Neurocrine Biosciences Inc. Reports Operating Results (10-Q)

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Apr 29, 2010
Neurocrine Biosciences Inc. (NBIX, Financial) filed Quarterly Report for the period ended 2010-03-31.

Neurocrine Biosciences Inc. has a market cap of $173.4 million; its shares were traded at around $3.26 with and P/S ratio of 58.7. Neurocrine Biosciences Inc. had an annual average earning growth of 1.2% over the past 10 years.NBIX is in the portfolios of Stanley Druckenmiller of Duquesne Capital Management, LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Research and development expenses decreased to $7.6 million for the first quarter of 2010 compared with $10.8 million for the respective period in 2009. Laboratory costs decreased by $0.5 million in the first quarter of 2010 compared to the same period in 2009 and depreciation expense decreased by $0.5 million in the first quarter of 2010 compared to the same period in 2009. Research and development personnel expenses decreased by $2.7 million in the first quarter of 2010 compared with the first quarter of 2009, primarily as a result of our restructuring program in the second quarter of 2009. External development costs increased by $0.3 million in the first quarter of 2010 compared to the same period last year, primarily due to our elagolix program.

Other income and expense changed from a loss of $0.5 million during the first quarter of 2009 to $1.5 million of income for the first quarter of 2010. The $2.0 million increase resulted primarily from a $1.5 million loss from an other-than-temporary impairment recognized on auction rate securities in the first quarter of 2009 and a $0.6 million realized gain on the sale/redemption of auction rate securities in the first quarter of 2010.

Net loss for the first quarter of 2010 was $8.6 million, or $0.19 per share, compared to $19.7 million, or $0.51 per share, for the same period in 2009. This decrease in net loss was primarily due to our restructuring program implemented during the second quarter of 2009 and expense management efforts during the first quarter of 2010, coupled with activities in our investment portfolio as discussed above.

Net cash used in operating activities during the first three months of 2010 was $12.2 million compared with $14.4 million during the same period last year. Net loss for the first three months of 2010 was $8.6 million compared to $19.7 million for the same period in 2009. This decrease in net loss was primarily due to our restructuring program implemented during the second quarter of 2009 and expense management efforts during the first quarter of 2010.

Under the terms of the Lease and the Amendments, we pay base annual rent (subject to an annual fixed percentage increase), plus a 3.5% annual management fee, property taxes and other normal and necessary expenses associated with the Lease such as utilities, repairs and maintenance, etc. In lieu of a cash security deposit under the Lease, Wells Fargo Bank, N.A. issued on our behalf a letter of credit in the amount of $5.7 million. The letter of credit is secured by a deposit of $6.3 million with the same bank. We have the right to extend the Lease for two consecutive ten-year terms and will have the first right of refusal to lease, at market rates, any facilities built on the vacant lot included in the real property sold by us. The terms of the Lease also require that we maintain $50.0 million in cash and investments at all times, or increase our security deposit by $5.0 million.

In September 2009, we and DMH entered into the Second Lease Amendment. The Second Lease Amendment obligated us to vacate the Front Building and make an immediate payment of $4.0 million to DMH as an initial release fee, which was paid in October 2009. We continue to occupy the entire Rear Building. Upon payment of the initial release fee, we were released from our obligations with respect to the Front Building, except with respect to 1) certain indemnity obligations for events prior to the payment of the initial release fee, 2) certain operating expenses for the Front Building in accordance with the terms of the Lease through July 2011, and 3) 50% of tenant improvement costs between $65 and $100 per square foot in connection with initial leases between DMH and other third parties for space in the Front Building. As of December 31, 2009, we had completely satisfied our obligation with respect to payment of tenant improvement costs. Pursuant to the Second Lease Amendment, we are also obligated to pay DMH an amount equivalent to the rent on the Front Building through July 2011 and then approximately $44,000 per month beginning in August 2011 through December 2019 as a rent differential payment for the Front Building, which such rent differential amounts may be prepaid by us at our sole discretion. Should we be in monetary default under the Lease beyond the normal cure periods and prior to repaying the entire rent differential balance, the rent differential payment will double.

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