Neurocrine Biosciences, Inc. (NBIX)

Q2 2010 Earnings Call

July 29, 2010 8:30 a.m. ET


Kevin Gorman - President & CEO

Jane Sorenson - IR

Tim Coughlin - VP & CFO

Chris O'Brien - CMO


Phil Nadeau - Cowen

Thomas Wei - Jefferies & Company

Ryan Tochihara - Oppenheimer



Good day everyone, and welcome to today's program. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. (Operator Instructions) It's now my pleasure to turn the conference over to Kevin Gorman.

Kevin Gorman

Thank you very much, and thank you everyone for joining us this morning. I'm joined here with Tim Coughlin, our CFO, Chris O'Brien, our Chief Medical Officer, and Jane Sorenson. Before we get started, I'd like Jane Sorenson, to read our Safe Harbor statement.

Jane Sorenson

Good morning. I want to remind you of Neurocrine's Safe Harbor cautions. Certain statements made in the course of this conference call that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements, which are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those contained in or implied by the forward-looking statements is contained in the company's SEC filings, including, but not limited to the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of these filings may be obtained by visiting the Investor Relations page on the company's website at Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. Kevin?

Kevin Gorman

Thank you, Jane. So this morning we will start out with Tim taking you through our second quarter results and the half yearly results and then importantly he will update our guidance for 2010. Chris will then briefly take you through the where we are with each of our programs and with our partnerships that we kicked off, and then we will open this up to any questions, so to start out with Tim.

Tim Coughlin

Thanks Kevin and good morning everyone. We released our financial results yesterday after market closed, and it was a very good quarter. And the big financial events for the quarter were the Abbott and Boehringer Ingelheim deals we signed in mid-June. As a result of these two deals, our financial position is dramatically improved, and we have provided new financial guidance for the balance of 2010 in our earnings release.

During this portion of the call, I'm trying to cover the quarterly year-to-date financial results, go over the highlights of the two new collaboration agreements and provide detailed guidance for the balance of 2010. As always, we will entertain any questions during the Q&A portion of the call.

Our financial results in those important metric is a cash burn from ongoing operations. If one were to exclude the impact to these two recent partnerships, we again met our targeted burn from operations of $11 million for the second quarter. Our net loss for the second quarter was $5.2 million or $0.09 per share. This compares a net loss of 15.3 million or $0.39 per share for the second quarter of last year.

Our year-to-date loss is 13.8 million, or $0.27 per share, compared with 2009 year-to-date loss of $34.9 million or $0.90 per share. The reduction and the net loss is primarily due to the restructuring program that we implemented in the second quarter of last year to conserve cash coupled with ongoing cost control measures across all functions within our company.

Research and Development cost as well as general and administrative costs were in line with our expectations for the quarter and the year-to-date and significantly lower than last year. This is primarily due to the lower personnel related cost and across the Board reductions in non-clinical related expenses. We entered the quarter with cash and investments totaling $134 million, a significant increase resulting from our up-front collaboration fees.

Additionally on July 1, $9 million worth of our auction rate securities were redeemed at par. We now have one auction rate security left with the par value of approximately $3 million. As previously mentioned, we signed two significant strategic collaborations in mid-June, one with the Abbot for GnRH program and one with Boehringer Ingelheim for GPR119 program for diabetes.

Both of these collaboration share similar financial structure consisting of upfront payments, milestones and royalties in future sales. The Abbot collaboration for GnRH and Elagolix provided us $75 million up-front payment and allows for milestones of approximately $530 million, and up till approximately 24 million in personnel funding through December 2012.

Additionally all external development, marketing and commercialization cost related to GnRH are paid for by Abbot. Second collaboration grew with BI for GPR119 consists of $10 million up-front. Potential milestones are approximately $225 million in research funding.

All external development, marketing and commercialization cost are borne by Boehringer Ingelheim. For 2010, we initially guided that our operations burn would be up to 45 million exclusive of any partnering agreements. Our burn from operations for the first half of the year again excluding the financial impact of the partnerships of 23 million as planned, 12 million in the first quarter, 11 million in the second quarter.

Our operations burn for the second half for the year will drop to approximately 7 million per quarter. The decrease in our burn is directly attributable to both agreements more specifically the previously mentioned external cost funding, and the funding of certain internal cost will mitigate our burn from operations.

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