Neurocrine Biosciences, Inc. (NBIX) received a very surprising second approvable letter from the FDA on Indiplon after the market closed on December 12, 2007. The letter outlined three requests from the FDA, asking Neurocrine for preclinical data in third trimester pregnant women, asking for PSG data with the 5mg dose in the elderly, and asking for an active comparitor (head-to-head) trial to assess the safety of Indiplon vs. a marketed product.
The last request, in our view, essentially creates an endgame for the development of the drug. Disappointing, considering the company had secured and was ready to announce a major partnership with a large-cap pharma. Given the significant questions remaining around Indiplon, we downgraded our rating back to Hold in December 2007 and lowered our price target to $6. The company exited 2007 with $179 million in cash.
Burn for 2008 should be $65 to $70 million, meaning management should still have over $100 million on hand by 2009. And, this does not include a deal for GnRH. The current cash on hand is nearly $5 per share. The stock is currently trading at just above cash levels.
Our sum of parts analysis, including cash, yields a price of $8+ per share. However, confidence in management, even with a new CEO, is low and it will take some time for shareholders to return to the name. Neurocrine's stock is probably dead money for the next few months. We rate the shares a Hold, with a $6 target.
Read the full analyst report on NBIX.
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