongoing innovation is anticipated to establish a sustainable foundation, supporting future revenue and earnings growth.
  
• Investments in operating expenses are closely aligned with growth priorities, particularly in driving revenue through commercial expansions and continuing investment in R&D programs, which are expected to enhance net margins and align with the launch of commercially promising therapies.

Neurocrine Biosciences Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Neurocrine Biosciences's revenue will grow by 14.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.5% today to 25.3% in 3 years time.
• Analysts expect earnings to reach $902.5 million (and earnings per share of $8.74) by about March 2028, up from $341.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.4 billion in earnings, and the most bearish expecting $373.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.0x on those 2028 earnings, down from 32.0x today. This future PE is greater than the current PE for the US Biotechs industry at 19.6x.
• Analysts expect the number of shares outstanding to decline by 0.93% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.3%, as per the Simply Wall St company report.

Neurocrine Biosciences Future Earnings Per Share Growth

Risks

• Increased competitive pressure and utilization management by payers could result in slower growth for INGREZZA in 2025, potentially impacting future revenues and net margins if the trend continues.
  
• The launch of CRENESSITY, while expected to be a blockbuster, is anticipated to have measured initial revenues due to delayed reimbursement, frequency of patient flow into offices, and trialing of the new medicine, which could impact short-term earnings.
  
• The increasing complexity of the payer environment and changes to utilization management could affect patient access and prescription volumes, impacting revenue growth and net margins.
  
• Revenue growth for INGREZZA could be hindered by the sale force expansion disruption in Q4 2024, potentially affecting earnings in early 2025 if the new staff do not ramp up as quickly as anticipated.
  
• Economic reliance on expanding into new therapeutic areas and advancing the pipeline carries execution risk; failure to successfully launch new products or achieve anticipated clinical outcomes could impact long-term revenue growth and profitability.

Valuation

• The analysts have a consensus price target of $164.37 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 $138.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $902.5 million, and it would be trading on a PE ratio of 21.0x, assuming you use a discount rate of 6.3%.
• Given the current share price of $109.7, the analyst price target of $164.37 is 33.3% 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.