Neurocrine Biosciences, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; balance-sheet comparisons are to December 31, 2022. Amounts are in U.S. dollars. Neurocrine is a neuroscience-focused biopharmaceutical company; INGREZZA (valbenazine) generated nearly all net product sales.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $420.4 million | $310.6 million; up 35% |
| Net product sales | $415.3 million | $305.0 million; up 36% |
| INGREZZA sales | $410.4 million | $302.6 million; up 36% |
| Collaboration revenue | $5.1 million | $5.6 million |
| Research and development | $139.5 million | $102.2 million |
| Acquired in-process R&D | $143.9 million | None reported |
| Selling, general and administrative | $242.7 million | $200.7 million |
| Operating income (loss) | $(114.2) million | $3.1 million |
| Net income (loss) | $(76.6) million | $13.9 million |
| Basic and diluted EPS | $(0.79) | $0.15 basic; $0.14 diluted |
| Operating cash flow | $(125.2) million | $(40.5) million |
Revenue growth reflected record INGREZZA prescriptions, higher customer demand, and increased commercial activity. The quarterly loss primarily reflected the Voyager upfront payment expensed as acquired in-process R&D, plus continued commercial and pipeline investment. Investment income and other net income was $10.9 million, including $9.8 million of investment income and other, net.
At March 31, 2023, cash and cash equivalents were $103.8 million and available-for-sale debt securities totaled $1,035.4 million, for cash, cash equivalents and marketable securities of $1,139.2 million. Working capital was $1,058.7 million. Total assets were $2,359.8 million and total liabilities were $675.3 million. Convertible notes had $170.4 million principal outstanding ($169.5 million carrying value), due May 2024; the company expects to pay the principal at maturity unless converted, redeemed, or repurchased. Management said existing resources, anticipated INGREZZA sales, and investment income should fund current and projected requirements for at least 12 months.
Material changes and notable items
- Neurocrine expanded its Voyager Therapeutics collaboration, paying $175.0 million upfront, including a $31.3 million equity investment. The remaining $143.9 million was expensed as acquired in-process R&D. The collaboration covers GBA1 gene therapy and three rare CNS programs; potential Voyager milestone payments under this agreement are up to $6.1 billion, subject to achievement of specified events. Neurocrine reported a $9.3 million unrealized gain on its Voyager investment and a $66.1 million investment fair value at quarter-end.
- Total R&D expense rose 36%, reflecting higher late-stage, early-stage, and discovery spending. SG&A rose 21%, including higher headcount, the expanded sales force, and commercial investment.
- Cash, cash equivalents, and restricted cash decreased $159.1 million during the quarter. Operating cash outflow increased versus the prior-year quarter; investing cash outflow was $42.1 million, including $31.3 million invested in Voyager.
- Neurocrine gave BIAL notice that it is terminating its U.S. and Canadian ONGENTYS commercialization license; termination is anticipated in December 2023. The company said continued commercialization was unsustainable and intends to support an orderly transition and patient access.
- Four specialty pharmacy and distributor customers accounted for approximately 81% of Q1 product revenue and 79% of accounts receivable at quarter-end.
Outlook, risks, and contingencies
- No specific revenue, earnings, or product-sales guidance is provided in the filing. Management’s liquidity assessment covers at least the next 12 months, but it cautions that resources may not fund all planned development and commercialization activities.
- Existing collaboration agreements could require up to $16.9 billion in future event-based milestone payments in aggregate; these are contingent, not current debt.
- Risks include INGREZZA commercialization, reimbursement and drug-pricing pressure, competition (including generic challenges), clinical and regulatory uncertainty, dependence on third-party manufacturers and collaborators, customer concentration, and the ability to sustain profitability. The company reported an accumulated deficit of $483.4 million.
- Clinical activities for valbenazine and luvadaxistat in Russia and Ukraine remain suspended because of the conflict, creating potential development and regulatory delays.
- In Q1, Neurocrine settled its INGREZZA patent litigation with Teva. Litigation against other generic applicants continues; trial was scheduled for January 2, 2024. The filing says outcomes are unpredictable.
- The company reported effective disclosure controls and procedures and no significant changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether INGREZZA prescription growth and demand continue to support revenue growth, and how customer concentration and reimbursement affect sales and collections.
- Pipeline progress, spending, and timing for crinecerfont, valbenazine in schizophrenia, and the expanded Voyager gene-therapy programs.
- The terms and practical impact of the Teva settlement, remaining generic litigation, and the scheduled January 2024 trial.
- The financial and operational effects of the planned ONGENTYS license termination and transition.
- Cash use, the timing and funding implications of contingent collaboration milestones, and the May 2024 convertible-note maturity.