4 Reasons Behind Stifel's Neurocrine Bull Thesis

Neurocrine Biosciences, Inc. NBIX, which already has two strong drugs in the market in the form of Ingrezza and the recently approved elagolix, has a promising pipeline ahead, according to Stifel. 

The Analyst

Analyst Paul Matteis initiated coverage of Neurocrine with a Buy rating and $137 price target. The stock was added to Stifel's "Select List." 

The Thesis

Notwithstanding the run-up in shares, Neurocrine stock has scarcity value in the midcap space due to its "blockbuster lead asset, strong patent protection, multiple shots on goal and near-term profitability," Matteis said in the initiation note. 

These factors give a positive twist to Neurocine's long-term growth story even in the presence of very few attractive near-term clinical catalysts, the analyst said.

Stifel's bullish stance is predicated on four factors, Matteis said: 

• Ingrezza, the company's lead asset for tardive dyskinesia, possesses blockbuster potential, the analyst said: nearly 8,000 patients who took Ingrezza in the second quarter and represent a small fraction of the total candidate pool. The analyst estimates that Ingrezza will hit the $1-billion mark in tardive dyskinesia sales in 2021.
• The belief that Ingrezza has a reasonable chance of succeeding and expanding its market in Tourette's syndrome.
• Stifel's projection that endometriosis-related pain treatment elagolix will generate close to $2 billion in cash flows.
• The analyst's view that little of Neurocrine's remaining pipeline is priced into the stock.  

"We expect Neurocrine to continue to diversify its pipeline with both in-house candidates and the consideration of small acquisitions or licensing arrangements," Matteis said. 

The Price Target

Neurocrine Biosciences shares have gained roughly 50 percent year-to-date. 

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