Neurocrine Biosciences, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing reports full-year results; it does not provide a separate Q4 financial summary. Amounts are in U.S. dollars.
Business context
Neurocrine is a neuroscience-focused biopharmaceutical company. Its principal revenue driver is INGREZZA (valbenazine), approved in the U.S. for tardive dyskinesia and, beginning August 2023, chorea associated with Huntington’s disease. INGREZZA represented approximately 99% of 2023 net product sales. The company also earns collaboration royalties and is advancing a clinical pipeline.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $1,887.1 million | $1,488.7 million | Up 26.8% |
| Net product sales | $1,860.6 million | $1,440.9 million | Up 29.1% |
| INGREZZA sales | $1,836.0 million | $1,427.8 million | Up 28.6% |
| Collaboration revenue | $26.5 million | $47.8 million | Down 44.6% |
| Operating income | $250.9 million | $249.0 million | Up 0.8% |
| Net income | $249.7 million | $154.5 million | Up 61.6% |
| Diluted EPS | $2.47 | $1.56 | Up 58.3% |
| Cash from operations | $389.9 million | $339.4 million | Up 14.9% |
Operating margin was approximately 13.3%, versus 16.7% in 2022; net margin was approximately 13.2%, versus 10.4%. The operating-margin decline reflects expense growth outpacing revenue. Research and development expense rose to $565.0 million from $463.8 million, and selling, general and administrative expense increased to $887.6 million from $752.7 million. 2023 also included $143.9 million of acquired in-process R&D expense for the Voyager partnership.
Liquidity, debt and cash flow
- Cash, cash equivalents and marketable securities totaled $1,719.1 million at year-end, up from $1,288.7 million.
- Working capital was $952.2 million, compared with $915.8 million.
- Operating cash flow was $389.9 million. Investing cash outflow was $467.1 million, including net investment activity in debt securities, a $31.3 million Voyager equity investment and $28.3 million of capital expenditures. Financing cash flow was $65.3 million.
- $170.4 million principal amount of 2.25% convertible notes remained outstanding, due May 15, 2024. The company reported that holders would receive principal and any conversion premium in cash; it expected to pay the outstanding principal at maturity if not earlier converted, redeemed or repurchased.
- The filing states existing capital resources, anticipated INGREZZA sales and investment income are expected to fund projected requirements for at least the next 12 months, while noting there is no assurance they will cover all planned programs and activities.
Material changes, outlook and notable items
- INGREZZA growth was attributed to higher prescription demand, advertising and the expanded sales force. The FDA approved INGREZZA for Huntington’s disease chorea in August 2023; the FDA accepted the NDA for an oral-granule formulation, with an April 30, 2024 target action date.
- Phase 3 crinecerfont studies in adults and pediatric patients with congenital adrenal hyperplasia met reported primary endpoints. The company planned to submit NDAs in Q2 2024; this is a stated development plan, not a guarantee of submission or approval.
- Management anticipated 2024 top-line data for EFMODY studies in adrenal insufficiency and CAH, NBI-1117568 and luvadaxistat studies in the second half of 2024, and NBI-1065845 in the first half of 2024.
- Phase 2 studies of NBI-921352 in focal onset seizures and NBI-1065846 in anhedonia did not meet primary endpoints; no further development of those programs was planned at the time of filing.
- The Voyager strategic partnership involved a $175.0 million upfront payment, including a $31.3 million equity investment; $143.9 million was expensed as acquired IPR&D. Potential future collaboration milestone payments across existing agreements were up to $17.0 billion, contingent on specified events.
- INGREZZA generic patent litigation was settled. The settling companies may begin U.S. generic sales on March 1, 2038, or earlier under certain circumstances.
- Key risks include dependence on INGREZZA and a concentrated distribution channel, competition, reimbursement and drug-pricing pressures, clinical and regulatory uncertainty, reliance on third-party manufacturers and suppliers, intellectual-property risks, and cybersecurity and privacy risks. Four customers accounted for approximately 91% of 2023 product sales and 98% of year-end accounts receivable.
- 2023 results include a $28.4 million unrealized gain on equity securities and higher investment income; 2022 included a $70.0 million loss on extinguishment of convertible notes. These items affect year-over-year earnings comparisons.
Important facts for investors to verify
- Whether INGREZZA prescription growth, pricing, payer access and distribution remain strong, given product and customer concentration.
- The status and timing of the crinecerfont NDA submissions and the FDA’s decision on INGREZZA oral granules.
- Cash requirements and settlement of the $170.4 million notes due in May 2024, alongside lease commitments and planned R&D spending.
- Potential effects of Medicare and other drug-pricing or reimbursement changes, including the company’s stated small-biotech exemption position under the Inflation Reduction Act.
- Terms and milestones of collaboration agreements, generic-entry settlement conditions, and clinical results for the remaining pipeline.
The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of December 31, 2023.