Neurocrine Biosciences' (NBIX -0.79%) Ingrezza is quickly becoming a top seller as a treatment for tardive dyskinesia, a side effect of antipsychotic medications, but that's not the only reason this biotech stock's future appears bright.

In this clip from The Motley Fool's Industry Focus: Healthcare, host Shannon Jones and Motley Fool contributor Todd Campbell explain why this stock is about to turn the corner to profitability and how a few fast-approaching catalysts could boost this company's sales even higher in a year or two.

A full transcript follows the video.

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This video was recorded on Sept. 26, 2018.

Shannon Jones: Let's turn over to my top pick. My top pick is actually a company called Neurocrine Biosciences, ticker NBIX. The reason why this is my top pick, and it's really one of my favorite stocks, primarily because I've actually been holding on to it for about three years now. I got in early, before Ingrezza got approved. Was really impressed with some of the late stage data. And two, they had a really solid cash position, even at the end of 2015. Then, they also had the backing and credibility of a well-funded partner, which was AbbVie at the time, too. That's still their partner. So, for me, it checked a lot of the boxes.

Kind of like you, Todd, I try not to get too excited with companies that are yet to have an approved drug on the market. But this one really caught my eye. It was kind of floating under the radar, but was really generating some early traction.

Just to give our listeners an overview, Neurocrine Biosciences is focused on neurological and endocrine-based diseases. Their first commercialized drug is Ingrezza. That was actually approved in April 2017, became available commercially in May. This is a drug that's been indicated to treat a disease called tardive dyskinesia. It's an involuntary movement disorder that can often be associated with anti-psychotic medications. That's important for a couple of reasons that I'll get to in a minute. This particular drug, in terms of launch trajectory and sales expectations, has really blown them out of the roof.

Just looking back, Ingrezza generated about $97 million in net product sales in the second quarter of 2018. That's up from $71 million in the first quarter of 2018, giving them about $168 million in net product sales in the first half of the year. This is important because they were really expecting a very slow launch trajectory. When I talk about tardive dyskinesia, and its associated with anti-psychotic medications, one of the reasons is because of the patient population. When you think about it, patients that are on anti-psychotics -- and it's not even confined just to that -- patients that are on that tend to have much lower compliance and adherence rates than other therapeutic classes. So, they were really expecting a much lower launch in trajectory. Generally speaking, for that patient class, you're looking at compliance rates of about 60%-70%. Ingrezza has exceeded that, and has been able to hold well above that level. It'll be interesting to see if that does start to taper off over time.

What that says is that not only are prescribers prescribing and that patients are more willing to take it, especially as it relates to being able to suppress many of these involuntary movements that are caused by an irregular dopamine signal that's happening in the brain, Ingrezza is really indicated to stop that mechanism. So far, so good with the launch and the sales.

Todd Campbell: I was actually surprised. I missed this stock. When you started talking about it, I was like, "Wow, I really have to do some more work on this name, because this is a fascinating story." The fact that they're already at $97 million per quarter, and that's up from $71 million from Q1, that's darn impressive. What's even more impressive is, as I was looking through the 10-Q and some of the other filings, looking at the fact that, that may not be it for Ingrezza. It looks like they're also evaluating its use in other indications, specifically Tourette's.

Jones: Yes. That's going to be a really exciting indication, I think, to read through. Tourette's is another neurological movement disorder. I think the read through to that is huge. That's another multibillion-dollar opportunity as well.

One side thought to that too is, when you look at the marijuana market, you see CBD also potentially being studied in the same indication. You see a lot of darts being thrown at the target. I'll be watching that. But yes, we've got a Tourette's label expansion that's also coming up with Ingrezza.

That's not to say that it stops there. Ingrezza was the first approved therapy. Also in late July 2018, in partnership with AbbVie, there is now a drug on the market called Orilissa. AbbVie right now has exclusive worldwide commercialization rights. Neurocrine receives about a 20% royalty on sales. What's interesting about partnering with AbbVie, AbbVie is really known for being the label expansion king. They do that really well. Granted, they have their ups and downs. But they do that really well. It's really interesting, seeing their partnership with Neurocrine here. Right now, Orilissa is approved for moderate to severe endometriosis pain. It's is the first FDA-approved oral treatment for the management of moderate to severe pain associated with endometriosis in over a decade.

The drug hit the market just last month. It's providing yet another source of revenue for a fairly new commercial stage company. We'll be keeping everything a close eye on the launch numbers heading into the latter half of this year for that. That could be, easily, another $1.5 [billion to] $2 billion opportunity. I talked about label expansions, uterine fibroids is another indication that they'll be looking into. Just had some really positive phase 3 data in that indication, too.

They've got multiple shots on target here. Really, if you look at their pipeline, there are some other really interesting products, too.

Campbell: Really quickly on that Orilissa, that $1.5 billion in peak sales. If everything goes its way, like you said, AbbVie being so good at expanding labels, conducting trials, getting the most out of their drugs, you could actually get up to that $300 million run rate in royalties for Neurocrine. That would be pretty fantastic.

You talked a little bit about the pipeline. One of the things I wanted to see what your thoughts were on is, what do you make of this move into Parkinson's? This licensing deal that it did last year for that Parkinson's disease drug?

Jones: That one was interesting to me, Todd. For our listeners, the drug is called Opicapone. It's currently being studied in Parkinson's disease. I will say, it is approved in Europe as an adjunct therapy in the disease. It's got some kind of positive read through here, particularly as they look to file in the U.S., which could happen as soon as the first half of 2019.

Anytime I hear Parkinson's, Alzheimer's, I'm a little hesitant. I try not to get my hopes up too much, just because those are diseases that, honestly, we haven't quite figured out what causes it yet. For me, when I'm looking at a potential investment in biotech, I always like to know that the science is well-backed and well understood. This is just one of those areas where I don't feel like we've got a strong enough hold on what actually causes the disease yet. So, I'm a little on the fence on that one, Todd.

Campbell: I understand, absolutely understand. What's the failure rate in Alzheimer's disease clinical trials? I think it's like 99%.

Jones: 99%, yes.

Campbell: It's really crazy! I do think, though -- I'm just putting on my hat for a second -- this is a little bit de-risked, for two reasons. One, you've got the EU approval already in hand. Two, you've got the fact that this isn't a game-changing medication. It's a medication that helps the most commonly used Parkinson's disease drug work better. I think that that adjunct status also de-risks this compound. If it can get approved, this could be a big deal. I think there are 60,000 people in the U.S. alone that are getting diagnosed with Parkinson's disease every year, and about a million people with Parkinson's disease. If this drug does reduce the off-time that people suffer when they take Levodopa, then I think you'll see it get pretty widely used. And yet again, you have another drug that could push this company toward profitability, right?

Jones: Absolutely. And they're very, very close to profitability, speaking of. Net loss for the most recent quarter was $5.9 million. That was compared to a loss of $60 million in the same period for 2017. Even before accounting for the Orilissa sales that just came onto the market here in August, they're extremely close. To your point, going back to the Parkinson's opportunity, that, to me, could be a huge game changer for this company itself. We're talking about Ingrezza, we're talking about these other drugs that are already approved. This could really put Neurocrine Biosciences on a completely different level, completely different scale, if that works.

Another thing I really, really love about this company is management. This company has been around since the early '90s, but the management team in place right now is particularly tight when it comes to expense control. They do a phenomenal job of level-setting expectations. They will usually tend to set expectations on the lower end when they do. But, just looking at their cash position, they had $800 million at the end of June. Now, you've got sales coming in. Now, you've got royalty payments coming in. They are well-positioned to fund many of these trials, especially in an indication like Parkinson. Feel pretty good there. Granted, I got in on Neurocrine three years ago. The evaluation has jumped up quite a bit since then. I don't plan to sell anytime soon, but definitely is a bit lofty right now.

Campbell: Yeah, I just took a quick look before we started recording the show. The price to book was like 28, and the price to sales is 33 on future. It's definitely not a cheap stock. That being said, the valuation could get brought in check if the growth happens more quickly than the estimates go up. I went on looked at the average analyst estimates over the last 90 days. $1.89 per share in earnings expected in 2019. That's up from $1.43 90 days ago. That's a pretty significant increase in the past 90 days.

Jones: Absolutely. So, yes, definitely a stock to watch. All the stocks we've talked about today, so many interesting things happening, so many novel disease targets and indications. Certainly be sure to add them to your watch list.