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Neurocrine Biosciences Inc. (NBIX) Offers a Solid Product Pipeline and a Probable $575 Million Development Deal with Abbott Labs

One of the real tricks to investing in the bioscience sector is finding a company with a solid research arm, solid relationships with big pharma and a solid product pipeline that is ready to pump out product at regular intervals. If one can do this, a profit will most likely be had.

Neurocrine Biosciences Inc., a developer and commercialize of endocrine and neurological based pharmaceutical products, works to develop and commercialize a wide variety of products. The company currently has several products in phase II FDA testing and several others that have received FDA indicators with positive approval status (with the understanding that these approval status indicators have been known to be false.)

Neurocrine Biosciences has several relationships with leading pharma companies desiring to market and distribute its products currently under development. The company’s most recent product development contract involves development and commercialization, with Abbott Labs, of an endometriosis product (gynaecological product.) Moving forward, the current status of the deal calls for an up-front payment of approximately $75 million from Abbott Labs and milestone payments that could total well over $500 million. Additionally the company has several other hormone based products under development which Abbott will have the opportunity to investigate.

As is the general practice within the biosciences industry, Neurocrine Bioscience’s financial picture will and does flux quarter to quarter. In the first quarter of 2010, the company began to witness the advantages of a restructuring program begun in the second quarter of 2009. Administrative and in-house research cost are down while revenue from license agreements with Asian Pharma companies provided respectable profit of approximately $0.8 million. As most operating capital is derived from development projects, as outlined above, the company appears to be in sound shape. In this respect, it has raised capital to purchase facilities while signing several longer-term leases. It has also become essentially debt free. While some companies may be in earlier product trial stages, Neurocrine Biosciences is well along the approvals path with its latest Abbott Labs deal looking at a yearend process. Neurocrine Biosciences could well be worth a closer look.

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