BMO upgrades Neurocrine to market perform on Ingrezza outlook (NBIX)

BMO Capital Markets has upgraded Neurocrine Biosciences (NASDAQ:NBIX) to market perform, citing its “improved confidence” in the “short-term durability” of the company’s neurological drug Ingrezza, also known as valbenazine.

The investment bank said the upgrade follows a survey of psychiatrists about the drug, which is used to treat tardive dyskinesia, or uncontrollable movements of the face and other body parts. The condition is often brought on by long-term use of certain psychiatric drugs, such as antipsychotics.

BMO said the survey boosted its view on the “durability” of Ingrezza as the physicians noted increased coverage for the drug, limited risk to market share and willingness to prescribe the product via telehealth visits.

The bank’s sales estimates for Ingrezza are still below consensus. BMO sees the product generating sales of $427M for Q2 and $1.71B for fiscal 2023 versus the consensus view of $432M and $1.77B, respectively. It also believes Neurocrine could “positively update expectations” in conjunction with the release of its Q2 results.

BMO still has reservations about Neurocrine’s pipeline, which it believes “lacks strength and depth.” However, due to lowered expectations in the wake of recent readout failures, BMO sees share upside going into an upcoming readout of Phase 3 data for the drug crinecerfont in the treatment of congenital adrenal hyperplasia, which is expected in Q4.

BMO also said that Ingrezza likely won’t be subject to price negotiations at this time due to the “small biotech” drug exemption clause under the Inflation Reduction Act. The exemption, however, wouldn’t apply to potential acquirers.

“As a result, we believe a takeout premium is largely removed from NBIX shares, as acquiring it might open Ingrezza to pricing negotiation,” BMO added.

More on Neurocrine: