Macro Tsimmis

intelligently hedged investment

Neurocrine Biosciences (NBIX) update #5

Posted by intelledgement on Mon, 14 Jan 08

Well…we still don’t have a GnRH agonist partner yet, as CEO Gary Lyons promised us we would by the end of 2007 or early 2008…and now we don’t have Lyons, either.

In a press release posted after the close of the market today, Neurocrine Biosciences (NBIX) announced that Lyons had resigned as CEO and President, and that COO Kevin Gorman—who like Lyons has been with the company since its founding in 1993—has been promoted to CEO/President and appointed to the Board of Directors. Lyons will also continue to serve on the BoD.

We don’t expect this change to have a big impact on the company or the stock. While under Lyons Neurocrine had failed twice to obtain FDA approval for the company’s indiplon anti-insomnia product, it appears from the outside that management was blindsided by changed requirements and (the first time) pressured by then-partner Pfizer into inopportune choices that weakened their NDA. Arguably management could have resisted Pfizer and done a better job with the 2006 application; conceivably there might have been some way to foresee the agency’s new off-the-wall requirements to run additional trials on pregnant animals and for competitor’s already-approved products that derailed the 2007 application. But it doesn’t seem likely that Gorman, who was part of the incumbent management team for both those NDAs, would have done better.

On the other hand, given the presumably advanced partnership negotiations for the company’s potential blockbuster GnRH agonist candidate product (now in Phase 2 trial), bringing in a brand new CEO might have been disruptive, but it seems likely that Gorman will be able to smoothly run with that ball.

However much he was at fault, for sure Lyons had a credibility problem with The Street after two big failures to deliver in two years. Gorman starts with a clean slate, and if he can deliver on some promises, NBIX’s valuation might recover faster with a new CEO. We look forward to hearing from him. An update on the GnRH agonist partnership discussions would be a good place to start.

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