Pinned straw:
Adding to @wtsimis straw on results reported by Acadia Pharmaceuticals in New York early this morning, I am just off the call, and the results have significant implicatoins for Neuren ($NEU).
Note: $ACAD markets Trofinetide (“Daybue”) under licence from $NEU.
Revenue
DAYBUE sales in the quarter were $66.9m, far exceeding guidance set just last quarter of $45-55m.
The revenue was attributed to a surge in demand from the Rett community, a significant portion of which are treated through Centres of Excellence, which created strong demand for the product once launched. Retts Syndrome has a strong patient community both at local levels and globally, So awareness of the treatment in the community is very high, and there is no other treatment.
Uptake, Persistency and Dosing
There are now 800 patients on DAYBUE.
On persistency, i.e., how long people stay on the drug, the great news is that persistency is significantly higher than seen in clinical trials. The key persistency measures at 4 months are:
· 81% as measured by confirmed discontinuations
· 75% measure by confirmations + patients at 60+ days past their scheduled refill
· compares favourably with 65% recorded in the Lilac-1 clinical trial
This indicates that patients are staying on the treatment at a higher rate than was projected in the clinical studies.
On dosing, as reported earlier, patients typically start on 50% of the label dose (calculated according to their weight) and then titrate up until they achieve maximum benefits at tolerable side effects. To date, compliance to dose at month three is 75-80%, indicating the progress patients are making towards building toward the label dose.
Reimbursement
In terms of access, Payers are adopting formal plans covering almost 80% of lives to date. (We've spoken separately about the VA 5-year contract, for example.)
Market Rollout
Canada will be the next market to launch. $ACAD are already in conversations with the regulator, and expecting to launch in the next 18 months.
$ACAD are starting conversations with regulators in Europe and take scientific advice. (A two year timeframe has been indicated previously).
Also starting conversations with Japan and prepared to be opportunistic elsewhere.
Guidance
Guidance for Q4 is $80-$87.5m.
MY ANALYSIS
These are outstanding results significantly exceeding expectations. Not only is sales strong, but the measures of persistency and dose-to-label compliance are very positive, indicating that patients will take more of the drug for treatment and are likely to stay on treatment for longer.
While its early days, the market uptake is ahead of my model. The 800 patients on DAYBUE at end of Q3 is the number I had modelled as the average for Q4.
Given Q2 sales of $22m, and $66.9 in Q3, the 4th Q sales range of $80m - $87.5m appears to be conservative, give the progress to date.
However, the early surge in demand has even surprised $ACAD, and no doubt they are proceeding cautiously in the event that the initial surge begins to fade. Clearly, many patients and their families were eagerly awaiting launch driving the initial surge of prescriptions in Q2 which flowed into sales in Q3, given the time lag to register and gain approval for reimbursement.
CEO Steve Davis said “We brought the launch to a stepped up basis, but what we expect to see leaving the 3rd quarter is more linear growth”. He noted that this is the pattern $ACAD have seen with other rare disease product launches.
These results are very encouraging, and should read across very well to $NEU.
My Key Takeaway
I think this could be the start of a series of upgrades for $NEU. Here is the picture to date ... that analysts are waking up, but the market has been slow to respond.
I have an order in the market to increase my RL position by 25%.
My Valuation
My current Valuation is $20, based on a wide range of scenarios from $12 to $58.
I'll do my next model rebuild once Q4 is in, when we'll have had the readout on NNZ-2591 to which I currently ascribe zero value. However, I may take a look at the lowest value scenarios to see if they remain credible in light of the progress of DAYBUE to date.
Below, is a graph of analysts consensus. SP has aimlessly drifted lower on bond yields. Wakey Wakey!
mikebrisy
Now I can see the EPS forecast Revisions - very interesting. (There's usually a day's lag on marketscreen.com between seeing the target price change and the EPS revision. Its now available for $NEU and it is interesting.)
First of all on target price: I see that the increase in TP reported in my post yesterday is due to one broker revision only. Going from what appears to be $22.21 to $31.64! This gives us a flavour of the potential strength of valuation upgrades we might see on this stock as 1) more analysts start to update their research and 2) we get more quarters of sales growth data from DAYBUE. As other brokers upgrade, I expect to see more upward revisions. We're also likely to get more brokers covering this.
What I find fascinating from the chart below, is that the FY24 EPS upgrade from $0.43 to $0.57 or $18m makes sense for 1 of 4 analysts moving a milestone payment from FY25 into FY24 with some additional % royalty from higher sales. (Milestone element = US$50/0.64 x 70% (tax) = $A55m or +$0.43 incremental eps; +$0.43m/4 = +$0.11m, with the balance due to %royalty on increased sales).
Consequenty, FY25 EPS has fallen from $0.89 to $0.80 to reflect the removed milestone of one analyst offset by some increase in the % sales royalty...but not much.
But that puts FY25 on a p/e of 15! For a product that will still be growing reasonably well in the US, and not even getting started in ROW! (Gimme a break)
While I haven't update my model yet, I think there could be further time-horizon arbitrage in this. I am even more confident that the upgrade cycle has further to run, and that all it needs is a strong Q4 salres number.
Disc: Held in RL and SM
mikebrisy
$NEU have now issued their own release.
(Pleased my order was executed at $12.40, RL position is 3.5%)