A decade ago, Neurocrine was reeling from three rounds of layoffs, back-to-back rejections of its main drug candidate and a persistent funding problem.

The San Diego, California-based biotech had bottomed out by late 2009. Its workforce had shrunk to 67 employees, down from nearly 600 four years earlier. After going public in the 1990s biotech boom and rising to command a valuation north of $2 billion, Neurocrine's stock price was worth less than a gallon of milk.

Today, the company has two commercialized drugs and sports a market value of roughly $7.8 billion, more than buzzier biotechs like Alnylam Pharmaceuticals and Bluebird bio.

Boom-and-bust stories are common in the high-risk venture of drug development, but few have fallen as far as Neurocrine.

The company's rise, crash and reemergence track with the biotech industry's evolution, from its birth in the late 1980s to an industry that can stand apart from drugmaking behemoths such as Pfizer and Merck & Co.

One recent report showed small biotechs were responsible for nearly two-thirds of newly approved drugs in the U.S. last year, despite much smaller R&D budgets than their pharma counterparts.

"Biotechs can take things now, with the way the industry has matured, from beginning to end," Neurocrine CEO and co-founder Kevin Gorman said in an interview. "We don’t always have to go looking for pharma."

But the company is now facing a new set of challenges. It will have to battle for market share with industry leaders, and investor skeptics also doubt its pipeline can keep delivering new therapies to drive revenues.

But Neurocrine has failed before in epic fashion. Navigating ahead, Gorman pointed to the growing pains for the biotech, and the industry at large, as necessary in getting to where it is today.

Early growth

Gorman joined Neurocrine in 1993 as head of business development, coming on staff after working on the biotech's launch at a venture capital firm.

When Neurocrine went public in 1996, it followed a familiar path of clinical-stage growth and rode a wave of biotech buzz.

By 2005, it employed nearly 600, was worth $2.4 billion and built a headquarters on a sprawling campus in southern California. Employee perks included a 24-hour onsite workout room and once-a-week subsidized massages.

Kristen Harrison joined the company in 1999 as a receptionist — calling it her first "real adult job" after being placed there from a temp agency.

"I thought I hit the jackpot," Harrison said, who grew into new roles to coordinate recruiting as the company hired hundreds of new employees.

Around that time, Pfizer partnered on Neurocrine's experimental sleep drug, building blockbuster hype as it neared a regulatory decision.

"A lot of us were thinking, 'Okay, here we go. This is the big opportunity for Neurocrine,'" said Haig Bozigian, who joined in 1997 in a research role. "We were very confident this was going to happen."

Rejection, two times

And then, rejection struck. The Food and Drug Administration raised issues with the insomnia drug's application in 2006, declining to approve the compound and sending Pfizer running from the agreement.

Suddenly, Harrison’s duties were flipped on their head, from hiring to laying off dozens of people. The salesforce that was just brought on was largely let go, and Neurocrine worked to re-submit the application without Pfizer as a partner.

That second regulatory decision came back in December 2007. Neurocrine workers gathered in a seminar room to hear the result.

"We knew going into that, that this was kind of all the eggs were in one basket," Harrison said, who had created layoff packets ahead of time for every single employee to be able to act quickly. "We needed that news to be good."

Gorman delivered the news: The FDA had rejected the insomnia drug again. When an employee asked what that means for them, the exec said half of them will be gone. Layoffs left only about 135 people.

A month later, Gorman was tapped as CEO after the former leader stepped down amid the struggles.

But the layoffs weren't enough on their own. Wall Street was closed to them, and the executive team decided to sell its headquarters and lease it back to net $61 million. Just six weeks after the sale closed, the real estate market crashed, slashing the building’s value in half.

"We never would have survived," if the deal took just a few weeks longer, Gorman said.

Without the insomnia drug, Gorman sketched a plan forward with an experimental endometriosis drug. If Neurocrine could get positive Phase 2 data, it could make it through by inking a licensing partner.

'We didn't listen'

In a needed respite, the biotech got some good news. That endometriosis drug, called elagolix, succeeded in Phase 2b studies at reducing pain. 

But that high was short lived. The FDA raised issue with the trial's endpoint used to measure pain and proposed a new metric. Neurocrine had to go back to Phase 2 testing with this new measure.

Those studies kicked off in 2008 and failed on the FDA-proposed measurement the following year. Looking back, Gorman said the company saw the agency as more an antagonist at that point, particularly after regulators had twice-rejected its previous potential blockbuster.

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"We didn't listen carefully to the FDA. We did not engage the FDA as actually a partner in drug discovery and development."

Kevin Gorman

Neurocrine CEO

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By this point, investors sent Neurocrine to its lowest point. Shares traded around $2 in late 2009, a drop of about 97% from its 2005 peak of more than $70.

And, once again, Neurocrine had to shrink to stay alive, bringing its headcount down to 67 people through a third round of layoffs in a four-year span.

By the end of 2009, the company held about $53 million in cash, cash equivalents and short-term investments, a steady decrease from a high of more than $450 million at the end of 2003.

The company vacated the front building it was leasing, moving to rent just the back building that the company had once owned. Workers sold off excess office and lab supplies in the parking lot. Employees turned off every third bulb in the light units throughout the building to stretch the few dollars the company had left.

Climbing back

Things finally turned around two years later. In May 2010, the company announced the latest study for elagolix worked, using an endpoint that the biotech had jointly developed with the FDA.

The next month, the biotech landed a much-needed licensing deal with Abbott, paying $75 million upfront and outlining $500 million in potential milestone payments. When the drug business of Abbott spun off into AbbVie, that spin-off stayed as Neurocrine's partner.

The multiple clinical failures and frustrations with the FDA led to another takeaway for Gorman and Neurocrine on the arduous saga of drug development.

"You ultimately get success by spending a lot of time in Phase 2," he said. "That's where you learn about your patients, you learn about your endpoints, you learn about your drug."

From there, AbbVie ran a pivotal Phase 3 program that brought success in 2015. And in July 2018, elagolix turned into Orilissa with an FDA approval.

While Orilissa may have proven critical in securing the 2010 deal and keeping two-thirds of the lights on, another Neurocrine compound wound up beating it to market, winning FDA approval in 2017.

Before the rapid descent began, Nicole Harriott joined the company in early 2006 as a chemist, calling the atmosphere comfortable on the campus.

After the layoffs, she felt a sense of urgency in her work that wasn't there before. By late 2009, she had gone from chemist No. 70 to No. 4, she said. 

It was after the first round of layoffs that Harriott helped create the compound that would eventually be known as Ingrezza.

The future

Last year, Neurocrine recorded more than $400 million in sales. Despite an accumulated deficit standing at more than $1 billion, Neurocrine is making money.

"It's probably uncontroversial to say they've done an outstanding job launching Ingrezza,” said Paul Matteis, a biotech analyst at Stifel, in an interview.

As Neurocrine developed, so has the industry at large, leading to improved appetites for funding and independence for smaller companies now.

"Like Neurocrine, if you've got a great drug, Wall Street is going to give you the rope to monetize it as best as you can on your own," Matteis said.

Even with two approved drugs, Neurocrine has faced the challenge all biotechs encounter in moving from the clinical to commercial stage, essentially starting over to sell drugs instead of just develop them.

Further challenges loom, with Ingrezza facing stiff competition from a rival medication being sold by Teva, a pharma giant with a track record of commercial chops in central nervous system therapies.

And Neurocrine has faced recent failures. Ingrezza failed a study in Tourette's syndrome last year, and shares have dropped by about one-third since then. Some skeptics doubt Neurocrine can elbow out market share against Teva and also raise questions on if its pipeline will keep delivering. 

In building out that pipeline, Neurocrine struck a deal with Voyager Therapeutics earlier this year, paying $165 million upfront and outlining more than $1 billion in potential milestones to gain rights to four gene therapy programs, with the most advanced in ongoing Phase 2 testing for Parkinson's disease.

For a company that was down to 60-some employees a decade ago, it's been constant growth since then, with a headcount of 636 as of last month, according to the company.

Harriott, the chemist who helped develop Ingrezza, is now Neurocrine’s research director. And while she found a sense of ownership in the biotech through its struggles, she said the test now will be keeping that urgency as the biotech scales up.

"That is a feeling that is going to be our challenge going forward as we’re growing," she said.