Neurocrine Biosciences, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited consolidated results; amounts in millions except per-share data.
Business context
Neurocrine’s principal commercial product is INGREZZA (valbenazine), for tardive dyskinesia. The company also sells ONGENTYS for Parkinson’s disease and earns collaboration revenue, including royalties on elagolix sales and milestones from partners. INGREZZA accounts for the significant majority of product sales.
Financial highlights
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $378.2 | $288.9 | $688.8 | $525.5 |
| Net product sales | $352.0 | $266.8 | $657.0 | $497.8 |
| Operating income | $54.7 | $62.8 | $57.8 | $94.3 |
| Net income (loss) | $(16.9) | $42.3 | $(3.0) | $74.4 |
| Diluted earnings (loss) per share | $(0.18) | $0.43 | $(0.03) | $0.76 |
| Operating cash flow | Not provided for the quarter | Not provided for the quarter | $97.6 | $190.5 |
Q2 INGREZZA sales were $349.6, versus $264.8 a year earlier; ONGENTYS sales were $2.4, versus $2.0. Collaboration revenue was $26.2, including a $20.0 milestone following MTPC’s first Japanese commercial sale of DYSVAL. The filing attributes INGREZZA growth to more new patient starts, record prescriptions, higher demand and increased commercial activity.
Q2 operating expenses were $323.5, up from $226.1. R&D was $135.9, including a $30.0 Heptares milestone expense, and SG&A was $182.8, reflecting commercial investment, expanded staffing and stock-based compensation. The filing does not report gross profit or gross margin as a separate metric.
Balance sheet, liquidity and debt
- At June 30, cash and cash equivalents were $163.3; marketable debt securities totaled $890.2. Cash, cash equivalents and marketable securities were $1,053.5, compared with $1,272.0 at December 31, 2021.
- Working capital was $733.6, versus $727.0 at year-end 2021. Total assets were $2,005.7 and total liabilities were $582.3. Accumulated deficit was $564.3.
- Cash, cash equivalents and restricted cash declined by $172.9 in the first half. Financing cash outflow was $270.3, primarily due to the $279.0 cash repurchase of convertible notes; investing cash flow was $(0.2).
- The company repurchased $210.8 principal amount of its 2.25% notes due 2024 for $279.0, recording a $70.0 extinguishment loss. Remaining principal was $170.4 at June 30; the balance-sheet carrying amount was $169.0.
- Management said existing capital resources and anticipated revenue should fund current and projected requirements for at least 12 months, while noting funding sufficiency for all planned programs is not guaranteed.
Material changes, outlook and risks
- Revenue rose substantially year over year, led by INGREZZA, but operating income declined as R&D and SG&A grew. The six-month net loss included the $70.0 notes-extinguishment loss.
- The company adopted ASU 2020-06 on January 1, 2022, changing convertible-note accounting and recording a cumulative transition adjustment to equity and the notes’ carrying amount.
- The FDA accepted the IND for NBI-1117568 for schizophrenia; management anticipated starting a Phase II study in the second half of 2022. The associated $30.0 Heptares milestone was expected to be paid in Q3 2022.
- In August 2022, after quarter-end, a Phase IIa study of NBI-827104 in essential tremor did not meet specified endpoints; the company said it did not plan further development for that indication.
- Russia-Ukraine conflict led the company to suspend planned clinical trial activity for valbenazine and luvadaxistat in those countries. COVID-19-related effects on trials, suppliers and commercialization also remained uncertain.
- Four customers represented about 89% of first-half product revenue and 94% of accounts receivable at June 30. Generic INGREZZA patent litigation was ongoing; a consolidated Delaware trial was scheduled for January 2, 2024.
- The company disclosed potential future collaboration milestone obligations of up to $10.8 billion, contingent on specified events. Other key risks include clinical-trial outcomes, pricing and reimbursement, third-party manufacturing and supply, competition, intellectual-property protection and dependence on collaborators.
- No numerical revenue or earnings guidance is stated in the supplied filing text.
Important facts for investors to verify
- INGREZZA prescription, patient-start and sales trends, including the extent of customer concentration and receivables collection.
- Progress and spending for late-stage programs, the planned NBI-1117568 Phase II study, and implications of the NBI-827104 result.
- Cash use and liquidity after the note repurchase, the remaining 2024 Notes and the expected Q3 Heptares milestone payment.
- Developments in INGREZZA generic patent litigation and the potential timing and impact of generic competition.
- Effects of reimbursement or pricing changes, supply-chain constraints, and Russia-Ukraine and pandemic-related trial disruptions.