Business context and reporting period
Neurocrine Biosciences, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2020. The commercial business was primarily driven by INGREZZA, approved for adults with tardive dyskinesia. The company also received FDA approval for ONGENTYS in April 2020, after quarter-end.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Total revenue | $237.1 million | $138.4 million |
| INGREZZA net product sales | $231.1 million | $136.4 million |
| Collaboration revenue | $6.0 million | $2.0 million |
| Operating income (loss) | $58.9 million | $(101.0) million |
| Net income (loss) | $37.4 million; diluted EPS $0.39 | $(102.1) million; diluted EPS $(1.12) |
| Operating cash flow | $38.2 million provided | $112.5 million used |
Revenue grew approximately 71%, largely due to increased INGREZZA sales, which management attributed primarily to new patient additions. Operating margin was approximately 25% and net margin approximately 16% in Q1 2020. Research and development expense rose to $58.3 million from $37.7 million; selling, general and administrative expense rose to $117.8 million from $87.5 million. Q1 2019 included a $113.1 million acquired in-process R&D charge related to Voyager.
At March 31, 2020, cash and cash equivalents were $187.0 million and available-for-sale debt securities totaled $820.6 million, or approximately $1.0 billion combined. Total assets were $1.362 billion, total liabilities $661.6 million, and stockholders’ equity $700.3 million. The company reported $38.2 million of operating cash flow and $1.3 million of property and equipment purchases. Convertible senior notes had $517.5 million principal due in 2024 and a $414.1 million net carrying value; operating lease liabilities totaled $94.4 million.
Material changes versus the prior comparable period
- Revenue increased $98.7 million year over year, primarily from INGREZZA sales growth.
- The company moved from an operating and net loss to operating and net income. The comparison benefited from the absence of the $113.1 million Voyager-related IPR&D charge recorded in Q1 2019.
- R&D and SG&A spending increased, reflecting higher development activity, personnel costs, and continued commercial investment.
- Other expense included a $16.5 million unrealized loss on equity investments, principally reflecting fair-value adjustments to Voyager and Xenon investments.
- The 2024 notes were classified as long-term at quarter-end; the company said it was not aware of conditions then permitting holders to convert.
Outlook, commentary, and risks
The filing provides no numerical revenue or earnings guidance. Management said existing funds, operating cash generation, and financing access were expected to meet planned needs, including for at least the next 12 months. It cautioned that a prolonged pandemic or associated downturn could materially affect revenue, profitability, operations, and liquidity.
COVID-19 led the company to pause enrollment of new patients in certain studies, including programs in Huntington’s disease, Parkinson’s disease, and congenital adrenal hyperplasia. Management anticipated delays to completion and data readouts for some ongoing and planned studies, while reporting no interruption to clinical-trial drug supply to date and no expected INGREZZA supply disruption at that time. The company planned to launch ONGENTYS later in 2020, but disclosed uncertainty about BIAL’s ability to replenish commercial inventory and said the launch had been delayed pending clarity on supply.
Other material risks include reliance on third-party manufacturers and a limited number of suppliers, customer concentration, reimbursement and pricing pressure, clinical and regulatory uncertainty, competition, and potential cash requirements associated with development and commercialization. Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether INGREZZA sales growth and patient additions continued after Q1, particularly amid pandemic-related limits on healthcare access and field-force activity.
- Whether ONGENTYS supply was secured and the planned 2020 launch proceeded; the filing identifies BIAL and its suppliers as key dependencies.
- The duration and impact of COVID-related enrollment pauses and resulting clinical-trial delays.
- Changes in operating expenses, operating cash flow, and the approximately $1.0 billion cash-and-investment position as commercial and pipeline spending continues.
- Any change in the 2024 notes’ conversion status, classification, or potential cash-settlement requirements.