Neurocrine Biosciences, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Neurocrine is a neuroscience-focused biopharmaceutical company. INGREZZA (tardive dyskinesia) is its principal product; ONGENTYS (Parkinson’s disease) is also marketed. The company also earns collaboration and royalty revenue and is advancing a clinical pipeline.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $296.0m | $258.5m | $821.5m | $798.0m |
| Net product sales | $288.8m | $254.1m | $786.6m | $752.8m |
| Operating income (loss) | $44.5m | ($44.3m) | $138.8m | $91.2m |
| Net income (loss) | $22.5m | ($57.6m) | $96.9m | $59.4m |
| Diluted EPS | $0.23 | ($0.62) | $0.99 | $0.61 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $252.3m | $134.0m |
Calculated from reported figures, operating margin was approximately 15.0% in Q3 2021 and 16.9% for the first nine months of 2021; net margin was approximately 7.6% and 11.8%, respectively.
- Q3 INGREZZA sales were $286.5m, up from $254.0m; management attributed the increase primarily to record prescriptions, higher demand and increased commercial activity. ONGENTYS sales were $2.3m versus $0.1m.
- Nine-month collaboration revenue was $34.9m versus $45.2m. 2021 included a $15.0m milestone for a Japanese valbenazine marketing application; 2020 included a $30.0m ORIAHNN approval milestone.
- Q3 R&D expense increased to $92.7m from $69.1m, and SG&A increased to $154.6m from $112.5m. Higher SG&A reflected commercial investment, including the INGREZZA “TD Spotlight” advertising campaign. Prior-year Q3 included $118.5m of Takeda upfront IPR&D expense, explaining much of the year-over-year improvement in operating results.
Financial position and liquidity
- At September 30, 2021, cash and cash equivalents were $311.1m and available-for-sale debt securities totaled $968.5m; together, approximately $1.28bn. Total assets were $2.02bn.
- Current assets were $1.01bn and current liabilities $225.9m. Accounts receivable was $163.8m.
- Convertible notes had $381.2m principal outstanding and a $330.7m net carrying amount; operating lease liabilities totaled $121.9m. Stockholders’ equity was $1.35bn.
- Nine-month cash flow: $252.3m provided by operations, $153.9m used in investing and $25.6m provided by financing. Cash, cash equivalents and restricted cash increased $124.0m to $314.3m. Investing cash flows largely reflected purchases, sales and maturities of debt securities.
- Management said existing capital resources, investment income and expected alliance payments should fund current and projected requirements for at least the next 12 months, while noting these resources may not support all plans, acquisitions or development ambitions.
Developments, outlook and risks
- Neurocrine received EU clinical trial application approval for NBI-921352 for focal-onset seizures in adults. It paid Xenon a $10.0m regulatory milestone, expensing $4.5m as R&D, and invested $5.5m in Xenon shares.
- The company terminated its Voyager NBIb-1817 Parkinson’s disease program, effective August 2, 2021; the other Voyager collaboration programs continued.
- Four companies filed ANDAs seeking approval of generic INGREZZA and challenged related patents. Neurocrine filed patent litigation in July 2021 seeking to prevent generic sales. The outcome and potential commercial impact are uncertain.
- COVID-19 effects remained uncertain. Management reported no current or expected INGREZZA supply disruption, while noting that future outbreaks could affect healthcare access, clinical trials, operations and revenue.
- No numerical revenue or earnings guidance was provided in the supplied filing text. Key risks include INGREZZA patent challenges, product acceptance and reimbursement, competition and pricing pressures, reliance on third-party manufacturers and collaborators, clinical and regulatory execution, and potential cash settlement or dilution associated with the 2024 convertible notes.
- The company reported effective disclosure controls and no significant quarter-specific changes to internal control over financial reporting. It stated that pending claims were not then expected to have a material adverse effect, while acknowledging litigation outcomes are unpredictable.
Most important facts for investors to verify
- Whether INGREZZA prescription growth and sales continue, and how generic patent litigation progresses.
- Whether rising commercial and R&D spending translates into durable operating and net income growth.
- Progress, costs and clinical results across the pipeline, including NBI-921352 and Phase III programs.
- Liquidity and capital needs relative to $381.2m of note principal, future investment plans and any conversion-related cash or share settlement.
- Whether COVID-19, reimbursement, pricing or manufacturing conditions materially affect product demand or supply.