Neurocrine's Rise and Fall: CEO Kevin Gorman on the Company's Journey from Rock Bottom to Revival

Editor's note:This article is the third installment of BioPharma Dive's new series "Unblinded," focusing on the people who play central roles in key narratives within the biotech and pharmaceutical industries. Click to view other articles in the serieshere。

A decade ago, Neurocrine was in deep trouble: three rounds of layoffs, two consecutive rejections of its lead drug candidate, and persistent funding problems. The San Diego-based biotech company hit rock bottom at the end of 2009—its workforce reduced from nearly 600 employees four years earlier to just 67. Neurocrine went public during the biotech boom of the 1990s, once boasting a market value exceeding $2 billion, but by then its stock price was worth less than a gallon of milk.

Today, the company has two commercialized drugs and a market value of approximately $7.8 billion, surpassing more high-profile peers such as Alnylam Pharmaceuticals and Bluebird bio. In the high-risk business of drug development, stories of rise and fall are common, but few companies have fallen as deeply as Neurocrine.

The company's rise, collapse, and resurgence parallel the evolution of the biotech industry—from its nascent stages in the late 1980s to its current status as an independent force capable of competing with pharmaceutical giants like Pfizer and Merck. A recent report shows that despite research budgets far smaller than those of large pharmaceutical companies, nearly two-thirds of new drugs approved in the U.S. last year came from small biotech firms.

"As the industry matures, biotech companies can now independently advance projects from start to finish," said Kevin Gorman, CEO and co-founder of Neurocrine, in an interview. "We don't always have to seek partnerships with large pharmaceutical companies."

But the company now faces a new set of challenges: competing for market share with industry leaders while addressing investor skepticism about whether its pipeline can continue to produce new therapies to drive revenue.

However, Neurocrine has failed in an extremely devastating way before. Looking ahead, Gorman points out that the growing pains experienced by biotech companies and the industry as a whole were necessary to get to where they are today.

Early growth

Gorman joined Neurocrine in 1993 as head of business development, having previously participated in the founding of the biotech company while at a venture capital firm. When Neurocrine went public in 1996, it followed a familiar clinical-stage growth path and rode the wave of the biotech boom.

By 2005, the company employed nearly 600 people, had a market value of $2.4 billion, and had built its headquarters on a sprawling campus in Southern California. Employee benefits included a 24-hour on-site gym and subsidized weekly massages. Kristen Harrison joined the company in 1999 as a receptionist—a role she described as her first "real adult job" after being placed by a staffing agency. "I thought I had hit the jackpot," Harrison said. As the company hired hundreds of new employees, she gradually took on new responsibilities coordinating recruitment efforts.

Around the same time, Pfizer partnered with Neurocrine on an experimental sleep drug, and market hype intensified as the drug approached regulatory approval. "Many of us were thinking: 'Okay, this is it. This is Neurocrine's big opportunity,'" recalled Haig Bozigian, who joined the company in 1997 in a research role. "We were very confident this would work out."

Two rejections

However, rejections came one after another. In 2006, the U.S. Food and Drug Administration (FDA) raised concerns about the insomnia drug application, refused to approve the compound, and Pfizer subsequently exited the collaboration agreement. Harrison's role abruptly reversed—from recruiting to laying off dozens of employees. Most of the newly formed sales force was let go, and Neurocrine resubmitted the application without Pfizer as a partner.

The second regulatory decision came in December 2007. Neurocrine employees gathered in a conference room awaiting the result. "We knew at that point that all our eggs were in one basket," Harrison said. She had already prepared layoff packets for every employee in advance to enable quick action. "We needed that news to be good."

Gorman announced the result: the FDA had again rejected the insomnia drug. When an employee asked what that meant, the executive said that half of them would be leaving. After the layoffs, only about 135 people remained. A month later, Gorman was appointed CEO after the previous leader resigned amid the crisis.

But layoffs alone were not enough. Wall Street had closed its doors to them, and the management team decided to sell the headquarters building and lease it back, netting $61 million. Just six weeks after the sale was completed, the real estate market crashed, and the building's value halved. "If the deal had been a few weeks later, we would never have made it through," Gorman said.

After losing the insomnia drug, Gorman outlined a path forward centered on an experimental endometriosis drug. If Neurocrine could obtain positive Phase II data, it could weather the storm by securing a licensing partnership.

"We weren't listening"

Just as the company desperately needed relief, some good news arrived. The endometriosis drug, called elagolix, successfully reduced pain in a Phase IIb study. But the joy was short-lived—the FDA raised objections to the endpoints used to measure pain in the trial and recommended new measures. Neurocrine had to repeat Phase II testing with the new endpoint.

Those studies began in 2008 but failed the following year on the FDA-proposed measures. Looking back, Gorman said the company viewed the regulator more as an adversary at the time, especially after its previous potential blockbuster drug had been rejected twice.

"We weren't listening carefully to the FDA. We didn't truly view the FDA as a partner in drug discovery and development."

—Kevin Gorman, CEO of Neurocrine

By this point, investors had pushed Neurocrine to its lowest point. At the end of 2009, the stock traded at around $2, down approximately 97% from its peak of over $70 in 2005. To survive, the company had to shrink again, reducing its workforce to 67 employees through a third round of layoffs within four years. As of the end of 2009, the company held approximately $53 million in cash, cash equivalents, and short-term investments, continuing a decline from a high of over $450 million at the end of 2003.

The company vacated the leased former building and moved back into the rear building on the campus it had once owned. Employees sold surplus office and laboratory supplies in the parking lot and turned off one out of every three lights in the building to conserve the dwindling funds.

A difficult recovery

Two years later, things finally turned around. In May 2010, the company announced that the latest study of elagolix had succeeded, using endpoints developed in collaboration with the FDA. The following month, the company signed a much-needed licensing agreement with Abbott: Abbott paid a $75 million upfront fee and listed up to $500 million in potential milestone payments. When Abbott's pharmaceutical business was spun off into AbbVie, the spun-off company continued as Neurocrine's partner.

Multiple clinical failures and friction with the FDA taught Gorman and Neurocrine another lesson in the long journey of drug development. "Success ultimately comes from investing significant time in Phase II," he said. "That's the stage where you learn about patients, endpoints, and the drug."

Thereafter, the pivotal Phase III program led by AbbVie succeeded in 2015. In July 2018, elagolix was approved by the FDA under the brand name Orilissa. Although Orilissa was crucial in securing the 2010 agreement and keeping two-thirds of the lights on, another Neurocrine compound beat it to market, receiving FDA approval in 2017.

Before the company's rapid decline began, Nicole Harriott joined in early 2006 as a chemist and described the campus atmosphere as comfortable. After the layoffs, she felt a new sense of urgency in her work that hadn't existed before. By the end of 2009, she said she had gone from chemist number 70 to number 4. It was after the first round of layoffs that Harriott helped create the compound that would later become known as Ingrezza.

Looking ahead

Last year, Neurocrine recorded sales exceeding $400 million. Despite accumulated losses still exceeding $1 billion, the company has achieved profitability. "It's probably uncontroversial to say they've done an extremely good job bringing Ingrezza to market," said Paul Matteis, biotech analyst at Stifel, in an interview.

As Neurocrine has grown, so has the industry evolved, with the environment for small companies to secure funding and independence now greatly improved. "Like Neurocrine, if you have a good drug, Wall Street gives you enough room to monetize it as independently as possible," Matteis said.

Even with two approved drugs, Neurocrine faces the challenges that all biotech companies encounter when transitioning from clinical-stage to commercial-stage—essentially selling drugs from scratch rather than just developing them. An even tougher challenge lies ahead: Ingrezza faces fierce competition from a rival product sold by Teva—a pharmaceutical giant with established commercial strength in central nervous system therapies.

Neurocrine has also recently suffered setbacks. Ingrezza failed in a Tourette syndrome study last year, and the stock has since fallen by about a third. Some skeptics believe Neurocrine will struggle to take market share from Teva while questioning whether its pipeline can continue to produce new products.

To bolster its pipeline, Neurocrine earlier this year reached a deal with Voyager Therapeutics, paying a $165 million upfront fee and listing over $1 billion in potential milestone payments to obtain rights to four gene therapy programs, with the most advanced program in a Phase II trial for Parkinson's disease.

For a company that had just over 60 employees a decade ago, growth has continued since—according to company data, the headcount stood at 636 as of last month. Harriott, the chemist who helped develop Ingrezza, is now Neurocrine's director of research. While she found a sense of ownership during the company's struggles, she said the real test will be maintaining that urgency as the company expands. "As we continue to grow, maintaining that feeling will be our challenge going forward," she said.