Top-notch biotech stock Neurocrine Biosciences surged Tuesday after analysts suggested the company's experimental depression treatment could rival ketamine.
Neurocrine and partner Takeda Pharmaceutical tested their drug in adults with major depressive disorder who didn't respond to other treatments. After 28 days, patients who received the experimental drug, NBI-1065845, showed a 4.3-point improvement in symptoms on a 60-point scale compared with a placebo. By 56 days, that extended to a 7.5-point improvement.
The novel mechanism behind Neurocrine's drug could help it "replicate the anti-depressive effects of ketamine in a more physiological, easier-to-administer presentation," RBC Capital Markets analyst Brian Abrahams said in a report. Johnson & Johnson sells a ketamine-derived nasal spray under the brand name Spravato for patients with treatment-resistant depression.
But ketamine can cause dissociative effects and hallucinations, so it's tightly controlled by the Drug Enforcement Administration.
On today's stock market, Neurocrine stock jumped 4.8% to 140.09. Shares lead an industry group of 748 biotech stocks in terms of fundamental and technical measures, as well as recent performance.
Biotech Stock: A 'Pleasant Surprise'
The results from Neurocrine's study suggest NBI-1065845 could outperform Spravato. In J&J's final-phase study, patients who received Spravato had a 4-point improvement in symptoms when compared with a placebo, Wedbush analyst Laura Chico said in a report.
Notably, a second dose of Neurocrine's drug showed a "trend of improvement."
Analysts had low expectations heading into the study, Mizuho Securities analyst Uy Ear said in a client note. NBI-1065845 works by stimulating a receptor known as AMPA. But this drug class has been plagued by side effects in the past, including dissociative effects and seizures, Ear said.
In addition to the safety concerns, drugs in this class have historically been limited by narrow dose-response windows, William Blair analyst Myles Minter said in a report.
Thus, the results were "a pleasant surprise to us, given the high-risk nature of drug development here and very limited credit given to the stock for the program," he said. He has an outperform rating on Neurocrine's biotech stock.
Ketamine-Like Effect?
Still, questions remain, says RBC Capital Markets analyst Brian Abrahams.
The mechanism could allow it to reproduce some of the anti-depressive effects of ketamine. Ketamine interacts with a different receptor. But its side effects are well-known, and the DEA notes it's commonly abused for its hallucinogenic effects.
Abrahams reiterated his sector perform rating on the biotech stock.
"We expect upside on these promising signals from this under-the-radar pipeline drug, though look for more details particularly around safety/therapeutic window to help clarify its potential to truly contribute to diversification around Ingrezza," he said in a report.
Ingrezza treats a movement disorder called tardive dyskinesia. It's Neurocrine's biggest moneymaker.
This story has been corrected to reflect Spravato is derived from ketamine.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
