@Nnyck777 I fully expected today's guidance downgrade based on the modelling I did after 1Q. (Remember, I concluded that I was surprised they didn't lower guidance at that time, but recognised they wouldn't have had a good enough basis to support any updated guidance.)

From my perspective, today's result was better than I feared and not as good as I hoped. The bounce back after the tough winter quarter was weak, but at least it was there.

How the market reacts is anyone's guess - SP is off 30% from the level going in to Q1. The market reacted quite negatively to the Q1/Q4 revenue decline.

You are probably right in that the market will react to the headline of the reduction in guidance. For example, afer Q1, the covering Jeffries analyst wrote that they expected guidance to be hit. I expect several others also gave the benefit of the doubt. Didn't happen.

So $NEU WILL BE downgraded on TP. But how much? Current consensus is $28.68 ($25.00 - $31.40; n=6; marketscreener.com), which is a long way north of the beaten up SP of $17.09.

Further Detailed Notes

On its own, revenue was not too bad. Afterall, sequential revenue growth of 11% Q-on-Q is pretty decent and, in a simplistic analysis, you could be quite bullish on a number like that.(Of the 11% sequential growth, 7% was volume and 4% was price.)

Most telling was the Q&A, where they said they are on track to hit the lower half of guidance. I've done some quick analysis which indicates to me that the guidance should have been more like $335 - $355m. I don't think they have any chance of getting anywhere near $370m. (I think it was face saving to have the top end of the new guidance equal the bottom end of the old guidance!)

I don't like the $ACAD management team - I feel they lack candour. For example, consider the discussion around the 900 patients, which was a 1-August number. Under Q&A, when asked for the number at the end of the reporting period (30-June) there were all kinds of weasle words (I could almost see the team on the end of the call squirming in their seats.) They wouldn't answer the question and didn't say why. That tells me there was something revealing in the 30-June number. (My hypothesis confirms speculation I made at 1Q that the winter trough was longer than was portrayed in 1Q call, and revealing the 30-June number would have demonstrated this. Or was the growth to 30-June close to 900, so that the month of July - a holiday month - was stagnant, and don't want to reveal that?)

The good news for $NEU is that, even if they just beat the low end, then the next Milestone payment of $50m (for $250 annual sales) will be secured by the end of Q3. This is consistent with $ACADs updated cashflow forecast. However, based on my initial modelling, I think it is highly unlikely DAYBUE will hit the $500m mark in FY25,... if ever, based solely on US sales.

I'll write a separate note on international roll-out, as I need to go back through the recording and get some of the details. However, it doesn't look like anything much will happen in FY25 or FY26, as new clinical work is needed (tbc).

Other good news is that persistency appears to be stabilising north of 50% long term with GI management, with some good survey data. It is conceivable that, over time, more return to taking the drug, having initially given up. (58% at 9-months exceeds my model of 56%,)

On market potential, they reiterated 5,000 diagnosed patients, with 6,000-9,000 prevalent, However, there was no indication of any evidence in an uptick in diagnoses 16 months into the product approval. Call me a skeptic, but that indicates to me the "prevalent population" is likely closer to 5000 than 9000.

(On my analysis and forecasts, I had hoped the result would history match to my patients/revenue model, enabling me to be more confident in projecting the US s-curve out to 2025 and 2026. Unfortunately, things don't line up too well, so its back to the drawing board.)

My Key Takeaways

For me, this was a difficult result, because it is unclear one way or the other. I need to do some work on this one.

Overall, I think it was a good decision to take profits after 1Q. On the face of it, its not a strong enough result to go back in. But to hold or not to hold, that is the question. (I'm heading out for a run to clear my head, and also to come back and see what Mr Market decides.)

If the market is tough on the results and we see a major SP leg down and NNZ-2591 comes in good for Angelman, then $NEU could still represent real value. However, I need to take a hard look at my model so that I can act when the next NNZ-2591 newsflow comes in.

Over the last year, the value balance for $NEU has shifted significantly from Trofinetide to NNZ-2591. With huge cash reserves and a modest, but steady inflow from Trofinetide, $NEU can play the long game. The investment proposition is, however, less clear to me.

Disc: Held in RL and SM