I've now gone back over the recording of the $ACAD announcement with a fine tooth comb.

Contrary to my initial impression, listening a little (i.e. A LOT) more carefully, I felt there was less evasion and more just some incompleteness and relatively minor inconsistencies. More a "misty day" than a heavy fog or smoke screen. So, I do need to row back a little on some of my less generous remarks about the management team.

I still believe there wasn't a straight answer on the active patients as at 30-June. However, I can understand from my own experience why a management team would agree not to put out such data for 30-June and 1-August, which covers the Summer month of July, to mitigate the risk that some idiot analyst would multiply the difference x 12 to get a misleading annual growth number. I.e., discontinuations don't slow down, but new scripts do over the summer month. Fair dues, I have also been guilty of managing similar messages when on their side of the table. And we all have our our experience here in Australia of the "Dance of the Seven Veils" with DW at $PNV.

OK, now I've got that off my chest, on with my analysis and key takeaways.

We've had a lot of posts on $NEU from several members with a lot of data and sound bites, so I'll not repeat any of it. Rather, I will lay out some calculations, based on the US alone, and then use that as a basis for further discussion of value and risk.

Methodology

I have decided to use a range of M&A mutliples of forecast peak sales to set out a range of scenarios for the value of DAYBUE in the US to $NEU.

Method is as follows:

• Market size (A): base 5,000. Range 6,000-9,000,... so conservatively I am taking scenarios of 6,000 and 7,500
• Long Run Persistency (B): 50% - there is upside and downside, but I'm keeping that simple
• Peak Market Penetration (C): scenarios of 40%, 45% and 50% (we're already at 30%-33%)

Revenue Per Patient (D) : As a shortcut, I used an RBC Capital Note from June 2024. They set out their calculations using dosing assumptions and cost per patient per annum of $585k and a gross-to-net leading to $536k per patient per annum.

The reason I chose RBC Capital, is that they appear to be a House Broker, who undertook or commission some detailed market research to support the valuation. I'm therefore not accepting their market assumptions, as I think they might be biased, but there dosing and revenue per customer assumptions appear to be OK.

Continuing the Method:

• Calulate Peak US Revenue: (PRev) = (A) x (B) x (C) x (D)
• Calculate $NEU Royalty Payments from tiered US Royalty Schedule (Roy)
• Apply Peak Revenue Multiple: (M)x(Roy)
• Add Sum of Milestone Payments (SMP)
• Convert to $A
• Value of US DAYBUE to $NEU = (M)x(Roy) + (SMP)
• Divide by Shares of Issue
• Result is an estimate of the $/Share of $NEU attributable to the Payments from $ACAD due to US Sales of DAYBUE

Acquisition Revenue MultipleBenchmarks

For the acquision revenue multiples, I have considered a wide range.

I've rejected more spicey multiples of forecast peak revenues in biotech, which can get up to 12x to 20x and more, and this is perhaps an area requiring further consideration.

Having examined some benchmarks, the reasonable range for a pharmaceutical company with a fully commercialised product in the market is an EV/Forecast Peak Revenue multiple ranging from 5 to 10.

In any event, it is simple enough for you to form your own view.

Here are the calculations:

So What? (Part 1)

If I assume that DAYBUE gets to a peak 45% market penetration within the next 2-3 years, so as to attract an acquisition multiple of 7.5 x Revenue, then the revenue stream to $NEU could be valued in the ballpark of $7 - $12.

Now I have to allow for Canada, Japan, EU and RoW - should these eventuate. These have a more attractive royalty structure, however, they are likley not to be as material in aggregate as the US. Let's assume that the better royalty structure is balanced by the small underlying aggregate revenue, so that Peak RoW equals Peak USA.

Assuming Peak ROW occurs 4 years after Peak USA, then by the same method, its worth $5 - $8 /share

This means the value of DAYBUE to $NEU is $12 - $20 - or $16 at midpoint.

But What About NNZ-2591

NNZ-2591 could be worth $0. But it could be worth 3 x DAYBUE, but another 5 years into the future, so let's say it could be worth 2x DAYBUE today.

My Decision

Who knows what the market will do tomorrow. But now, I just don't care.

My investment thesis is that $NEU is worth the value of DAYBUE, giving me a free option to the Upside of NNZ-2591.

If tomorrow, $NEU tanks 20% to below $14, then my thesis is completely intact, because I believe even given the less-than-stellar performance of DAYBUE, $NEU is worth anywhere from $12 - $46.

There is still uncertainty around DAYBUE, but it is rapidly becoming de-risked with now 9-months of Real World persistency data, and the growing evidence of open label clinical extension data spanning 3 years.

This is precisely the kind of risk I still want in my portfolio. I'm so grateful for the Angelman Trading Halt, because it has given me the time to do a proper analysis.

In fact, if the market throws a tantrum tomorow, I will buy back the one-third I offloaded on the back of the 1Q result.

I'm laying this all out in detail, as I value the views of the other StrawPeople who are following this one closely. (I won't hold my breath while you find the obvious errors!!)

Disc: Held in RL and SM

P.S. I have referred to the work of $ACAD House Broker RBC Capital. While they have a bias that is plain for all to see, they are one of the few houses I have seen that has done a detailed market analysis, based on primary research. Their reaction to the $ACAD result was to mark it down from $29 to $26 vs. closing SP of $15.17. The bias is evident in their elevated valuation; however, the fact thay they only marked $ACAD down by $3 or 11% from their elevant elevated valuation is telling - it is in line with my own view based on entirely indpedendent analysis - apart from the $/patient assumption.