From SSB report on Indiplon P2 results: (sorry for late posting)
Neurocrine Biosciences (NBIX)
NBIX: Positive Phase II Results for Indiplon in V3 (Venture, Neutral)
Elderly Patients Mkt Cap: $715.1 mil.
June 24, 2002 SUMMARY
* This morning, Neurocrine announced positive results from
BIOTECHNOLOGY a Phase II study of indiplon MR in elderly patients with
Elise Wang chronic insomnia. The study met its primary endpoint of
Sleep Efficiency with drug treatment at the 20, 30, and 35
mg dose levels compared to placebo.
Soham Pandya * With respect to safety, overall, the drug was well
tolerated. There were no significant effects of next-day
residual effects at the dose levels of indiplon MR likely
Caroline to be used in larger studies compared to placebo. In our
Goodman opinion, indiplon, because of its higher potency and
cleaner side-effect profile, has the opportunity to capture
a major portion of the market for insomnia products.
* We maintain our V3 rating on NBIX as we await the
potential announcement of a major marketing collaboration
for indiplon before altering our outlook on the stock.
Consequently, we are lowering our price target to $30 from
$45.
FUNDAMENTALS
P/E (12/02E) NA
P/E (12/03E) NA
TEV/EBITDA (12/02E) NA
TEV/EBITDA (12/03E) NA
Book Value/Share (12/02E) NA
Price/Book Value NA
Dividend/Yield (12/02E) NA/NA
Revenue (12/02E) $60.0 mil.
Proj. Long-Term EPS Growth NA
ROE (12/02E) NA
Long-Term Debt to Capital(a) NA
NBIX is in the Russell 2000(R) Index.
(a) Data as of most recent quarter
SHARE DATA RECOMMENDATION
Price (6/24/02) $26.10 Current Rating V3
52-Week Range $53.46-$29.00 Prior Rating V3
Shares Outstanding(a) 27.4 mil. Current Target Price $30.00
Convertible No Previous Target Price $45.00
EARNINGS PER SHARE
FY ends 1Q 2Q 3Q 4Q Full Year
12/01A Actual ($0.45)A ($0.52)A $0.09A ($0.53)A ($1.42)A
12/02E Current ($0.52)A ($0.79)E ($0.45)E ($0.63)E ($2.39)E
Previous ($0.52)A ($0.79)E ($0.45)E ($0.63)E ($2.39)E
12/03E Current NA NA NA NA ($1.73)E
Previous NA NA NA NA ($1.73)E
12/04E Current NA NA NA NA NA
Previous NA NA NA NA NA
First Call Consensus EPS: 12/02E ($2.41); 12/03E ($1.46); 12/04E NA
OPINION
This morning, Neurocrine Biosciences announced positive results from a Phase
II study of indiplon (NBI-34060) modified release (MR) in elderly patients
with chronic insomnia. This Phase II study, which enrolled 79 patients (ages
65-75 years), was a randomized, multi-center, double-blind, placebo-
controlled, dose response study. Patients were administered four doses of
the modified-release formulation of indiplon (10, 20, 30 or 35 mg) or placebo
in a cross-over manner. The primary endpoint of the study was Sleep
Efficiency (SE). Other efficacy endpoints evaluated included Total Sleep
Time (TST), Wake Time After Sleep Onset (WASO), Wake Time During Sleep
(WTDS), Number of Awakenings After Sleep Onset (NASSO), Latency to Persistent
Sleep (LPS), and Latency to Sleep Onset (LSO). In particular, WASO, WTDS and
NAASO are key secondary measurements of sleep maintenance. The results show
that indiplon MR treatment demonstrated a highly statistically significant
improvement in the primary efficacy endpoint of SE at the 20, 30 and 35 mg
dose levels compared to placebo. In addition, key endpoints assessing sleep
maintenance as well as sleep initiation (i.e., TST, WASO, WTDS, NAASO and
LPS) demonstrated statistically significant improvements at the 20, 30 and 35
mg dose levels compared to placebo.
With respect to safety, overall, the drug was well tolerated. There were no
clinically significant effects of next-day residual effects (e.g., hangover,
sedation, somnolence) with any dose level of indiplon, as compared to
placebo. For the 35 mg dose level, modest impairment on the Digital Symbol
Substitution Test (DSST) was observed. Consequently, the company does not
expect to pursue this dose level in additional clinical studies. Based on
the positive results, the company has selected the doses that will be used in
the remaining Phase III studies with indiplon MR in elderly patients, which
is scheduled to begin later this year.
To date, the company has completed 25 Phase I and Phase II clinical trials
for indiplon involving approximately 1,300 subjects. The company has
initiated a comprehensive Phase III program that is anticipated to enroll
approximately 3,500 additional subjects in eight clinical trials, five
studies for the immediate release (IR) formulation and three studies for the
modified release (MR) version. The first of these Phase III trials was
initiated last November, in a study that will enroll approximately 500
patients and evaluate two doses of an IR formulation of indiplon for long-
term use in patients with chronic insomnia. Two additional double-blinded,
placebo-controlled trials were recently initiated with the IR formulation in
patients with chronic insomnia and in adult subjects with transient insomnia.
The primary endpoint for the chronic insomnia study will be Latency to Sleep
Onset (LSO) as measured by patient self-reported outcomes over a six-month
period. The company has a goal to complete enrollment in its Phase III
program for the IR formulation this year (approximately 2,000 patients) and
complete a majority of patient enrollment for the MR formulation by year-end.
Topline results from two of the Phase III studies may also be released later
in the year.
Assuming clinical and regulatory success, we believe indiplon will likely be
launched in both the U.S. and Europe in 2004. In our opinion, indiplon,
because of its higher potency and cleaner side-effect profile, has the
opportunity to capture a significant portion of the market for insomnia
products. We forecast that indiplon could achieve $800 million in sales
worldwide by fiscal 2007. Since Neurocrine is likely to sign a development
and marketing partner for this compound, the company could record net
royalties of approximately 15%. We believe the signing of a partnership
agreement is likely to occur either later this year or early next year as
discussions continue to progress.
DETAILS OF PHASE II STUDY OF INDIPLON (MR) IN ELDERLY PATIENTS
Phase II chronic insomnia study of indiplon (MR) in elderly patients. The
trial enrolled a total of 79 patients over 65 years of age (mean age of 69
years) and was designed as a five-way cross over study. Four doses of the
modified release (MR) formulation (10 mg, 20 mg and 30 mg and 35 mg) of
indiplon were evaluated relative to placebo. The primary efficacy endpoint
examined was Sleep Efficiency (SE) as defined by Total Sleep Time/Time in Bed
and measured by polysomnography (PSG). The results seen in this trial were
consistent with data collected in previous studies with the compound.
Specifically, the results show that patients treated with indiplon MR
experienced a statistically significant effect on SE compared to placebo
treatment at 20 mg, 30 mg, and 35 mg dose level (p<0.0001). Furthermore,
this is the first clinical study assessing sleep maintenance in elderly
patients with chronic insomnia. In particular, the key secondary endpoints
for sleep maintenance of Wake Time After Sleep Onset (WASO), Wake Time During
Sleep (WTDS), and Number of Awakenings After Sleep Onset (NAASO) measurements
demonstrated statistically significance at 20 mg, 30 mg and 35 mg dose levels
as compared to placebo. The results also demonstrated statistically
significance in sleep initiation as determined by Latency to Persistent Sleep
(LPS) as measured objectively by PSG relative to placebo. We summarize
detailed data of some of the key efficacy endpoints measured objectively in
this trial in the table below.
Dose Sleep Efficiency Total Sleep Time
(SE) (mean)
Placebo 74% 355 minutes
10 mg 75.9% (p=0.5628) 364.5 minutes (NS)
20 mg 80% (p<0.0001) 384 minutes (p<0.0001)
30 mg 81.3% (p<0.0001) 390 minutes (p<0.0001)
35 mg 81% (p<0.0001) 390 minutes (p<0.0001)
Sleep Efficiency = Total Sleep Time/ Time in Bed
Dose Wake Time After Latency to Number of
Sleep Onset (WASO) Persistent Sleep Awakenings After
(LPS) Sleep Onset (NASSO)
Placebo 103 minutes 26 minutes 8.8
10 mg 102 minutes (NS) 17.6 minutes 7.5 (p<0.0001)
(p=0.008)
20 mg 87.3 minutes 11.0 minutes 7.1 (p<0.0001)
(p=0.005) (p=0.0001)
30 mg 81.9 minutes 11.0 minutes 6.5 (p<0.0001)
(p=0.0001) (p=0.0001)
35 mg 82.0 minutes 9.9 minutes 6.5 (p<0.0001)
(p=0.0001) (p=0.0001)
MARKET FOR INDIPLON
Insomnia, defined as difficulty in falling or staying asleep, is a common
neurological disorder in the U.S. According to the National Sleep
Foundation's 2000 Sleep in America survey, nearly two-thirds (62%) of
American adults report experiencing symptoms of insomnia a few nights a week
or more. The condition may be primary, in which case it is long-standing
with no direct relationship to immediate somatic or psychic events, or
secondary, where emotional problems, pain or use and withdrawal from drugs
are impacting the condition. Dr. Thomas Roth of the Henry Ford Hospital Sleep
Disorder Clinic, a renowned expert in sleep disorders, estimates that the
elderly comprise 15% of the total insomnia population, but account for 40% of
all prescriptions written for insomnia. Furthermore, sleep factors affect
more women than men and there are reports that between 45-60% of women aged
30-60 experience difficulty sleeping. We estimate that indiplon will likely
be launched in both the U.S. and Europe in 2004 and, given its profile, may
expand the market for these types of drugs. Today, the current market for
hypnotics represents approximately $2.0 billion in sales, with Ambien
commanding approximately $840 million or 42% of the market, and Sonata
capturing about $74 million or 4% of the market. We forecast that indiplon
could achieve $800 million in sales worldwide by fiscal 2007. Since
Neurocrine is likely to sign a development and marketing partner for this
compound, the company could record net royalties of approximately 15%.
UPCOMING MILESTONES
* Initiation of additional Phase I studies for CRF program Q2 2002
* Initiation of additional Phase IIb study for APL-MS program Q2 2002
* Initiation of Phase II study for APL-Diabetes program in Mid-2002
pediatrics
* Results from Phase II study for IL-4 fusion toxin in glioma H2 2002
* Results from Phase I study for IV form IL-4 fusion toxin in H2 2002
solid tumors
* Results from Phase III studies of NBI-34060 IR in insomnia Q4 2002
* Announcement of corporate partner for NBI-34060 program Q4 02/Q1 03
INVESTMENT THESIS & VALUATION
We are maintaining our V3 (Venture, Neutral) rating on the shares of
Neurocrine Biosciences as we await the potential announcement of a major
marketing collaboration for indiplon to alter our outlook for the stock. The
company currently has five programs in clinical development, encompassing
areas such as insomnia, brain cancer and depression, as well as treatments
for multiple sclerosis and Type I diabetes based on its Altered Peptide
Ligands technology platform. Indiplon, the company's lead product candidate,
has been demonstrated in both transient and chronic insomnia. In our
opinion, indiplon, because of its higher potency and cleaner side-effect
profile, has the opportunity to capture a significant portion of the market
for insomnia products. As previously indicated, we believe Neurocrine may
announce a marketing and development partner for this product candidate later
this year or early next year and progress on this front should help validate
the commercial feasibility of Indiplon.
We have reduced our 12-month price target to $30 from $45 given the apparent
reduced risk tolerance of investors in the current market. Our valuation
analysis suggests a 12-month price target of $30 per share for NBIX, which is
based on applying a P/E multiple of 35-40x and a 25% discount rate to our
2007 EPS estimate of $2.70.
RISKS & ISSUES FOR CONSIDERATION
Delays or lack of efficacy data in product and clinical development and
regulatory approval; dependence on collaborative partners and securing of
agreements; early-stage of development; and stock volatility and venture
nature of investment.
COMPANY DESCRIPTION
Founded in 1992, Neurocrine Biosciences is an early-stage biotechnology
company focusing on the discovery and development of treatments for
neurological and endocrine disorders. The company's most advanced product,
indiplon (NBI-34060), which targets the GABA-A receptor, is currently in
Phase III studies for insomnia. Other product candidates in clinical trials
include NBI-3001, a fusion toxin linked to IL-4, for malignant glioma, and a
CRF R-1 antagonist for anxiety and depression. The company has a priority
technology platform, Altered Peptide Ligands, which is being utilized to
develop treatments for certain autoimmune diseases such as Type I diabetes
(NBI-6024) and multiple sclerosis (NBI-5788). |
