Pinned straw:
Just off the $ACAD call.
As mentioned in my earlier post, while guidance on DAYBUE sales was narrowed to the lower bound of current guidance, this is almost precisly where I expected it based on my modelling. I think that's "the number" the market will respond to today - but the market has been fickle with $NEU, so who knows that will happen!
But I got a lot more out of the call, which I believe now re-risks the profile in the US from here, and gives me a better understanding of the likely international roll-out timeframe.
In this post I cover:
- The new $ACAD CEO, Catheine Owen. An assured and confident first results call from an experienced industry veteran
- DAYBUE - latest insights on sales, market, patient experience and strategy, de-risking steady growth into 2025
- $ACAD will be focused on multiple levers to drive sales
- PRV sale expected to close in Q4 FY24
- Updates on the international rollout: Canada, EU and Japan - no real changes to previous announcements
- Valuation - no change to my existing SM valuation. Result and outlook in-line with my model.
In each section, I'll sumamrise key information from the call, and then add my own interpretation and analysis.
Overall takeaway
My overall takeaway is that today's result supports my investment thesis for $NEU: the current valuation covers DAYBUE, and so NNZ-2591 remains a free upside option. Importantly, steady - if unspectacular - continuing growth in the US is derisking sustained growth with each passing quarter.
Perhaps Jon Pilcher is rigth. Maybe today marks a start in a shoft towards more positive sentiment and newsflow.
1. CEO Catherine Owen
I wanted to start here mainly because today's call was a stark contrast with previous calls. There was a clarity and confidence in Catherine's presentation and Q&A responses that seemed to me to then be reflected to some extent in the input from other speaker. (Follows of my posts on $ACAD may recall my frustration with previous calls. How much of this improved clarity is down to the new CEO and how much is just what you'd expect with the growing time in the market of DAYBUE, I can't say.)
Catherine has an impressive track record, having held senior positions in BMS both in the US and Internationally, and then before that 25 years at J&J. Importantly, her track record is in commercial delivery, including product launches and rare disease therapies. Her international experience is an important addition to $ACAD, who are very US-focussed and comes at the right time in the DAYBUE rollout.
Catherine said that, based on her experince, commercialisation of rare disease therapies is complex and highly situational. It is critical to focus on the patient journey, both in getting them started and keeping them on the therapy. She said DAYBUE was no different in that respect. The new CEO is "extremely confident about growth and has further confidence in the US and beyond" for DAYBUE.
2. Daybue Progress - my analysis
Picking up on the sales numbers in my earlier post, the graph below shows what the path to the midpoint of guidance requires - a modest 2.3%. with the lower and upper ranges being -3.2% and +7.8% respectively.
Now, I don't know what seasonal effects we might see in Q4, but it is interesting that the upper bound of guidance only requires that the Q3/Q2 rate is retained. Q3 might be seasonally strong, as families get up to date with scripts leading into the summer, and so there might be a slight bump in refills in Q3. Not sure.
My sense is that $ACAD are being cautious in putting $340-$350 (my model, updated for today's result is actually $348-352m). But we are splitting hairs here, although I image the new CEO is keen to outperform on her first guidance, if possible. We'll see.
Importantly, this profile and my further detail on Canada below, means I DO NOT expect to see the $500m sales milestone in 2025, but it is looking good for 2026.
Despite the un-inspiring and unsurprising guidance update, there are several positive developments from the call.
- Active patients are now 923 vs 917 vs pcp - a modest increase, however, what's important given discontinuations is that DAYBUE is continuing to grow.
- 60% of patients have now been on treatment for 10 months or longer
- The persistency curve is flattening and is at >50% after 12 months. THIS IS VERY IMPORTANT
- There are 800 unique presribers, with the lion's share still in Centres of Excellence (CoE)
- Seeing increased new starts from non-CoEs which are 70% of the market. Low penetration here
- The rate of new diagnoses for Rett has increased by 10% since launch of DAYBUE, which is starting to confirm that hypothesis that the existence of the treatment is now leading to the condition to be diagnosed whereas previously it went undiagnosed. This gives confidence that the available US market will be in the range 6,000-9,000, versus the 5,000 clinically diagnosed at launch. Again, positive news for the potential for sustained growth
- >30% of the 5,000 clinically diagnosed population has now started DAYBUE at some point. So 70% remains addressible, excluding the larger potential prevalent population
3. Levers to Drive Sales
The strategy to drives sales was discussed in greater detail, and while consistent that before, was conveyed more clearly.
The open label extension study LOTUS is continuing to provide evidence of the longer term benefits of staying on DAYBUE. Importantly this study is providing
- More data on real world benefits, which are being used in HCP and patient communications and education, and are more meaningful that the endpoints used in the clinical trial and approvals.
- Ongoing insights in helping patients manage GI side effects and developing treatment to manage the condition
Increasing focus on patient journey: as most discontinuations occur at refill 1 or 2, $ACAD are sharpening their focus on HCP and patient support to help then develop the best treatment plan.
Patients who are staying on the drug are all seeing sustained benefits. The dominant driver for discontinuation is GI side effects. <10>
$ACAD have improved their processes to support the re-verificatoin process, wherein patients need to overcome certain hurdles for continued payor support, given the high cost of the drug. This should prevent delays to refills and even perhaps some discontinuations.
CEO Catherine said there is a "strong possibility" we can recharge growth.
4. PRV sale expected to close in Q4 FY24
Covered in other posts. This is a positive market surprise.
5. Regulatory Updates
No changes but greater clarity. What I am writing here goes beyond what was communicated, and I am adding my own research.
Bottom line: Don't expect RoW sales and milestone until 2026. But Row will drive next wave of growth out to 2030, which should offset maturity in the US.
Canada
Approved during Q3 - not news.
However, as private payers not expected to be significant in Canada, the next focus is the public reimbursemt process
This has several stages at both national and provincial level. While $ACAD were vague on timing, high cost orphan drug reimbursement approval typically takes around a year in Canada, but it can take up to two years.
Therefore, I don't expect a launch in Canada until later 2025 or even early 2026. But when it does come, it will give a small bump to North American sales
Europe
On track for 1Q 2025 EMA submission. Timeline is around one year. Regulatory team is in place.
Like Canada, once approval is gained, there is a complex series of reimbursement negotiations country by country.
Germany tends to agree reimbursement fastest (My view 3-6 months)
Countries like Italy and Spain are very slow and more like 1-2 years.
No statement on European revenue timeline. My view, is this will be in mid-to-late 2026, which will trigger RoW milestones. Thereafter European sales will progressively build through 2027 and onwards.
Japan
No news - ongoing discussions with the PMDA. No dates set, but I wouldn't expect any sales in Japan before late 2026 or even 2027.
6. Valuation
Everything today is broadly in line with my model. Any softening in the expected growth profile is likely balanced by the re-risking. I'll only update this one the FY result is in, and we can see where $ACAD guides for 2025.
FY2025 will be a soft year for revenue, so need to see how analysts update models following the early PRV. Potential for market to misunderstand. Upside catalysts now firmly focused on NNZ2591 newslfow.
$NEU is only something to consider holding if you are a patient, long term investor.
I remain a hold at my current RL position size of 4.5%, despite SP being towards the low end of my valuation which is $24 ($12 - $46).
Disc: Held in RL and SM