Neurocrine Biosciences, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request metadata refers to 2021 Q4, the supplied filing reports annual results; it does not provide a clear standalone fourth-quarter income statement or cash-flow figure.
Business context
Neurocrine is a biopharmaceutical company focused on neurological, endocrine and psychiatric disorders. Its principal revenue driver is INGREZZA, approved for tardive dyskinesia. Other marketed products include ONGENTYS for Parkinson’s disease; AbbVie markets ORILISSA and ORIAHNN under an elagolix license from Neurocrine. The company also has a broad clinical-stage pipeline.
Financial performance and liquidity
| Metric (USD millions, except per-share data) | 2021 | 2020 | Change / context |
|---|---|---|---|
| Total revenue | $1,133.5 | $1,045.9 | Up 8.4% |
| Net product sales | $1,090.1 | $994.1 | Up 9.7% |
| INGREZZA sales | $1,081.9 | $993.1 | Up 8.9% |
| ONGENTYS sales | $8.2 | $1.0 | U.S. launch began in September 2020 |
| Collaboration revenue | $43.4 | $51.8 | Lower milestone revenue, partly offset by higher elagolix royalties |
| Operating income | $102.5 | $163.0 | Operating margin approximately 9.0%, versus 15.6% |
| Net income | $89.6 | $407.3 | 2020 included a $296.3 million deferred-tax valuation-allowance release |
| Diluted EPS | $0.92 | $4.16 | 2020 tax benefit makes comparison atypical |
| Cash provided by operations | $256.5 | $228.5 | Up; company cited higher INGREZZA sales |
Operating expenses were $1,031.0 million, up from $882.9 million. R&D expense rose to $328.1 million from $275.0 million; SG&A rose to $583.3 million from $433.3 million, reflecting commercial investment, higher staffing and share-based compensation. Acquired in-process R&D expense was $105.3 million, including the Heptares upfront payment. The 2021 net margin was approximately 7.9%.
At year-end, cash, cash equivalents and marketable securities totaled $1,272.0 million, versus $1,028.1 million a year earlier. Working capital was $727.0 million, down from $829.7 million. Total assets were $2,072.5 million and total liabilities were $698.5 million. The 2024 convertible notes had $381.2 million principal outstanding and a $335.1 million net carrying amount; stated interest is 2.25%, with maturity on May 15, 2024. The company reported no material interest-rate exposure in its short-term investment portfolio.
Material changes, outlook and notable items
- INGREZZA sales growth was attributed mainly to higher prescriptions and commercial activity. Two customers represented approximately 82% of 2021 product revenue, creating significant customer concentration.
- Management said existing capital resources, anticipated INGREZZA sales and investment income should fund current and projected requirements for at least 12 months, while noting this does not guarantee funding of all planned programs and activities. The filing provides no quantitative revenue or earnings guidance.
- Pipeline milestones included positive Phase III KINECT-HD results for valbenazine in Huntington chorea; the company planned to submit a supplemental FDA application in the second half of 2022. Data were anticipated in 2022 for NBI-827104 studies and in 2023 for several other studies, including crinecerfont Phase III trials and valbenazine in dyskinetic cerebral palsy and schizophrenia.
- Neurocrine planned to expand its U.S. specialty salesforce from approximately 250 to 350 by the second quarter of 2022. It also reported a February 2022 lease for a planned San Diego campus of approximately 535,000 square feet, with future rent and occupancy commitments to be assessed as construction and lease commencement progress.
- In 2021, the company recorded a $20.9 million unrealized gain on equity securities, principally associated with investments in Voyager and Xenon. The 2020 tax benefit materially inflated comparative net income; 2021 income-tax expense was $11.8 million.
- Four ANDA filers sought approval to market generic INGREZZA and challenged patents; Neurocrine filed litigation in 2021. The company stated it could not predict the outcome.
- COVID-19 remained a source of uncertainty for commercial access, clinical enrollment, suppliers and operations. Other principal risks include pricing and reimbursement pressure, competition, dependence on third-party manufacturers and collaborators, clinical and regulatory uncertainty, and patent protection.
Investor facts to verify
- Whether INGREZZA prescription growth, pricing, reimbursement and customer concentration support continued sales growth.
- Whether rising SG&A and R&D spending translates into sustained operating profitability and positive cash flow, excluding unusual tax and investment items.
- Progress and regulatory outcomes for the Huntington chorea supplemental application and other stated clinical milestones.
- Developments in the generic INGREZZA patent litigation and the strength and duration of relevant patent protection.
- Cash generation, capital requirements, and repayment or conversion terms for the $381.2 million principal balance of notes due in 2024.
- The financial commitments and timing associated with the new campus lease, and whether the company can sublease existing facilities as planned.
The financial statements received an unqualified audit opinion, and the auditor also reported effective internal control over financial reporting as of December 31, 2021.