Neurocrine Biosciences, Inc. (NASDAQ:NBIX)

On February 11, 2011 we initiated a short-term trading position in shares of NBIX @ $8.06

The company reported 2010 fourth quarter EPS of $0.05 vs. an estimate of $0.04 and a loss in the 2009 comparable period. We took a closer look at the story over the weekend and realized that fourth quarter operating income was actually a loss. However, the company provided 2011 EPS guidance of $0.62 to $0.71, well above analysts estimates of $0.37. The biotech industry is one we normally shy away from, unless we find a company that is profitable. We still need to determine whether a good chunk of the 2011 guidance will be the result of one time royalty payments, making this story less attractive. If this is not the case, we feel the stock can approach $9.75. Stay tuned for an update.