Neurocrine(NBIX) - 2024 Q4 - Annual Report

Financial Performance - INGREZZA net product sales reached $2.3 billion in 2024,$ 1.8 billion in 2023, and $1.4 billion in 2022, accounting for substantially all total net product sales during these years [18]. - Four customers accounted for approximately 93% of total product sales for 2024 and about 98% of accounts receivable as of December 31, 2024 [160]. - The commercial success of INGREZZA and CRENESSITY will significantly impact future revenues and profitability [163]. - The company anticipates fluctuations in operating results due to various factors, including seasonality and timing of customer purchases [173]. - The company expects to increase expenses and investments in the coming years to fund operations and capital expenditures [166]. - The company may need to raise additional capital to fund its business plan and future research, development, and commercial efforts [161]. - The company anticipates increased expenses in the foreseeable future, which may challenge its ability to sustain growth and profitability [130]. Market and Competition - Approximately 800,000 people in the U.S. are estimated to be affected by tardive dyskinesia, with 90% of the 40,000 individuals with Huntington's disease expected to develop chorea, and CAH affecting around 30,000 people in the U.S. [18]. - Competition for INGREZZA includes AUSTEDO, which introduced once-daily dosing in February 2023, and various off-label treatments [50]. - CRENESSITY competes with high-dose corticosteroid monotherapy, the current standard of care for CAH, with over two dozen companies manufacturing steroid-based products in the U.S. [50]. - The ongoing Journey study evaluates valbenazine for schizophrenia, a condition affecting over 20 million people globally, with annual costs exceeding$ 150 billion in the U.S. [28]. - The commercial success of INGREZZA and CRENESSITY is contingent upon their acceptance as safe and effective by the medical community and patients [119]. - The company faces intense competition from other pharmaceutical and biotechnology firms, which may impact the demand for its products [120]. Regulatory Environment - The FDA has a goal of 10 months to review standard NDAs for new molecular entities, with a six-month goal for priority NDAs [62]. - The FDA may require risk evaluation and mitigation strategies before approving a new drug application, which can affect market potential [69]. - Orphan drug designation may be granted for drugs treating rare diseases, but does not shorten the regulatory review process [71]. - Regulatory approval processes vary by country, and foreign approvals may not be granted timely or at all, impacting market entry [70]. - The FDA grants a seven-year marketing exclusivity for approved orphan drugs, preventing approval of similar drugs unless clinically superior [72]. - Post-approval requirements include ongoing FDA regulation, recordkeeping, and potential Phase 4 clinical trials to monitor safety and effectiveness [74]. - The company is subject to comprehensive regulatory oversight by the EMA, the European Commission, and/or the competent regulatory authorities of the individual EU Member States [103]. - The company must comply with a range of regulatory requirements applicable to the manufacturing, marketing, promotion, and sale of medicinal products [103]. Research and Development - The Phase 2 SAVITRI™ study of osavampator demonstrated a statistically significant change in the MADRS total score at Day 28 (p=0.0159) and Day 56 (p=0.0016) [30]. - NBI-1117568 showed a statistically significant reduction in PANSS total score at Week 6 (p=0.011) in a Phase 2 clinical study for schizophrenia [33]. - NBI-1070770 is in Phase 2 studies as a potential treatment for major depressive disorder, with ongoing evaluations of its efficacy and safety [35]. - The company has a diversified pipeline with multiple compounds in mid- to late-phase development across core therapeutic areas, including neuropsychiatry and neurology [17]. - The company is transforming its research and development strategies to include biologics, which requires substantial investment [115]. - The company has made substantial investments in R&D personnel and facilities to support its expansion into biologics, indicating a strategic shift in its product development focus [145]. Intellectual Property - INGREZZA is covered by 22 U.S. patents expiring between 2027 and 2040, with a patent term extension for U.S. Patent No. 8,039,627 now expiring in 2031 [44]. - Settlement agreements allow generic versions of INGREZZA to be sold in the U.S. starting March 1, 2038, or earlier under certain conditions [44]. - CRENESSITY is covered by U.S. patents expiring between 2035 and 2041, with potential extensions allowing expiration as late as 2045 [44]. - The company emphasizes the importance of obtaining patent protection for its proprietary technology and compounds to maintain competitive advantage [191]. - The company faces risks related to the validity and enforceability of its patents, which may be challenged by third parties [193]. Employee and Organizational Growth - The company has grown to a team of approximately 1,800 employees as of December 31, 2024, adding more than 400 new employees during 2024 [108]. - The company expects to add additional employees in 2025, focusing on expanding its research and development organization [109]. - The company has grown its full-time employee count from approximately 200 in 2017 to 1,800 as of December 31, 2024, indicating significant organizational expansion [142]. - The leadership transition with the retirement of the former CEO and the appointment of a new CEO may impact investor confidence and operational stability [148]. Legislative and Policy Risks - The Inflation Reduction Act of 2022 allows for price negotiations on high-expenditure drugs, which may impact competitive pressure on products like INGREZZA [84]. - The Medicare drug negotiation program may affect pricing for drugs like AUSTEDO and AUSTEDO XR, potentially impacting INGREZZA revenues [85]. - Legislative changes may lead to more rigorous coverage criteria and lower reimbursement rates for prescription drugs [88]. - The company is unable to predict future legislative impacts on the healthcare industry and its business [92]. - The company is evaluating the potential impact of new healthcare reforms and drug pricing measures, which could adversely affect its business and financial condition [183]. Cybersecurity Risks - Cybersecurity threats pose risks to the company's information technology systems and sensitive data [204]. - The complexity of the company's IT systems makes them vulnerable to various evolving threats, including cyber-attacks [205]. - The company must navigate a landscape of increasing cyber threats, which could disrupt operations and clinical trials [206]. - Ransomware attacks are increasingly prevalent, potentially leading to significant operational interruptions and loss of sensitive data [207]. - Supply chain attacks have risen in frequency and severity, posing risks to information technology systems and infrastructure [213]. - Remote work has heightened risks to information technology systems, as employees utilize external network connections and devices [208]. - The company has not experienced a material security incident to date, but cybersecurity threats are expected to continue [214]. - Security incidents could lead to material adverse consequences, including financial loss and reputational harm [215].