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Why Neurocrine Biosciences Shares Fell Nearly 10% Today

By James Brumley – Nov 2, 2021 at 3:14PM

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Investors have grown weary of unpredictable profitability and unexpected expenses.

What happened

Shares of biopharma Neurocrine Biosciences (NBIX 1.88%) were down 9.8% in Tuesday's late trading following a disappointing third-quarter report.

So what

For the three-month stretch ending in September, Neurocrine turned $296 million in revenue into an operating profit of $0.64 per share. The top line dramatically improved on COVID-crimped numbers from the same quarter a year earlier, when the company lost $0.18 per share on sales of $258.5 million. On the basis of generally accepted accounting principles (GAAP), however, profits of only $0.23 per share left the market wanting more, and arguably concerned.

Now what

Neurocrine's flagship drug is Ingrezza, for the treatment of tardive dyskinesia, which is a nervous system disorder resulting from the use of other medicines meant to treat psychiatric conditions. The need for such a drug is clear, given this company's rapid and continued revenue growth since the Food and Drug Administration (FDA) approved it in 2017. In fact, the only things that are slowing the drug's growth have been logistics complications stemming from the pandemic. The company's ability to monetize Ingrezza into a consistently profitable pharmaceutical franchise, however, remains in question. The disparity between recent GAAP and adjusted results appears to be widening in a way that suggests the company is repeatedly struggling with one-off costs.

An investor watching a falling chart on a computer screen.

Image source: Getty Images.

It's impacting the stock, too, in the near term and long term. Shares were just starting to recover from a rough patch that steered the stock sharply lower between June of last year and this August's new 52-week low, but today's stumble has dragged it back down closer to those lows than Monday's multi-month high. Moreover, with today's sell-off, this stock is now 25% below its 2018 post-drug-approval peak.

The sheer scope of Tuesday's selling sets the stage for a firm bounce starting tomorrow. Given how unreliable past rebound efforts have been, though, Neurocrine Biosciences remains a name with too much long-term risk for most investors to take on.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Neurocrine Biosciences. The Motley Fool has a disclosure policy.

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