Neurocrine Biosciences, Inc. — FY 2020 Form 10-K
Reporting period: Year ended December 31, 2020; filed February 5, 2021. This is an annual report, not a standalone fourth-quarter filing. Neurocrine is a neuroscience-focused biopharmaceutical company. INGREZZA and ONGENTYS are its U.S.-marketed products; ORILISSA and ORIAHNN are commercialized by AbbVie, with Neurocrine receiving royalties and certain milestone payments.
Financial performance and liquidity
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Total revenue | $1,045.9 million | $788.1 million |
| Net product sales | $994.1 million | $752.9 million |
| Operating income | $163.0 million | $72.3 million |
| Net income | $407.3 million | $37.0 million |
| Diluted EPS | $4.16 | $0.39 |
| Operating cash flow | $228.5 million | $147.0 million |
- Revenue increased 32.7%. INGREZZA sales were $993.1 million, up 31.9%; ONGENTYS contributed $1.0 million after its September 2020 launch.
- Operating margin was approximately 15.6%, versus 9.2% in 2019. Operating expenses rose to $882.9 million from $715.8 million, including higher R&D and SG&A investment and $164.5 million of acquired in-process R&D expense.
- Net income included a $300.6 million income tax benefit, primarily a $296.3 million non-cash benefit from releasing substantially all of the deferred-tax-asset valuation allowance. The filing cautions that income tax expense is expected to resume in 2021, likely reducing net income.
- Cash, cash equivalents and available-for-sale debt securities totaled $1,028.1 million at year-end; working capital was $829.7 million. Total assets were $1,734.7 million and stockholders’ equity was $1,126.2 million.
- Convertible notes had $381.3 million principal outstanding at year-end, with a $317.9 million net carrying amount, due 2024 at 2.25%. Neurocrine repurchased $136.2 million principal for $186.9 million cash in November, recording an $18.4 million extinguishment loss.
- Investing activities provided $4.1 million, largely reflecting purchases, sales and maturities of debt securities; financing activities used $157.8 million. Purchases of property and equipment were $10.9 million.
Material changes versus the prior year
- INGREZZA growth drove higher revenue and operating income; ONGENTYS launched in September following FDA approval in April.
- Collaboration revenue rose to $51.8 million from $35.2 million, including a $30.0 million AbbVie milestone upon FDA approval of ORIAHNN and $19.2 million of ORILISSA/ORIAHNN royalties.
- R&D expense increased to $275.0 million from $200.0 million, reflecting pipeline expansion and personnel costs. SG&A rose to $433.3 million from $354.1 million, primarily from headcount and continued INGREZZA marketing investment.
- The company entered or advanced pipeline collaborations with Idorsia and Takeda, recording $46.0 million and $118.5 million, respectively, as 2020 in-process R&D expense.
- Cash and securities increased from $970.2 million to $1,028.1 million, while the note repurchase reduced principal debt outstanding.
Outlook, commentary, risks and unusual items
- No specific 2021 revenue or earnings guidance is provided in the filing. Management stated existing capital resources, expected INGREZZA sales and investment income should fund planned needs for at least 12 months.
- Pipeline priorities include Phase III crinecerfont studies in adult classic CAH, planned pediatric Phase III initiation in 2021, and expected KINECT-HD valbenazine Phase III top-line results in Q4 2021. The filing also describes planned 2021 studies for several epilepsy and psychiatry candidates.
- COVID-19 disrupted sales-force access to healthcare settings and paused enrollment in some clinical trials. Enrollment resumed in certain studies during 2020; management expected delays to some study completions and data readouts. The company reported no supply interruption to date but warned of potential impacts on operations, revenue, liquidity and development.
- Key risks include reliance on INGREZZA and concentrated specialty-pharmacy customers (two customers represented approximately 86% of product revenue), reimbursement and drug-pricing pressure, reliance on third-party manufacturers and BIAL for ONGENTYS supply, clinical and regulatory uncertainty, competition, and dependence on collaborators.
- Neurocrine terminated its Voyager NBIb-1817 Parkinson’s disease program, with termination effective August 2, 2021, following a clinical hold related to MRI abnormalities in study participants; clinical implications were still under evaluation. Other Voyager programs remain in the collaboration.
- Management reported no material legal proceedings. The financial statements received an unqualified audit opinion, and the auditor reported effective internal control over financial reporting.
Investor verification checklist
- Separate recurring operating performance from the one-time deferred-tax valuation-allowance release when assessing 2020 earnings and 2021 comparability.
- Track INGREZZA sales, patient persistence, reimbursement and customer concentration, as well as ONGENTYS launch uptake and supply arrangements.
- Review the $381.3 million note principal, conversion and maturity terms, and the cash cost and accounting effects of the 2020 repurchase.
- Monitor clinical milestones, especially crinecerfont and KINECT-HD, and any further regulatory or safety developments affecting pipeline programs.
- Assess COVID-19 effects on clinical timelines and commercial access, alongside drug-pricing changes and third-party manufacturing continuity.