NBIX: Remaining Optimistic On Neurocrine Bio

Zacks Small Cap Research

By Jason Napodano, CFA

We continue to very positive on Neurocrine Bio (NasdaqGS:NBIX). In June 2012, Abbott Labs (NYSE:ABT) initiated a phase 3 trial with elagolix to evaluate the safety and efficacy in female patients with endometriosis. We remind investors that Neurocrine previously earned a $20 million milestone payment from Abbott on advancing discussions with the U.S. FDA on the phase 3 trial in 2011.

The phase 3 trial (ClinicalTrial.gov identifier: NCT01620528) is a 24-week, multinational, randomized, double-blind, placebo-controlled study designed to evaluate the safety and efficacy of elagolix in 875 women, age 18 to 49, with moderate-to-severe endometriosis-associated pain. It will be conducted at approximately 160 sites in the United States, Puerto Rico and Canada.

The primary endpoint will be a dual-endpoint in reduction in Dysmenorrhea and Non-Menstrual Pelvic Pain (NMPP) for women on two doses of elagolix (150mg and a yet unannounced higher dose) vs. placebo in a 1-1-2 randomization over 6 months. Efficacy will be assessed by a responder analysis for statistical evaluation. The inclusion of a higher dose of elagolix, perhaps 250mg or 300mg (150mg BID) is intriguing. It allows for a potential full label with dose titration and prescribing options post approval.

Responder analysis from the phase 2b trial showed an 85% response rate with 150mg elagolix. We believe Abbott is looking for greater than 90% response rate in the phase 3 trial through the inclusion of a higher dose. Secondary endpoints include Dyspareunia and Patient Global Impression of Change (PGIC), as well as analgesic use. Following the 6 month controlled portion of the trial, patients will enroll in a 6 month open-label extension study where Abbott will look for signs of persistent efficacy. For the safety analysis, patients will be followed for an additional 12 months, after which Abbott will conduct a DXA scan to assess changes in bone mineral density.

We expect that this program will take 12 months to enroll. Top-line data from the phase 3 trial should be available in the first half of 2014, with the full analysis in 2015. Abbott plans to conduct a second confirmatory phase 3 trial mirroring the M12-665 trial expected to start in 2013. We expect that this program will include sites outside North America, with an emphasis on Western Europe. Full analysis from the second trial is expected in 2016, along with the New Drug Application (NDA) planned for 2016.

We remind investors that Abbott is also studying elagolix in a phase 2a exploratory trial for the treatment of uterine fibroids. The trial is expected to enroll up to 325 women with heavy uterine bleeding associated with uterine fibroids at clinical sites around the U.S. for a total of 3 months. The doses for the trial have not been disclosed, but Neurocrine describes them as a broad range with previous work done in phase 1 program. We expect the trial to take about twelve months to complete, meaning we should see data over the summer of 2013. The primary endpoint will be quantified blood loss assessed by alkaline hematin.

Neurocrine is making progress within its own proprietary pipeline as well. The company is currently screening patients for the phase 2b trial that will assess its VMAT-2 inhibitor, NBI-98854, in patients with moderate-to-severe schizophrenia and tar dive dyskinesia. Management made a number of changes to the design of the phase 2b trial following the phase 2a data released earlier this year. Specifically, the trial will employ a independent rater to assess patients prior to randomization so that disease severity is confirmed separate from the treating clinician. 

The trial will seek to enroll approximately 125 patients in a placebo-controlled, double-blind, parallel group, multiple dose format. Management plans to test 25mg and 50mg NBI-98854 over a 12 week treatment period, with six weeks of placebo-controlled dosing followed by six-weeks of active treatment. The trial will incorporate a new capsule formulation of NBI-98854.

Beyond the enhanced inclusion criteria noted above, the AIMS primary endpoint assessment will be altered slightly to separate the clinician and the reader, with added certification training and monitoring. Scoring will be done by an independent AIMS reader at the clinical site. The rater will have no other contact with the patient other than the live scoring. The rating will be video-taped for quality control. We expect this trial to offer data in the first quarter 2013.

From a financial standpoint, we believe the company is in a solid position. The balance sheet reflects total assets of $202.1 million, including cash and short-term investments of $177.5 million. Our market research shows elagolix as a $1.5 billion drug in the U.S., potentially $2+ billion worldwide. We believe Neurocrine is in an outstanding position to build shareholder value over the next several years based on these factors. We recommend accumulating the stock at today's price, up to our $11 target. 

Additional information can be found by downloading our full report (NBIX_Napodano-7/31/2012) or by visiting our website at SCR.Zacks.com.

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