Following the announcement of disappointing Phase 3 DCP study results by Neurocrine Biosciences (NBIX.US), Deutsche Bank has reaffirmed its "Hold" rating and maintained a $152 price target. The bank believes investor expectations for this clinical outcome were low, anticipating a minimal impact on the stock price. Neurocrine Biosciences reported that the Phase 3 KINECT-DCP trial of valbenazine (Ingrezza) for the treatment of dyskinetic cerebral palsy (DCP) failed, eliminating the opportunity for Ingrezza to expand its indications beyond tardive dyskinesia (TD) and Huntington's disease (HD) chorea. Given that Ingrezza for the DCP indication was not included in Deutsche Bank's valuation model, the failure of this indication does not alter the firm's valuation of the company. A successful study could have supported the submission of a supplemental New Drug Application, expanded the indication label, and generated incremental revenue for Ingrezza; the market opportunity for DCP was considered comparable to or slightly larger than that for HD chorea. For reference, Deutsche Bank's peak sales estimate for Ingrezza is approximately $2.821 billion (compared to a consensus expectation of about $2.998 billion), which includes roughly $2.585 billion from TD sales and about $236 million from HD chorea sales. In the absence of label expansion, Deutsche Bank expects management to focus on driving prescription volume growth for Ingrezza, supported by an expanded sales force, while the TD market is expected to grow but currently suffers from insufficient penetration.
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