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Analysts Predict Sweet Dreams Lie Ahead for Neurocrine

Analysts Predict Sweet Dreams Lie Ahead for Neurocrine



Senior Staff Writer

If analysts’ projections are correct, Neurocrine Biosciences Inc. isn’t just dreaming of a blockbuster drug.

Gary A. Lyons, president, CEO and director of the La Jolla-based biotechnology firm, isn’t alone in his belief that Neurocrine’s insomnia drug candidate could rival market leader Ambien in 2004.

Ambien, which is made by French drugmaker Sonofi, has seen strong growth in its sales in the United States.

But Dennis Harp, an analyst at Deutsche Bank in New York City, said Neurocrine’s NBI-34060 may be even better in some ways.

“Initial tests and clinical trials suggest that Neurocrine’s drug is as effective as Ambien, but does not have the residual next-day hang-over effect Ambien sometimes has with some patients,” Harp said.

Data from six Phase II studies testing 1,000 insomnia patients suggests NBI-34060 is safe, effective and without adverse side effects.

To satisfy Food and Drug Administration requirements, the firm will study the effects of the drug in eight Phase III trials with 3,000 patients, Lyons said.

Neurocrine developed two formulations of the drug , a fast-acting capsule to get patients to sleep quickly and a longer-acting tablet to help patients go to sleep and to keep them asleep for six hours and more.

Neurocrine hopes to file for drug approval at the end of next year and receive marketing clearance by the end of 2004.

By then, Neurocrine is likely to have signed a deal with a company that has a large enough sales force to bring the pill to primary care physicians, Harp said. Neurocrine’s own sales force will bring it to sleep specialists.

Analysts and doctors are excited about the drug’s potential.

One-third of all American adults have at least one annual episode of insomnia, where people can’t go to sleep or wake up in the middle of the night unable to go back to sleep, said Dr. Chris Gillin, a UCSD professor and sleep specialist at the VA San Diego Healthcare System.

Sleeplessness ranges from mild to severe and can have many causes, including stress and depression.

Newer sleeping pills such as Ambien and Wyeth-Ayerst’s Sonata, a popular drug designed to help people go to sleep, are effective, but can cause side effects.

A sleeping pill that doesn’t produce the typical next-day hangover effect would truly be unique, experts said. Gillin said he has faith in Neurocrine’s talented scientists, but added more data is needed to prove the drug is one of a kind.

Lyons, however, isn’t banking on sleep alone. Neurocrine has a diversified portfolio of potential drugs targeting neurological and endocrine disorders and has attracted some lucrative partnerships.

A deal with GlaxoSmithKline plc. of London for new compounds in anxiety and depression brought Neurocrine $25.5 million in upfront and milestone payments.

Other backers include Wyeth-Ayerst Laboratories Inc. of Radnor, Pa., to help develop compounds for psychiatric disorders, a deal valued potentially at $70 million and Taisho Pharmaceutical Co. Ltd. of Tokyo for diabetes, which may bring Neurocrine about $100 million in payments.

Lyons said the business strategy was to focus on multiple drug candidates, some of which are developed with corporate partners and others alone.

“People don’t like to have just one product or one technology, because if it fails you put the company at risk,” he said. “When you have multiple products in development that takes a lot of money and expertise. So by having partners we are able to derive revenues and use their expertise.”

Holding on to product rights increases shareholder value by retaining or sharing in the ultimate profitability of the product, added Paul Hawran, Neurocrine’s CFO.

Besides its lead insomnia drug, Neurocrine wants to develop drug candidates targeting prostate cancer, obesity, multiple sclerosis and endometriosis.

Lyons estimated it will cost Neurocrine about $200 million to develop the insomnia drug alone.

As of December, Neurocrine had $320 million in the bank, Lyons said, adding, “If we stay on the present course, this should be sufficient until we get to product revenues.”

Harp shares Lyons’ optimism.

He projected Neurocrine will generate $72 million in profit and $2 per share in cash by 2005.

Lyons left biotech superstar Genentech as vice president of business development in February 1993 to lead Neurocrine, because he said the science showed great promise.

A San Diego-based venture capital group created Neurocrine with science derived from Stanford University and the locally based Salk Institute.

Lyons had the know-how and connections to raise $30 million in private financing to develop the core technology to the point where it would attract corporate interest.

In 1996, Neurocrine raised $45 million in its initial public offering. The firm, traded on Nasdaq, has a market capitalization of $1.08 billion and its stock price is among the leading local biotechnology companies. It closed at $36.47 on March 12.

Neurocrine Biosciences, Inc.

President and CEO: Gary A. Lyons

Founded: 1993

Location: 10555 Science Center Drive, San Diego

Employees: 250 employees, of which 110 work in research

Earnings: For the fiscal year ended Dec. 31, net loss of $36.9 million on revenues of $41.2 million

Business: Biotechnology company focusing on neurological and endocrine disorders


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