One of the side effects of the pandemic that continues has been less interaction with others and a disruption of normal routines.

Social circles have shrunk dramatically since the beginning of quarantine and never recovered fully.

These adjustments have caused a surge in demand for antidepressants and other psychological medications.

People rely on these drugs to sustain their mental health and create a resemblance of normalcy. However, many of these drugs have adverse side effects.

For example, tardive dyskinesia. This is a nervous system disorder that can cause various facial tics. It commonly occurs in patients who use long-term neuroleptic drugs.

Due to the rise in the use of these medications, it’s no surprise that Neurocrine Biosciences (NBIX) became successful.

Neurocrine has built a solid reputation in the biotech industry, largely thanks to the success of its lead tardive dyskinesia drug, Ingrezza.

Ingrezza has been the company’s financial lifeline. Since its approval in 2017, its sales have continued to climb, and the company expects to hit $2.3 billion in revenue from the drug by the end of 2024.

Neurocrine has expanded its offerings by adding a new oral version, Ingrezza Sprinkle, which helps patients who struggle with swallowing pills.

The company continues to perform well off the heels of Ingrezza, achieving a 28% Uniform return on assets (ROA) and 17% asset growth last year.

However, Neurocrine has faced setbacks, particularly with its drug aimed at treating schizophrenia, reflected by a Uniform P/E of 15x.

While the drug met its goals in a phase 2 trial, it didn’t perform as well as expected, especially compared to a competing drug from Bristol-Myers Squibb.

This led to a drop in Neurocrine’s stock price. Yet, the company isn’t giving up. It has other drugs in development for schizophrenia, including Luvadaxistat, which targets cognitive impairments linked to the disorder.

With results from Luvadaxistat expected soon, there’s hope that Neurocrine can bounce back in this competitive space.

Beyond Ingrezza, Neurocrine has a range of drugs in its pipeline.

One standout is Valbenazine, currently being tested as an add-on therapy for schizophrenia patients who don’t respond well to standard treatments. This drug could address a significant unmet need in the market.

Additionally, Crinecerfont, a drug designed to treat congenital adrenal hyperplasia (CAH), is under priority review by the FDA. If approved by the end of 2024, it could become another major product for the company.

Despite some challenges, Neurocrine is in a good spot. Its strong revenue from Ingrezza, combined with a promising pipeline of new drugs, puts the company on a solid path for future growth.

If it can overcome the regulatory hurdles and bring new treatments to market, the company has the potential to see its stock price rise.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

This portfolio analysis highlights the same insights we share with our FA Alpha Members. To find out more, visit our website.