The past couple of months have been tough for Neurocrine Biosciences
With all the bad press surrounding Neurocrine lately, I half-expected more to come when the company released its second-quarter results yesterday. Of course, the majority of the conference call was spent discussing Indiplon and the approvable letter that the FDA issued on it in May, but the company didn't reveal any new bad news.
At first glance, seeing Neurocrine with a sub-$400-million market cap and a potential multimillion-dollar drug poised for approval piques my interest. Unfortunately, without knowing why the FDA did not outright approve any of the Indiplon dosages, it's hard to handicap Indiplon's potential worth, much less its eventual release date.
Most drugs that receive approvable letters do eventually get approved, but Neurocrine is feeding an idle 200-person sales force right now, and running six non-Indiplon drugs in clinical development as well. For potential Neurocrine investors, the key question isn't whether Indiplon will get full approval, but when.
The company did say that it hopes to license a product to put the sales force to use. If Neurocrine can't do that by the end of the month, it will probably disband the sales force altogether.
Neurocrine currently is sitting on $234 million in cash, and it expects to end the year with $180 million in the bank. With minimal debt, the company is trading close to its book value. That's cheap for a company with an approvable drug in a billion-dollar indication and multiple drugs in the clinic.
Would I buy Neurocrine at its current market cap, though? Not just yet. I'd like to see what the company has to say regarding the regulatory way forward for Indiplon. On this front, Neurocrine plans to meet with the FDA sometime in August. Hopefully, management will then give us some sort of timeline for Indiplon's market debut.
Companies trading just north of their cash value, especially those with valuable technology like Neurocrine, can sometimes offer great value opportunities to investors. With a little more visibility on Indiplon and the other drugs in the company's pipeline, Neurocrine may just be one of these opportunities -- if you've got the stomach to tolerate the risk.