https://www.businesswire.com/news/home/20241016133678/en/Acadia-Pharmaceuticals-Announces-Health-Canada-Approval-of-DAYBUE%E2%84%A2-trofinetide-for-the-Treatment-of-Rett-Syndrome

Daybue has just received approval for use in Canada. This will add to the US sales numbers.

Lets see if this can halt the continued slide of Neu share price - despite good news.

The recording of today's meeting with Jon Pilcher from Neuren is now up.

The big takeaways:

• NNZ-2591 has the potential to be much more impactful than Daybue -- both in terms of addressable market and the nature of partnership agreements (which should be much more favourable than the initial agreement with Acadia)
• Jon was extremely optimistic about its prospects, not just because of very encouraging Phase 2 results, but because of their experience bringing trofinetide to market
• Expect about 2 years or so before this is contributing to revenues
• In the meantime, they have a fortress balance sheet. It seems more than enough to support them, especially given their Daybue business is profitable and fast growing.
• The partnership agreement outside of North America was significantly better than the initial terms with Acadia, and the market in Europe is essentially the same size.
• The business is in the best shape its ever been, and yet the share price is down 50% or so from its high. I suspect because the market got a little carried away last year, but also because of some doubt cast by a short report targeting Acadia, and a downward revision in Acadia sales -- but Jon said that had little to do with their partnership

Neuren operates in a high-risk space, but it seems like things have been substantially de-risked in recent years. A reliable cash-cow in Daybue with a long runway of growth, a rock-solid balance sheet and another candidate coming to market (hopefully) in the coming years with even bigger potential.

I haven't had a crack at a valuation, but things certainly seem more compelling now given the recent decline in price.

Phase 3 finalization confirmed with positive meeting with FDA. No estimates of costings until final end points agreed.

PMS.pdf

ASX Announcement

From a quick scan, the Angelman Result looks good. This one won't be a priority to commercialise, but its building evidence that NNZ-2591 is a platform molecule with benefits for a range of neurological disorders related to its mechanism of action. In that respect, it further de-risks NNZ-2591.

Some snap-shots:

Pretty good results for Phase 2. Not great that improvement is minimal, but the consistency is good.

Again, the story is less about Angelman, but more about providing more data on safety/side effects for PMS and PHS.

Confernce call at 11:00.

Overall takeaway - good news.

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.

$NEU is into a trading halt as it prepares a presentation on the top line results of the Angleman Phase 2 Study for NNZ-2591.

This is tricky timing, as buying and selling was setting up a 10% fall in SP based on the DAYBUE result.

Shareholders looking to exit may be bothered that they weren't given the chance to get out early. By the time trading resumes (presumably Friday morning) analysts will have given reports on DAYBUE sales, which as I wrote at length is complex and likely disappointing.

Personally, I'm pleased, as it gives me some time to properly digest the DAYBUE result and then consider what weight to give to NNZ-2591 in light of the Angleman result, taken together with the previous results.

This was tricky from an investor relations perspective - not allowing the market to react to reported results. Some investors may take cues from $ACAD SP response tomorrow. However, $ACAD is a multi-product company, where the other product was upgraded. However, there may be a range of analyst commentary to consider before taking decisions.

How might this play out? A strong Angleman result would unlikely on its own offset a 10-20% decline based on DAYBUE. However, as @Nnyck777 has stated before, a positive read across all indications (i.e., a less stringent regulatory pathway due to the larger dataset) could potentially more than offset DAYBUE softness.That said, I'm not sure how good the market will be at assessing the read across - i.e., what risk to attach to it.

Ho Hum.

ASX Announcement

$NEU has received Rare Pediatric Disease Designation from the US Food and Drug Administration (FDA) for NNZ-2591 in Phelan-McDermid syndrome. A sponsor who receives an approval for a drug with this designation may qualify for a priority review voucher (PRV) that can be redeemed to receive priority review for a different product or sold to another sponsor. The rare pediatric disease PRV program aims to incentivize drug development for serious rare pediatric diseases. Neuren is preparing for an End of Phase 2 Meeting with FDA in Q3 2024 to discuss the development program for NNZ-2591 in Phelan-McDermid syndrome. Neuren previously reported results from a Phase 2 trial in which significant improvement was assessed by both clinicians and caregivers across multiple efficacy measures.

My Analysis

Today's announcement is marked price sensitive and, while that is reasonable, I think given the Phase 2 result announced previously it is hardly a surprise.

What it does mean is that if the NNZ-2591 NDA is eventually approved (and this is probably still 2 years or so down the track, because the Phase 2 process hasn't fully wrapped up year, and therefore Phase 3 hasn't formally begun) then is it likely that $NEU would reveive a Prority Review Voucher, which can be traded or used to accelerate the FDA review process. The traded values of PRVs vary widely, depending on their availability when they are sought. Values have been as low as $21 million and as high as $350 million, but these are extreme outliers and the average traded value tends to be in the vicinity of $100 million +/- $30 million.

However, beyond the potential future value of the PRV, the orphan designation is the validation by the FDA of the therapeutic need for NNZ-2591 in the market for the rare condition Phelan-McDermid Syndrome. This is a positive step in the development of this product.

Having said that, given what we know about the disease and the early apparent safety and efficacy of NNZ-2591, it might have been more of a surprise had the designation now been granted.

Future News Flow for $NEU

The near term expected items of significant newsflow for $NEU are:

• DAYBUE Q2 Sales from Acadia ($ACAD) (31-July/1-Aug)
• Phase 2 Anglemann Clinical Trial Readout for NNZ-2591 (expected this quarter)
• End of Phase 2 Meeting with FDA on Phase 2 PMS Study report back (expected this quarter)

Taken together, the cumulative effect of these announcements have the potential to be material - either way.

Disc: Held in RL and SM

2A1528913_NEU.pdf

Director buying this mornin $100k worth of shares for their super fund. Always reassuring when SP drops after positive news. Games afoot.

Hi All, for those of you in Melbourne, there is an in-person investor briefing on Neruen and Dimerix:

Twilight briefing on Thursday 13 June, 4:15 for 4:30pm start at Level 33, 477 Collins Street, Melbourne

contact Monsoon Communications info@monsoon.com.au

PH: 03 9620 3333

I was unable to attend $NEU's AGM today (as busy on other things). The materials weren't marked price sensitive as they only disclosed what has already been well communicated over the last 6 months.

However, one slide is interesting, and I'll explain why.

Without being labelled as indicating any relative quantification of value, I wonder whether the relative areas of the rectangles imply management's view of the contribution to company value of each of the elements.

As someone who used to prepare these kinds of communications professionally as part of a listed company management team, this is one way you can subtley convey to analysts the management view, without explicitly communicating the numbers.

I have no way of knowing if that is the case here. But it actually makes sense to me. From my own experience in pharma decades ago, US and RoW often represent equal chunks of value. Even though ultimate volumes in RoW exceed US, the US is usually first market (so, time value of money - sometimes by years) with significantly higher prices. So the size of boxes 1 and 2 make sense.

Box 3, therefore, is interesting.

If this was my presentation, I'd be making sure the area of each element represents the relative risked value of that element per the latest Board defence valuation.

I wonder what Jon's approach is? (Guess I'll need to look for clues in the transcript.)

$NEU into a trading halt today, as some data has emerged from the Pitt Hopkins P2 clinical trial (I think this is the one that was expected in Q2 2024 for NNZ-2591).

ASX Announcement

Depending on what is actually being announced, I imagine there will be a release and potentially a presentation on it tomorrow. (A presentation if its a trial initial read-out.)

Disc: Held in RL and SM

As the $NEU SP enjoys another SP pop on the back of no new information at a conference this morning, I thought I'd air something that has been bothering me since I analysed the results of DAYBUE in detail over the weekend.

HEALTH WARNING: the charts I have posted below are the just the results of modelling. Even historical data are not disclosed results and there are discrepancies with disclosed facts. So the analysis should not be understood to be my forecast.

With the disclaimer out of the way, I realised I cou;=ldn't fully reconcile the DAYBUE Q1 sales results with some of the statements made on previous calls. Understandably, with the product in the market for only one year, $ACAD are being careful.

Top Level Question: Can DAYBUE sale reach 2024 Guidance (The market seems to think it can with only modest downgrades to TP's for $ACAD and $NEU)

Facts: What do we know?

Sales Revenue ($US m):

Q223 $23.2

Q323 $66.9

Q423 $87,1

Q124 $75.9

Patients Taking the Drug

Q223: not disclosed; 400 prescribers had written scripts, with 7/10 so far converted to paid prescriptions

Q323: about 800 patients taking the drug

Q423: almost 900 patient taking the drug (ok, I assume 890)

End-Feb: 860 patients taking the drug

End-Mar: 862 taking the drug of 1300 who have initiated.

Other Key Facts

Over the winter holidays there were payer delays with getting refills.

January: significantly reduced Rett Clinic days in over 50% of COEs

January-February: discontinuations peaked (due to massive uptake in Q4) exceeding new starters, hence net patient declines.

For the 6 weeks up to 3-May, net patient adds positive again for each week (which means net declines continued to late March!)

We know the Persistency of the drug over time. Below is my modelled curve which interpolates gaps in published data.For the purposes of this analysis we can treat this as a fact (even though there is long term uncertainty).

Modelling Method

With all the above information, I have built a simple model as follows.

Patients (month m) = Patient (month m-1) x Persistency Function + New patients (m)

Guess and iterate patients in months 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 to fit reported numbers

Ramp down new patients in month Dec, Jan, Feb and March to hit reported numbers

Ramp back new patients from May 24 and hold new adds constant to match company statement that we are entering a more linear phase (this was the report at Q4 results and essentially repeated most recently).

So what will the rate of new patient adds be? That's the billion dollar question.

In the scenario below, I've modelled 88 per month. That would take them from 1300 patients having started the drug by end April 2024 (26% of the US diagnosed population) to 2000 (or 40%) by end 2024.

Note: you can't do the maths without the model because you need to apply the perisistency function to each cohort.

Here's what it looks like.

Revenue Calculation

This is the hairy bit. I do a prop rata calculation on the quarterly revenue based on the average modelled number of patients taking the drug in the quarter and BINGO. (I could have been more sophisticared and taken the unit price x n x 75-80% average rate, but I am nore sure that this leads to a better answer. Add to the "to do list".)

For the scenario shown above, my modelled 2024 DAYBUE revenue is: $US346m (versus guidance of $370m to $420m)

So, if I believe the model, the question is what level of monthly new patient adds do I need to hit the bottom of guidance.

Answer: 116

This gives end 2024 patients of 1428 with 2225 having initiated, which is 44.5% of the diagnosed population.

If they can sustain that rate of patient adds, they'll get to 2313 patients by end 2025, with 3613 patients having initiated or 72.3% of the diagnosed population.

I won't model higher rates because I don't think its credible. Here's why. Reaching the entire population will be a challenge. My scenario above assumes linear growth is sustained, which is very unlikely into 2025 as you start to penetrate the second half of the population. (New adds will follow some kind of exponential decay function).

One reason uptake will fall off, is that a significant proportion of the population will likley elect not to try the drug. Side effects and limited efficacy will put some off. Furthermore, there will be accessibility issues.

Implications

First, maybe my modelling is wrong. But do far I haven't found the bug.

Second, maybe my revenue calculation introduces signfiicant error. After all, the model predicts that Q124 revenue should have been $88m, whereas is was $76m, but maybe they really got hit bad by reimbursement delays over the winder holidays?

But if the model is right, why didn't $ACAD update guidance? Who knows. Maybe they want a clear quarter, so they can update when they report in August. But by then if my model is right it will be very, very clear. So continuous disclosure obligations would push them to announce an earlier update.

$ACAD have better data than me, and would be able to build a much better model. (Mine only took an hour's work!)

The Bear Thesis

DAYBUE sales were blamed on seasonal effects impacting: 1) reimbursement and 2) new patient adds.

The model, which is pinned to reported data, help visualise how significant this must have been. It is interesting to re-read the transcripts with this picture in mind.

$ACAD might just hit bottom end of guidance. Too early to tell. But likely guidance will be revised downwards, once they have a better handle on monthly new patient adds. They only have 6 weeks of stabilisation at the last call, so maybe fair enought.

Implications for $NUE

2024 - the US$50m milestone is safe, so that's great news.

2025 - the next US$50m milestone will just be hit in 2025, if $ACAD hit 88 new patient adds per month and sustain this into 2025. If new patient adds fall in 2025, then it will miss.

Canada will help royalties for 2025.

My rough forecasts for $NEU as follows (consensus in brackets):

88 monthly patient add:

2024 $130m ($152m); 2025 $163m ($172m)

116 monthly patient adds (to be clear, I consider this scenario unlikely, based on the modelling)

2024 - $134m and 2025 - $185m

Implications for the Investment Thesis

The modelling confirms my hunch that the $ACAD results point to more than a seasonal blip.

That said, with Canada, Japan and EU in the pipeline, DAYBUE could still become a $bn+ drug by 2027 / 2028.

However, the weight of my thesis has shifted squarely over to NNZ-2591.

The result on the Phase 2 trials due in Q2 and Q3 this year will guide my portfolio weighting.

In the interim, I am bracing myself for an $ACAD downgrade - which would knock the SP.

On balance, my sense of risk-reward has shifted, and I have taken the opportunity today to trim my position size by one-third.

Investment Strategy

I now have a model to which I can history match the Q2 result. This will add a lot to my insights and projections.

If NNZ-2591 continues positive results in future indications - will add back to my full position as SP allows.

Likely catalyst to add back will be the $ACAD guidance downgrade, which I am pretty confident is only a matter of time. Based on commentary so far, the downgrade will be a surprise and so $NEU will take a hit.

If NNZ-2591 results are not positive AND DAYBUE disappoints, I'd potentially exit quite quickly.

Looking to $NEU Strawman Bulls to challenge this ... after all its a strawman!

Disc: Held in RL and SM

As @Nnyck777 has highlighted, $ACAD announced their Q1 results including sales for DAYBUE.

I attended the call early this morning, and wanted to drill into the results in a little more detail. (all numbers USD)

While sales of $75.9m represented a decline of 13% over Q4, this had been signalled at the FY23 results presentation in February.

$ACAD has retained 2024 Guidance of $370-420m.

Decline, what are you talking about?

So, why the decline, if such strong growth is expected for the FY? Three reasons have been cited:

• Many patients who started in Q3 and Q4 faced admin delays with payers over the holiday season
• The initial surge of new patients in Q4 also saw a high level of discontinuation, as not everyone can tolerate the drug well vs. the benefits they see
• Severe weather during the East Coast winter saw access to prescribing physicans, especially, the important Centres of Excellence fall, due to a reduced number of "Rett Clinic Days"

$ACAD reported that prescribing has now picked back up, with the last 6 weeks showing postive net patient additions. Because of this they are holding to their guidance for the full year. The high level of discontinuations in the early part of the year as a result of the surge in prescriptions in Q4 has now levelled off.

My Revenue Analysis

The table below indicates the kind of quarterly revenues that will be required to hit the revenue guidance range of $370-$420 (midpoint $395)

Table 1: Daybue Sales Scenarios Required to Hit 2024 Guidance

So how reasonable is this?

Well, at the FY call, $ACAD disclosed the following information, in terms of number of patients taking the drug:

• End Q3: about 800
• End Q4 about 900
• 27th Feb: 860
• 8th May; [862]

Today, I think I heard them say there are 862 patients on the drug (I'll have to check the transcript when it comes out as I am not sure I heard this correctly).

If that's true, and if 862 represents 6 weeks of net additions, then its likley that Q2 Revenue could reasonably get back to the low point or the mid-point of guidance. What we don't know if what the trough was and what the rate of recovery has been.

If they could get back to 900 patients by end of Q2, that would require net weekly addition of 5-6 patients. At that level, average patients for the Q would be about 870-880, compared with c. 850 in Q4. So, in broad terms, you'd expect Q2 revenue to be north of $87.

Importantly, with all this information and the "noise" of Jan and Feb out of the way, the Q2 result is going to be a key predictor of longer term growth. This is for three reasons: 1) the intial surge of highly motivated patients has passed, 2) we will be clear of the seasonal noise and 3) the product is now moving into a more steady state / linear growth phase.

Other Key Insights

To date, 1300 of a prescribed population of 5000 have started taking the drug.

Although it is believed that 6000-9000 people have the condition in the US, and it is expected that there will be increased diagnoses, we haven't heard any evidence of that, as yet.

9-month persistency is 58% (versus 47% on the Lavender trial), so the real world setting outperformance on persistency above the clinical trial appears to be holding up.

Importantly, $ACAD have reported that of the patients who took the drug during the Phase 3 trial, more than 50% are continuing to take the drug after 2 years. They further said that discontinuations are at a maximum over the first two refills, and decline significantly after refills 4 and 5.

On discontinuations, they have observed the following:

• Some patient discontinue before they have titrated to the effective dose and therefore may not be seeing the benefits
• Some patients prescribed outside of COEs, may be starting on the label dose, and then discontinuing due to GI side effects
• They are having success with GI management plans

Overall, as experience with the drug grows, they believe there is an improvement opportunity to help physicans and patients 1) have realistic expections 2) be patient to wait for benefits to show through and 3) improvement management of side effects.

International Timeline

We got some more specific details on the timeline:

• In Europe, they have engaged with the EMA, who has agreed the Pediatric Investigation Plan (PIP). They expect to file the NDA in Q125. (I think this indicates that a decision in 2025 is possible, depending on the priority given by the EMA)
• In Japan, they have scheduled a formal meeting with the PDMA to "discuss clinical plan"
• NDS (New Drug Submission) has been accepted for filing in Canada, and priority review granted. Decision is expected around end of 2024

My Conclusions

These are OK results and $ACAD appear to be managing the challenges that come from patient experience with the drug.

It is important to be realistic. Rett's is a very challenging condition for sufferers and their families. The drug does deliver some benefits, but not to everyone. And treatment brings unpleasant side effects to many. Depending on the individual patient experience of benefit versus discomfort, a significant proportion of patients abandon treatment.

It is encouraging that Canada have granted priority review. The decision in Canada later this year will be a key marker as to how a regulator assesses the drug with a longer body of clinical trial and real world experience to consider. The Canadian decision will be a key leading indicator for the EU and Japan.

From my reading of the report, the low to mid range of guidance remains on track. The upper end looks challenging and potentially out of reach. Where we end up will depend as much on how successful $ACAD are in their sales and marketing execution, particularly as they move beyond the COE's into the large institutions and small clinical practices.

I am less bullish about DAYBUE that I was at the end of last year. Today's result was less definitive than I had hoped, as it is not clear what the current trajectory is.

I am not sure how on top of the $ACAD details the Australian investment community will be, and it will also be interesting to hear how $NEU portrays the results.

In any event, much of my investment thesis rests on NNZ-2591, so I remain a HOLD. Today's result indicates that sales of DAYBUE are recovering from the early bumps in the road. But Q2 will be an important confirmation.

(Will post a brief update when I can access the presentation transcript)

Solid results on the Acadia earnings call. 1300 patients now on Daybue numbers picking up again the past 6 weeks. Progress into Canada by end of 24 discussions with Japan commenced. Eu possibly early 25. Children remaining on 75-80% of titratied dose.

Standard of care plans in development to manage GI issues.

$74 million qrt in line with expectations.

Full report here

$NEU have announced this morning that Health Canada has granted Priority Review status to the NDA for trofinetide.

ASX Announcement

The core data supporting the application is the Phase 3 LAVENDER study.

The announcement is significant for several reasons:

• It confirms that $ACAD initiated the application on time with their Q1 2024 target
• It means that with a target review time of 180 calendar days for Priority Applications (compared with 30 caledar days for Standard Reviews) , they will likely achieve their indicated milestone of a decision in Canada before YE 2024, opening an incremental market opportunity of 600-900 patients, which would be expected to show strong pent-up demand given the community response across the border
• As the first regulatory agency after the FDA to signal priority treatment, it bodes well for approaches in 2025 to the EU and UK, although note that $ACAD lacks a presence in these markets.

Overall, an incremental positive step.

Disc: Held in RL and SM

Ultragenyx has just reported on its successful completion of its past 1/2 Angleman Syndrome trial.

“GTX-102 is an antisense oligonucleotide developed by GeneTx, designed to inhibit the UBE3A-AS DNA strand.”

The patients in the trial showed a significant improvement across several areas on the Bailey-4 development scale scores. These improvements were greater for the children on the drugs compared to the natural development scores of children with Angelman who are not on treatment.

Ultragenyx still has not had its phase 3 meeting with the FDA. There are some safety concerns sighted with several patients developing lower extremity weakness, which appeared to be reversible on sensation of treatment.

This is the major competitor to NEU. The drug work by targeting DNA - a very different therapeutic pathway. Even if both are succesful they may be used in conjunction.

It will be interesting to see if NEU also uses the Bailey-4 scale for its primary end points. This will be different to the scoring used in the Phelan Mcdermid study.

The Phelan Mcdermid study used:

o ClinicalGlobalImpressionofImprovement(CGI-I)-scale

o CaregiverOverallImpressionofChange(CIC)–scale

I would say it is unlikely that Neu would swap mid study which means the two drug programs Neuren’s and Ultragenyx may be using different measurement scales. It will be interesting to see whether the FDA looks for a more consistent - gold standard measure for the future Phase 3 trials.

https://endpts.com/ultragenyx-preps-for-pivotal-angelman-syndrome-trial-aan24/

Snapshots of Phase 3 progress of Trofinetide for Retts syndrome

Took nearly 3 years for Phase 3 trial to finally complete (Oct 2019 - Feb 2022)

Have done this to understand the timeframe for Phase 3 trials given I'm holding a couple of bios currently undergoing phase 3 at the moment.

24 Feb 2023

25 Feb 2022

24 feb 2021

6 apr 2020

Oct 2019

Phase 3 commencement announcement 31 Oct 2019

[held[

$ACAD presented on 18 March at the UBS Virtual CNS day. There were two bits of interesting information about the ongoing progress of DAYBUE.

• Persistency continues at about 10% above the level in the clinical trials. While not an increase, it is good that this level is holding steady. In the Q&A, the reasons for increased persistence are 1) in RL physicans are titrating up to manage tolerability and 2) in RL there is proactive applicatoin of GI management plans, whereas GI management wasn't applied until quite late the in the CT.
• The market is expanding. CEO Stephen Davis stated that at launch, in 1H 2023, there were 4500 diagnosed Retts patients in a market where the calculated prevalence is 6000-9000 (US only). According to $ACAD, the number is now 5000, an 11% increase in one year. He went on to say that this is a common observation in rare untreatable diseases, implying that one a treatment becomes available, there is an increased propensity to make a diagnosis of the condition.

Analysts tried to drill into the reported weather-related (clinic closures) in January, which reduced sales in January, with recovery in February and March. Clearly, the analysts (aware of the short thesis) are trying to understand whether there is any slowdown in sales and have been talking directly to the CoE clinics.

Nothing in the presentation indicates that $ACAD are changing their view on 2024 revenue guidance, although it wasn't discussed explicitly.

$ACAD are scheduled to report 1Q 2024 results on 30 April. I'm expecting a softer DAYBUE sales number than Q4 23, and the market reaction will depend upon how closely $NEU holders and analysts have been paying attention, although CEO Jon has been clear to communicate that 1Q 24 revenue will be lower than 4Q 23 as a result.

Disc: $NEU held in RL and SM

An excellent summary of where Neuren stands and potential acquisition value. See below

https://www.livewiremarkets.com/wires/neuren-where-to-from-here-2024-03-23

Acadia Pharmaceuticals ($ACAD) have announced their Q4 results.

Sales of Daybue came in at $87.1m.

This compares with $66.9m in Q3, and is at the top end of the guidance range $80.0 to $87.5m.

$ACAD have set FY24 guidance for Daybue at $370-$420.

In terms of implications for $NEU, the targeted sales will trigger the $50m milestone for sales >$250m, but it looks like the next milestone payment of $50m will fall in FY25.

Considering the 4Q run-rate of $87.1m as $348.4 annually, the FY24 guidance represents growth over the 4Q run rate of 6% to 21%, which means that $ACAD still see growth ahead.

The recent Culper Research short report claimed that Daybue sales peaked in Q3, so I think the short thesis is severly undermined by this result.

Just going on the call now, to see what further colour there is on the result.

Disc: I hold $NEU in RL and SM

When you are heavily invested in a stock and a short report is released targeting your major revenue stream or investments it is not a nice feeling. Many of us Strawpeople would have experienced this before. One example was February 2021, when J Capital Research released its short report on Nearmap. Thankfully this report was easily refuted. The company's share price recovered quickly. 

Thank you @mikebrisy for linking this short report see here (Culper Research Short Report).  Great summary @Slideup.

Perhaps it is best to read this document from back to front. I think a short report is an excellent opportunity to pay attention to your investment thesis. I decided to take a few hours to go through the report, FDA website and latest research, as well as follow the money and really think about my position. I will have confirmation bias which I am trying to logic my way through and full disclosure I took this 15% drop on Friday as an opportunity to buy a few more shares in my already overweight position in Neuren Pharmaceuticals. 

My immediate thoughts that lead to this purchase were:

1.     I know this stock, the drug works, I have done my due diligence (DD), I follow social media accounts and I am seeing the positive effects of the drug in real time.

2.     The science works and Acadia plus other unnamed pharmaceutical companies were in a race to buy the rest of world rights to Daybue and they all would have done their DD

3.     Neuren has a second drug that is likely much more valuable than Daybue and has had recent outstanding phase 2 results for its trial in Phelan McDermid patients. The drug also has fewer side effects than Daybue

4.     There are 3 more impending phase 2 trial results for Neuren’s second drug which will act as short term catalysts

5.     I know that there a sharks circling who may use unscrupulous methods to absorb more Neuren or Acadia stock or apply pressure on the share price as we know Neuren is a current acquisition target

The Culper short report targeting Acadia Pharmaceuticals released on friday was unexpected. I am curious whether Acadia or its licencing partner Neuren was specifically the target of this report. It is possible that Culper may have had an incentive to quickly wind up a potential short position in Acadia. A quick short and distort attack can induce panic selling and allow a shorter to quickly get out before they are caught in a financial disaster. 

Acadia had two positive updates recently: 

1)    Acadia recently won its patent litigation for Nuplazid - giving the company further protection from generic competition into the future and preserving revenue growth of the drug. 

2)    On the 9^th of January 2024 Acadia reported an increase in guidance for Q4 from $80 million to $87.5 million for its sales of its newest drug Daybue.

Given the above points, anyone with a short position was likely to be in trouble come the February 28^th, 2024 when Acadia released its financials. The share price would likely respond positively to this upcoming announcement. 

The 8% drop following this reports release could have been an exit strategy or perhaps Culper really has increased its short position. However US analysts covering Acadia obviously didn’t think the report held much water as there was a full share price recovery on the same day. 

The Report

The Culper report is full of hyperbole and emotive language – examples in the report assert that Daybue has been a total flop.

The report uses phrases such as horror stories to describe the stories spreading through the Rett community regarding Daybue.

The report also takes aim and Acadia’s credibility itself suggesting a downplaying of adverse events  by the company and that 1 in every 10 to 11 patients who use Daybue end up in hospital. 

Firstly, a total ‘flop’ of a drug doesn’t see such fast uptake and increasing revenue. Nor does a pharmaceutical company who is expecting sharp declines in uptake and increases in discontinuations pay such a hefty premium for the rest of the world rights for a drug. 

With regard to the FDA Adverse Event Reporting System or (FAERS), this is a public post-drug release monitoring system. This database does not analyse the cause of hospitalisations or separate the cause from the drug or the disease. 

Daybue is not a cure for Rett and ongoing health conditions and vulnerabilities from the disease will continue. There is no comment or comparison of standard hospitalisation rates for patients with Rett Syndrome versus hospitalisation rates for Rett patients on Daybue in the report. Acadia has been very clear that side effects and dosing management and assistance is a crucial part of successful treatment while on Daybue. It advised all patients to start on low dosing levels and titrate up as side-effects are managed.

FDA Adverse Event Reporting System (FAERS)

The FDA website states:

“Most common adverse reactions, occurring in at least 10% of Daybue-treated patients and twice the rate of placebo, included diarrhea (81%) and vomiting (27%).”  See here (FDA reported Daybue Side Effects)

Culper report alternatively states “nearly everyone” experienced adverse events on Daybue. My interpretation of Culper’s statement is that the research house may be taking the total number of reported adverse events in the FDA database, which is 1115 cases and ascribing this as if everyone on Daybue has reported an adverse event. 1005 reports of diarrhea were made in the database and that is likely where they are falsely arriving at the >90% prevalence of diarrhea amongst those taking Daybue. 

However as seen below the FAERS does not work like that. Reports are not verified, multiple reports may be in the system and causation cannot be linked to the drug. This is clearly stated on the FDA website. 

Furthermore there was no black box label assigned to Daybue. This is given to drugs: 

‘’when serious adverse reactions or special problems occur, particularly those that may lead to death or serious injury.” (according to the FDA website)

Furthermore the FAERS database has the following statements attached:

  1. Duplicate and incomplete reports are in the system: There are many instances of duplicative reports and some reports do not contain all the necessary information.

2. Existence of a report does not establish causation: For any given report, there is no certainty that a suspected drug caused the event. While consumers and healthcare professionals are encouraged to report adverse events, the event may have been related to the underlying disease being treated, or caused by some other drug being taken concurrently, or occurred for other reasons. The information in these reports reflects only the reporter's observations and opinions.

3. Information in reports has not been verified: Submission of a report does not mean that the information included in it has been medically confirmed nor it is an admission from the reporter that the drug caused or contributed the event.

4. Rates of occurrence cannot be established with reports: The information in these reports cannot be used to estimate the incidence (occurrence rates) of the events reported.

Patients should talk to their doctor before stopping or changing how they take their medications.

The number of adverse events reported by the public for 2023 and 2024 are reported below in Figure 1. Remember these are not causative, there may be duplicate reports and reports have not been verified. 971 events were attributed to 2023 and 144 to 2024 so far. 

Figure 1: FDA screen shot from FAERS database ( Source see here: FDA DAYBUE REPORT NUMBER IN FAERS)

Figure 2: FDA screen shot from FAERS database by reaction type reported by the public (see here FDA DAYBUE REPORTED REACTION TYPE)

As you can see the main reported % events are in green which represents non-serious events. Hospitalisations are a minority of the events recorded. Gastro intestinal disorders are by far the most common non-serious event reported which matches the Lilac study expectations see Figure 3 below. 

Figure 3: FDA screen shot the most commonly reported non-serious Gastro-Intestinal events.

The next most common adverse events reported were issues such as under-dosing, with 494 events reported.  See Figure 4 below. This matches the initial suggestions made by Acadia to start on a lower dose and titrate up as patients began their treatment on Daybue during 2023. 

Figure 4. FDA screenshot of other most common adverse reporting on FAERS relates to dosing. 

We can draw no causative conclusions from FAERS but no life-threatening events have been reported. It was made clear by Acadia and Neuren that Daybue had side-effects and many community support groups offer assistance with this.

A 2023 Epidemiology report paper released in the US offers some better insights into what the average Rett patient experiences. This would have been published just prior to patients receiving Daybue. (see study here).

The authors acknowledge gaps in available data for Rett patients in the US. Highlighting a lack of understanding around the following:

·      Health care resource utilization and

·      Health care costs

Of the Rett patients surveyed nearly 25% had hospital admissions for lower respiratory tract infections in the previous 5 years. Roughly 12% had 2 or more admissions. Unfortunately, there were no % rates for overall hospital admissions given in the study. 

It is difficult to determine then if 1 in 10 or 11 Daybue patients being hospitalised is more or less than the number of hospitalisations expected by Rett complications alone. So the quote in the Culper research report offers no particular insight as there is no context whether Daybue causes higher hospitalisation rates.

The most common clinical manifestations of Rett without Daybue treatment include:

·      Neurological disorders 72.8%

·      Gastrointestinal/ nutritional disorders 41.9%

·      Orthopedic disorders 34.6% 

The authors reported an average of 44.43 health related visits per patient per year. Feeding assistance (37.9%) was the most prevalent supportive therapy required for Rett patients. So gastro-intestinal and nutritional management is definitely part of the Rett treatment pathway whether on Daybue or not. The requirement for anti-epileptic drugs (54.8%) was also a  prevalent support requirement. The conclusion of the above study was that Rett patients had a substantial disease burden. The FDA adverse events reported in the short report very much match the disease burden of a patient with Rett syndrome. 

Gene Therapy

Another example of emotive writing in the report is the title used in the Gene Therapy section. This title eludes to new gene therapies being a potential “harbinger” for Acadia.

Let’s explore:

I agree with the report that there is a limited number of patients with Rett Syndrome.  Hence there is a small population of potential trial subjects to pull from. Gene therapy has been mentioned by Jon Pilcher, Neuren CEO, as a possible treatment, not cure, for Rett Syndrome but a final treatment is years away, if successful at all. It is also something that could be used in conjunction with Daybue so patients can have multiple treatment options. 

Taysha Gene Therapies is currently conducting phase 1 / 2 trials for its TSHA-102 drug in adults with Rett Syndrome. This gene therapy is delivered via injection into the intrathecal space see Image 1 below. This drug regulates MECP2 expression. 

Image 1:  Injection into Subarachnoid space or lumbar areas are the most common delivery pathways for gene therapies. Source (here)

This is obviously a more complicated treatment pathway than an oral dosing in Daybue. The treatment is currently only in adults with Rett’s and the company only plans to run the phase 1/2 REVEAL trial on 2-3 adults. 

Forty-two days following the initial trial the first patient results were released (Taysha Gene Therapy Initial Trial Results). Results on 1 patient were as follows:

4 weeks in:

“Four weeks following the administration of TSHA-102, the patient demonstrated a score of 2 (“much improved”) on a version of the Clinical Global Impressions–Improvement scale adapted to Rett syndrome, an improvement to a score of 5 (“markedly ill”) from a baseline score of 6 (“severely ill”) on the Clinical Global Impressions–Severity scale, and an improvement to a score of 29 from a baseline score of 52 on the Rett Syndrome Behavior Questionnaire. Conversely, on the Revised Motor Behavior Assessment, there were no marked changes at 4 weeks after dosing.”

 6 weeks in:

 “At 6 weeks after administration of the gene therapy, observations of improvement in autonomic function, sleep quality and duration, normalization of night time behavior, and social interest were reported. Gained abilities to sit unassisted for 3 minutes, to hold an object, to unclasp hands, and to use fingers to touch a screen were also noted. At 5 weeks after treatment with TSHA-102, there had been no quantifiable seizure events recorded. “

Study summarized

“Following treatment, we have observed improvements in breathing patterns, vocalization, and motor skills. The patient was able to sit unassisted for the first time in over a decade, and she demonstrated the ability to unclasp her hands and hold an object steadily for the first time since infancy.”

 TSHA-102 was well tolerated in the 1 patient it was trialled on and there were no significant adverse events reported. The second patient is now in the trial. FDA has recently approved a new drug application to commence treatment trials on children in the US. Taysha is also looking to run a trial on children in the UK. 

There will be patients who may struggle or discontinue Daybue who are keen to be involved in a Gene therapy study. However, gene therapy is an unproven treatment that is years away if it proves successful at all. Patients who are seeing improvements will be unlikely to cease Daybue for an unproven treatment. Companies such as Taysha Gene Therapies are likely to struggle to recruit patients as there is an existing FDA treatment available for families with Rett children. There are still potential adverse events of gene therapies that are still unknown.

The short report describes Daybue’s many “short-comings”  and suggests that gene therapy approaches are compelling.

The difficulty with the  statements made by Physician’s quoted in the short report is that the testaments of these doctors largely make up the basis for the justification of Daybue being a flop. In Culper’s very own disclaimer -they acknowledge that these statements may not be fully truthful and are potentially bias and may leave out positive statements. Furthermore doctors were often financially compensated for their statements which they acknowledge might have skewed their report. 

On the 10th of January this year Taysha announced that it was initiating the REVEAL paediatric trial in the US. TSHA-102 was expanded to female patients 5-8 years old. This study would include US, UK and Canada and the first trial was to include 3 children. This would test safety and efficacy of Taysha’s gene therapy in a paediatric population. The results for this study are due mid-2024. See announcement (here)

The dose is a single lumbar intrathecal injection. The studies so far are recruiting very small numbers of Rett patients with n=6. This is hardly going to lead to mass cessation of Daybue by Rett patients in order to participate. 

Clinical Trials.gov website shows that the TSHA-102 Phase 1/2 Trials won't be completed until:

Estimated Primary Completion Date  :

November 2, 2028

Estimated Study Completion Date  :

November 2, 2031

Source (here).

Neurogene Trials

The second gene therapy trial in Rett syndrome also targets mutation in MECP2 gene like Taysha.  The MECP2 protein regulates the activity of genes critical in brain development and function. The NGN-401 therapy delivers a working MECP2 gene. The thought is that a functional gene will lead to normal regulation of activity by the MECP2 protein. It is delivered via an adeno-associated virus (AAV) to deliver the gene inside working cells.

Phase 1/2 clinical trials begun December 2023. Two girls are being treated and it so far is well tolerated. A third patient begins treatment at the beginning of 2024. Efficacy data readouts will be available at the end of 2024. N=5 and girls are between 4-10 years of age. So another very small study. 

There is currently no follow up data available. If the study continues and there are no serious adverse events further recruitment will begin in the second half of 2025. Source (here).

Further Information on the NGN-401 study can be found on Clinical Trials.gov  (here) according to this website: 

“The study is a phase 1/2, open-label study designed to assess the safety, tolerability, and efficacy of administration of an adeno-associated viral vector serotype 9 (AAV9), using Neurogene's proprietary transgene regulation technology. NGN-401 contains a full-length human MECP2 gene which is designed to express therapeutic levels of the MECP2 protein while avoiding overexpression.

The study treatment will be administered under general anesthesia via intracerebroventricular (ICV) delivery. Each participant will be followed for safety and preliminary efficacy for 5 years after treatment and is expected to enroll in a long-term follow-up study for 10 years.”

According to Clinical Trials.gov website Phase 1-2 safety will take up to 10 years to establish which provides a wide moat for Daybue as the only safe and efficacious treatment of Rett. 

As Taysha’s gene therapy is a similar process I imagine this is why Jon has been so unphased during question time on Neuren calls as possible phase III trials may be a decade away. 

The lead time for Daybue seems to be longer than I was actually modelling for. A quick google search reveals these time frames are hardly a harbinger for Acadia as there will still be years before a phase III trial,  if that is ever reached. 

Funding Taysha Gene Therapy

RA capital management is funding Taysha’s Gene therapies to the tune of $150 million. 

About RA capital management:

Assets under management: 9.65 billion USD (March 2023)

Founded: January 2002

Founders: Richard Aldrich; Peter Kolchinsky

Headquarters: Berkeley Building, Boston, Massachusetts, U.S

Interestingly RA capital which is funding Taysha Gene Therapies also had a large stake in Acadia Pharmaceuticals in 2014. 

Funding Acadia 

There are 573 institutional owners and shareholders.

Shares on issue: 169,300,389 

Largest shareholders:  Baker Bros (26%). Vanguard, Black Rock, State Street Corp etc… 

I can’t see whether RA capital still holds any Acadia stock. However in 2016 an Acadia Shareholder suit ended in $15.75 M settlement against RA Capital Management LCC claiming that they colluded with two investors to score millions in short-swing profits from the drug company in violation of the securities laws (source  (here)

The same RA Capital and Peter Kolchinsky that is funding Taysha Gene Therapies. 

Further to this A Fierce Biotech article (here). States that RA Capital is hardly pristine. And has a history of settling with the US Securities and Exchange Commission. In another case they were ordered to pay US$3.6 million in disgorgement, interest and penalties related to 17 instances between 2009-2013,  where they bought shares in stock too soon after selling short the same stock.

“This allows a fund to buy shares in a company offering at a lower-than-market price to cover its short position. This episode highlights a fundamental tension that plagues life science hedge funds between supporting innovative companies and deriving financial benefit--regardless of whether it's to the detriment of those same companies.”

Funding Neurogene pharmaceuticals

Neurogene is a fully owned subsidiary of Neoleukin (Source: here). The merger was completed in December 2023.

“Neoleukin is focused on developing immunotherapies to treat cancer, inflammation and autoimmunity, leveraging its de novo protein design technology.”

 Investors include: Casdin Capital, EcoR1 Capital, Great Point Partners, Janus Henderson Investors, Redmile Group and Samsara BioCapital were among those taking part in the financing round

Rachel McMinn is Neurogene CEO and founder. 

Culper Report Insurance Payment Issues

 Insurance payment issues for Daybue are certainly a valid concern for all investors in Acadia and Neuren on page 11 of the report Culper suggests that Acadia is now facing a wall of discontinuations. They suggest 6/12 insurance re-authorizations are likely to be rejected based on minimal improvements by patients who have been on Daybue. 

Page 13 of the short report discusses issues with insurance plans. This is true of all drugs in the US system and the PBS system in Australia too. To stay on an expensive drug patients have to achieve improvement to justify ongoing costs. This area is challenging for patients to navigate. Acadia has set up help lines to help patient streamline payments from insurers.

I acknowledge this is a risk but I trust that Acadia has a strategy to assist patients navigate these difficulties. Future qrtr growth beyond this 6 month window should certainly help to alleviate investor concerns. 

According to the report numerous insurance plans require an improvement of CGI-I scores of 1 to 3. There is an argument that due to the lower dosing and slower titration up, patients may not achieve the required improvements within 6 months to receive continued payment. 

It appears in the report that physicians have complaints of time management when filling out these tests for patients.  This is certainly a common complaint across all areas of medicine and is not unique to Daybue.

Caregivers indicated in the report that they are facing challenges of navigating a complex system. However this once again is not unique for Daybue. 

The report also claims that patients are losing interest in Daybue due to its side-effects. On page 10 of the report Culper sites reduced Facebook engagements and impressions since Daybue’s release in June 2023. 

This trend may be falsely attribute to drop out rates and alternatively may be caused by the opposite effect – less need to post as more and more caregivers have started Daybue and are managing the side effects so they are less likely to post for advice. High initial post rates may also have been related to questions about Daybue applications and insurance coverage.

There are 5 physician quotes in the report sighting a variety of reasons patients are reluctant to start Daybue e.g. due to diarrhea. It is difficult to put much weight in this anecdotal evidence when a sample of 5 other physicians are likely to give different answers again. 

There are certainly common stories of caregivers having to titrate Daybue dosages up and down and find dietary solutions to help with symptoms before further increases. This is true. Is this leading to attrition? Certainly some but so far Acadia denies high rates of drug attrition and claims a 76% retention rate at 6 months. Culper questions this and states that churn is likely “closer to double that.”

This assumption of double the churn appears to be based on the statement  made by a Physician interviewed for the report who suggested roughly 40% of patients cannot safely reach their full prescribed dose without safety issues.

I do acknowledge that this is a potential risk of Daybue. However I await further confirmation of these numbers directly from Acadia. 

Financials 

The Culper short report proposes that the market analysis is incorrect in its assumptions regarding the financial projections of Daybue and that sales have already peaked in 2023 and are going to fall moving forward. 

They double the churn reported by Acadia and a much higher attrition rate due to side effects and insurer payee issues. They also sight gene therapy as a major threat to Daybue usage as patients will opt to cease this medication in search of access to gene therapy trials. 

As explained above no gene therapy trials are likely to begin phase 3 which will require more participants than phase 1/2 until 2028-2030. So this is toward the very end of the proposed model. The current trials require very small sample sizes until safety and efficacy is established. Gene overexpression is a risk that requires serious caution especially in children. 

Culper Research history

At the beginning of this short report there is a disclaimer that I suggest everyone reads  (Culper Research Short Report). 

The disclaimer basically states that they are not liable for any losses from the information provided. That you should assume they have a position or are affiliated with people who have a position in the securities discussed in the short report. That Culper is or affiliates are long, short or neutral on the stock discussed in the short report.

There is a statement that they are continuing to transact in the securities that there is no warranty around the information provided and that they cannot attest to the accuracy of statements provided and quoted. That positive comments may not have been included and that the people quoted may have received compensation which could make them bias representatives. 

Culper involved in previous defamation

Life MD Inc Vs Culper– involved in defamation suit 

Culper Research and owner Christian Lamarko allegedly defamed Life MD Inc, CEO and CTO and claimed the pair had engaged in fraud in a previous company and had engaged unlicenced doctors to dispense medications. 

See news article ( here)

Life MD Inc was a telehealth company offering prescription based products and services for areas such as dermatology and hair loss. On April 14 2021 Culper research published a short report on the company. 

Defamation proceedings were bought against Culper Research and Lamarco shortly after this report was released. See defamation suit here.

Life MD CEO and CTO claimed that the report was a short and distort attack:

A “short and distort” stock scheme occurs when “short-sellers borrow securities, sell them, and then drive the price of their target company's stock down by spreading materially false, misleading, defamatory, and disparaging information about the company. Once the company's stock drops to an artificially low price, the short-sellers repurchase and return the borrowed securities, pocketing the difference.” 

Side note: Interestingly in this defamation case of Life MD Inc vs Culper Research and Christian Lamarco a footnote states: 

“Christian Matthew Lamarco is the sole employee and member of Culper Research.”

This is apparently a very small research house of one. 

The case is ongoing.

Summary

This short report has given me a chance to catch up on the latest gene therapy trials and investigate the FAERS database for myself. I am not currently overly concerned and I never believed or modelled a 100% retention rate or 100% TAM in the Rett community for Daybue. 

Daybue has side effects and they are manageable the benefit of this drug is life changing and worth the management of side effects. I will continue to hold my position and my conviction remains unchanged. Although I acknowledge potentially lower than modelled revenue for 2030 If attrition rates are slightly higher than expected.

I have read and been thinking about the Culper research short report targeted at Arcadia and indirectly Neuren. Of the short reports that I have previously seen I consider this to be one of the lower quality attacks. It is very opportunistic timing 10 days before ARCADIA release their quarter numbers. Neuren's SP has also doubled recently so people are more likely to sell to lock in a gain, so this could be an attempt to establish a long position in Neu but thats neither here nor there. I did invest more in Neu yesterday after the trading halt as I am comfortable with the data that I have seen and I think Jon Pilcher is an honest CEO and I would be surprised if they were flogging a dodgy drug.

The short report is very heavy on emotive wording, lacks verifiable information and generally uses strawman (not the good platform type) arguments to support its points. It uses a nice trick of generating authority by attributing quotes to authority sources (Dr's, or de-identified facebook patient quotes etc) that are unidentifiable so their validity can not be verified. The disclaimer at the front of the report is also worth a read too and basically tells you that they will make stuff up.

The four main arguments of the short report are:

1: The treatment (Trofinitide) is ineffective, poorly tolerated and is causing significant adverse events

2: Patients are either not continuing its use or can't get insurance re-embursement so patient numbers have peaked

3: Insiders at ACADIA are leaving

4: Gene therapy treatments will become available and take the market

These arguments taken at face value and read in the emotive language of the report are pretty concerning. It also plays nicely into the the recency bias --> where the most recent piece of information we have is given more weight than older information. The trick here is that the brain isn't very good at separating real from fake information.

The 1st argument that the treatment is ineffective has some merit to it as we have known from the development trials that not all Rhetts patients would benefit from or tolerate the drug. Notice the link they provide goes to the prescribing medicine information rather than the peer reviewed study data which breaks these adverse events down.

Culpers wording:

This information while true is misleading as this data is from the intial 12-week double blind trial. Nothing like quoted percentages in red ink to cause panic. The design of the study with good descriptions of the response metrics and the actual results is worth reading. Importantly an adverse effect in itself does not necessarily mean much. As part of these studies everything is reported and can be unrelated to the drug itself. In the Lavender study 2% (n=2) of placebo patients had adverse effects leading to drug withdrawal vs 17.2% (n=16) in the trofinitide group. Diarrhea and vomiting were the main adverse impacts and table 2 breaks down the severity of these effects with most being mild to moderate. Its worth pointing out that since this trial Acadia have developed treatment plans to manage these effects and there is good information about how they are doing this. Despite this diarrhea is still the main adverse event. ARCADIA are still fine tuning patient management of this event, and it is a valid risk that the severity of these issue limit the long term use or total dose rate. But for now this information is not conclusive.

Importantly, and what the Culper research failed to mention is that this initial 12-week Lavender trial transistioned into a 40 week open label trial called Lilac 1, where any patients who wished to continue the treatment could, as well as any patients on the placebo could start on trofinitide. 90% of the patients on Trofinitide in the Lavender trial continued using it. After the 52 weeks (Lavender + Lillac-1 time) only 54% (84/154) patients continued on trofinitide, with the majority dropping out due to adverse events (probably diarrhea), and 3% discontinued due to lack of efficacy.

77 of these patients then transistioned into Lillac 2 whose aim was long term safety and efficacy data. It ran for 32 months. 79% (n=60) of patients completed the study. In this study a further 3.9% (n=3) discontinued due to lack of efficacy and their were 5 deaths but these were due to causes unrelated to Trofinitide. Some patients have now been on the drug for 2.5 years. So this gives a reasonable amount of confidence that trofinitide is relatively safe and patients do see a benefit from using it. Diarrhea is still an issue as the main adverse event. This data was presented in December 2023 and a short video update was also provided by Dr Ponni Subblan - Acadia chief medical officer. The efficacy data over this period is consistent with the Lavender study, with most patients having minimally improved CGI-I scores. I am taking the Dr's interpretation on the CGI-I and the RSBQ scores and believe the benefits that they have published in peer reviewed journals. I think that the continued use of Trofinitide by patients and the willingness to tolerate the diarrhea will probably come down to the perceived improvement from the carer. So I think the best way to read this is to watch the ACADIA quarterly numbers.

From the data above I cant see how a "wall of discontinuation is about to hit ACADIA". Likewise, the argument Culper make that ARCADIA are misrepresenting the true discontinuation rate also doesn't make much sense to me. I don't think it matters if the patients tell their Dr that they are stopping or not as the uptake/discontinuation rate will be monitored through sales of Trofinitide, which ARCADIA would have as an early read and I can't see why ARCADIA would inflate this. Given they have guided for sales of between $80-87M, anything below this will be a concern and anything below the $66M they achieved last quarter would be an immediate sell and would validate Culpers patient discontinuation argument.

The insiders leaving ARCADIA argument doesn't really hold much weight - 3 senior people are leaving Doug Williamson Executive Vice President, Head of R&D (Jan 2023 - transition out currently) and Katie Bishop, Chief Scientific Officer (Jan 2021-Dec 2023). Arcadia has >500 employees, so we would expect some turnover and without anything but circumstantial conjecture I can't really see this claim being anything but a misdirection to make the situation seem dire. Especially since one of the recent hires is Kimberly Manhard as a Senior Vice President , Global Strategic Planning and Execution. Seems to me if the internal data on Trofinitide was dodgy you wouldn't be continuing to develop a global rollout strategy. Instead you would have raised capital after the last quarters numbers and projections before the "theoretical 6 month wall of discontinuations" hit you.

The gene therapy argument is not new and it is a genuine risk, but I don't think it will be a deal breaker for Trofinitide. If patients gain a benefit from Trofinitide then they will keep using it, likewise I am expecting that Arcadia are continually improving the management of diarrhea symptoms to make it more tolerable. The benefits and tolerability will determine whether ARCADIA's guidance is correct. Trofinitide has a significant first treatment advantage, currently there are no other FDA approved treatments. The gene thereapy enrollment trial they highlight is a phase 1 trial, so a long way to go before it is ready for the market. Gene therapy has been discussed on Strawman previously and it could be something great, but it is still a long way off so I don't really think at this stage it is a viable threat to Trofinitide.

I am also more comfortable buying into Neuren on this weakness due to the valuation being modest - although this is based on the trofinitide rollout continuing, and the recent positive readout from their NNZ-2591 phase 2 trial for Phelan-McDermid syndrome in December. I had previously prescribed this drug no value but after the phase 2 result I think this is now worth owning an option on it being successful.

That was a long winded way for me to say I think the Culper research was scaremongering.

Short response .pdf

Calm and measured response- nothing to see here. Acadia. Barely blipped so neither should Neuren.

Short Report on Acadia and Daybue.

$NEU SP plunges 17% on open.

It will be interesting to see how $ACAD responds in its results report next week.

I have a full position on $NEU, so won't be buying more on this opportunity.

Interesting. Short reports provide entertainment value, but sometimes there can be something in it.

Disc: Held RL and SM

Culper Research discloses short position in Acadia Pharma

February 15, 2024 at 12:26 pm EST

 Share

Feb 15 (Reuters) - Culper Research has taken a short position on Acadia Pharmaceuticals' stock, it said on Thursday, sending the drugmaker's shares down as much as 8%.

Acadia's drug, trofinetide, to treat Rett syndrome, a genetic brain disorder, was launched in the U.S. last year under the brand name Daybue.

"Acadia has misrepresented Daybue's safety profile, and in turn, patent retention rates," Culper Research alleged in its report.

"The company now faces a wall of discontinuations due to insurance reauthorization requirements. Numerous insurance plans we reviewed require tangible proof of improvement on the drug," the report said.

Reuters could not immediately verify the short seller's allegations.

San Diego California-based Acadia, which licensed trofinetide from Australian drugmaker Neuron Pharmaceuticals , did not immediately respond to a request for comment.

The approval had allowed use of the drug in adult and pediatric patients two years of age and older, with a label warning of diarrhea and weight loss.

Culper the drug "will continue to decline over time as patients discontinue" treatment and the company "runs out of new patients to fill the gap" and estimates revenue from Daybue will be $316 million in 2024.

Analysts were expecting revenue of about $379 million for the drug in 2024, as per LSEG data.

Acadia has an antipsychotic drug sold under the brand name Nuplazid approved for patients with a type of Parkinson's disease.

The company's shares clawed back some lost ground and were last down 2.1%.

Short sellers make money by betting that the price of a security (such as a stock) will decrease.

(Reporting by Pratik Jain in Bengaluru; Editing by Shilpi Majumdar)

$NEU have just issued their quarterly report.

Activity Report

All the key news flow has been covered by releases, so I'll not rehash any of that.

The end-2023 balance sheet is strong with $229m, ample to support the clinical program for NNZ-2591.

In terms on ongoing revenue, Trofinetide is the driver, with the chart below showing the relationship to sales by $ACAD.

Just to clarify, we don't yet know the Q4 revenue number because $ACAD doesn't report Q4 until 25th Feb. That's a key date to watch, as the DAYBUE sales will provide a key datapoint on sale trajectory. My key question is: was the Q2 to Q3 jump pent up demand that will moderate quickly, or is the Q4 guidance conservative, in which case there could be an upside surprise?

So look out for a market announcement by $NEU at the open on $26th Feb unless, of course, $ACAD gives a sales update ahead of the earning release - which is possible - in which case $NEU would follow at the next open.

Last year $NEU reported FY results on 24th Feb, and I don't know what the plan is this year. Ideally, their FY result need to include the $ACAD 4Q revenue number.

Has John said anything about this before?

Beyond that, I can't see anything of particular note in the release. ($ACAD are still holding on to the PRV.)

Bell potter has a hold on Neuren. Note this was before the trading halt before the SP rocket on 6 dec.

Given BP track record, maybe it is safe to say to ignore these recommendations but use their research to form your own thesis.

Seriously Neu not skipping a beat announcing complete enrollment for Angelman study results due Q3 next year.

Acadia up another 3% overnight should be another very good day for NEU today. Following Daybue announcement continued rally in SP for the week appears to be continuing following PMS results release.

Interesting what results will be with different route gene variations. The more success with varied gene mutations the more valuable the NNz2591 compound becomes.

Angel.pdf

Just saw a number of upgrades published this morning, here are the highlights from CMC:

19/12/20238:44AM Dow JonesNeuren Pharmaceuticals Price Target Raised 54% to A$27.00/Share by Bell Potter (headline only)

19/12/20238:44AM Dow JonesNeuren Pharmaceuticals Upgraded to Buy from Hold by Bell Potter (headline only)

19/12/20238:39AM Dow JonesNeuren Pharmaceuticals Price Target Raised 27% to A$31.10/Share by Petra Capital (headline only)

19/12/20238:17AM Dow JonesNeuren Pharmaceuticals Price Target Raised 33% to A$27.10/Share by Jefferies (headline only)

19/12/20238:17AM Dow JonesNeuren Pharmaceuticals Target Price Raised 19% to A$27.23/Share by Wilsons>NEU.AU (headline only)

Link to release: Phase 2 trial results: significant improvement

Highlights:

• Significant improvement was assessed by both clinicians and caregivers across multiple efficacy measures
• Improvements were consistently seen across clinically important aspects of Phelan-McDermid syndrome, including communication, behaviour, cognition/learning and socialisation
• Clinician and caregiver global efficacy measures showed a level of improvement typically considered clinically meaningful:
• Clinical Global Impression of Improvement (CGI-I) - mean score of 2.4, with 16 out of 18 children showing improvement assessed by clinicians
• Caregiver Overall Impression of Change (CIC) – mean score of 2.7, with 15 out of 18 children showing improvement assessed by caregivers •
• For 10 out of 14 efficacy endpoints, improvement from baseline on overall/total scores was statistically significant (Wilcoxon signed rank test p<0.05)
• NNZ-2591 was safe and well tolerated, with no clinically significant changes in laboratory values or other safety parameters during treatment

Brokers have cranked their models on $NEU. I don’t yet have visibility of the FY24/25/26 EPS forecast changes, however, in the chart below, average target price has moved up from $19.14 to $22.41 (+17%) on yesterday’s news.

Given that the SP only advanced about 8.5% yesterday, the gap between consensus and SP has widened even further, now standing at 83%.

(My model has a mean Val of $20, and it will be a while before I have time to update it, but eyeballing the patient build profile, if I accelerate US growth number growth without changing market size or revenue per patient assumptions or other assumptions, my mean Vals are likely to advance about 5% to $21. So, now consensus is ahead of me. However, like $ACAD, I don’t want to be too exuberant. With strong community advocacy and centralised treatment through CoEs, a decent chunk of the market was always going to mobilise rapidly. I want to see what Q4 looks like before getting too excited.)

Interesting to see how this pans out.

Disc. Held in RL and SM

Source: MarketScreener.com

Acadia just released Q3 results and Daybue sales were $66.9m with Q4 sales of Daybue anticipated to be $80-$87.5m

Very solid on the high side of estimates.

Disc Held

Big pharma actively moving back into neuroscience drugs. Stars are aligning for Neuren if there is upcoming success in a few weeks for Phase II Phelan-Mcdermid study. A lot of eyes will be watching NNz2591.

https://www.biopharmadive.com/news/bristol-myers-neuroscience-cns-reserach-ken-rhodes/698062/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202023-10-27%20BioPharma%20Dive%20%5Bissue:55879%5D&utm_term=BioPharma%20Dive

Acadia up 10% in US overnight and up over 3% here close of day. Scuttlebutt Acadia just received a funding deal from DVA US for $300 million worth of Daybue for soldiers PTSD / insomnia related?? Will try and find out more.

A few quick takeaways from the $NEU SM meeting with Jon just concluded (in these I am purposefully not going over ground covered in previous SM discussions, but have to give a big shout out to @Nnyck777 for great insights which broight me to the party!

• $NEU appear commercially very astute - getting back the 4 indications for NNZ-2591 in doing the $ACAD ROW deal is a master-stroke
• Building a sales, marketing and supply chain capability in orphan drugs is less of a challenge than mainstream pharma or medical devices because of the patient community and small number of specialists who support them
• Competition - I perceive this a lower threat than I have discussed earlier, but I will still be watching the Anavex Phase III result
• Its hard to see $NEU not getting an acquisition offer if NNZ-2591 Phase II Phelan-McDermid read-out is positive. (I hope they have a good defence valuation logged with the Board, as that is the biggest risk to long term holders.)
• NNZ-2591 in the success case is multiples of trofinetide, and $NEU aim to maintain exposure to more of the total value. But success is not assured. However, if it yields a positve impact in humans for P-McD in the PII readout, then that potentially de-risks the other indications given the mouse model findings. (December is a BIG potential catalyst.)

Investment milestones: what I am focused on going forward:

1. Attend $ACAD results call in late-Oct/Early Nov (Q3 sales, Q4 outlook)
2. Await NNZ-2591 Phase II readout in December
3. Monitor for news of regulatory filing for Trofinetide in Europe and/or Japan
4. $ACAD annoucement of sale of PRV (and value)
5. Monitor Anavex Phase III report towards year end

1. and 2. are both potential material SP re-rate catalysts, and would also drive my holding. A negative result in NNZ-2591 is not a thesis-breaker and, if there is a SP pull-back, could even present a further buying opportunity.

I know I am sitting on a SM valuation of $20; but that is a top-down scaling back of results of a range of scenarios which are actually $12.50-$58.00, which assumes nothing from Fragile-X or NNZ-2591. Rather than settle on a single number, I think it is better at this stage to consider the range. I will update my model post-Q3 $ACAD results.

I've taken another bite of $NEU, and will consider more at milestones 1. and 2. above.

Very happy to have this risk-reward profil in my portolio.

Disc: Held in RL (2.4%) and SM

Article on $NEU this morning in The Australian. Very much looking forward to tomorrow's SM meeting with CEO Jon Pilcher.

$35m payday for Neuren Pharmaceuticals as blockbuster drug takes off

Neuren Pharmaceuticals, the $1.5bn ASX-listed biotech company that for a few loyal investors has proved a ride of a lifetime, is about to receive something incredibly rare in the Australian biotech sector – a cheque in the mail for drug sales.

Well, not an actual cheque of course, but its first royalties payment based on $US23m ($35.19m) of quarterly sales earned by its blockbuster drug Daybue for the treatment of Rett syndrome, a rare genetic disorder and developmental affliction that can appear in very young children and that has a life expectancy of around 40 years.

For patients it‘s welcome news, of course. For Neuren shareholders it is a payoff for years of work and capital with the biotech’s US partner, Acadia, selling since April the first ever treatment approved for Rett syndrome, which also earned Neuren a milestone payment of $US40m.

These revenues mean that a first significant profit will be expected in Neuren’s first-half results due out later this month and making it one of the few biotech companies listed on the ASX to actually be profitable.

In July Neuren and its US partner Acadia expanded their partnership to be worldwide, for which Neuren received another upfront payment of $US100m.

The nation’s sharemarket is jam-packed with biotechs that promise the world, spend hundreds of millions of dollars – or billions – to develop a drug only to fall short at the last hurdle, fail to deliver a commercial pharmaceutical and have nothing to show but exhausted cash reserves and a cratering share price.

An expanding audience of institutional investors are focused on the Melbourne-based biotech as it has moved through a transforming series of events led by Phase 3 trial success, FDA approval of the first ever treatment for Rett syndrome, a successful US launch and now significant revenues.

A small group of funds, notably Karst Peak, Milford Asset Management, Antares and Regal Funds Management, were involved at the start of this journey, but many more have moved in, including index tracking funds.

Neuren joined the ASX 300 last year and with a current market cap of $1.5bn – its share price is up 830 per cent in the last five years – and it is tipped to join the ASX 200 soon.

E&P analyst David Nayagam believes there will be an inevitable correction from US analysts that should drive up the price of Acadia, with flow-through for Neuren. Looking forward, E&P’s short-range launch projection has increased 20 per cent for fiscal 2023, representing around a $US15m royalty payment.

Those fundies and investors who follow the biotech sector closely are also getting increasingly excited about another drug in the Neuren pipeline, NNZ-2591, which has applications for a range of neurological disorders. If current Phase 2 studies are supportive, Neuren will now have the sufficient cash to continue development of at least some of these indications into Phase 3.

ELI GREENBLAT 

 SENIOR BUSINESS REPORTER

Intelligent Investor have just released a research note on NEU (Neuren Pharma: biotech royalty)

They don't have an official buy/hold/sell price target or any other rating on the stock and they aren't officially covering it nor do they plan to at this stage

Their positives essentially align with the discussions already covered here on Strawman. They do also cover a number of possible risks/negatives - e.g. "Neuren only has one product, so any issues discovered after commercialisation could be catastrophic to its royalty stream", the reliance on Acadia (and their limited presence in Europe), and the risk a gene therapy is found for the single gene mutation and actually cures rather than treats the disease

$NEU reported their 4C this morning;

Their Highlights

DAYBUE™ (trofinetide) launched by partner Acadia in the United States on 17 April 2023 as the first treatment ever approved for Rett syndrome:

• US$40 million milestone payment received by Neuren on first commercial sale

• Highly encouraging early progress, with expected net sales of US$21-23 million in Q2 2023 and US$45-55 million in Q3 2023

• Neuren to receive quarterly royalties on net sales, plus milestone payments of up to US $350 million subject to achievement of annual net sales thresholds, plus one third of the market value of Rare Pediatric Disease Priority Review Voucher awarded to Acadia

Transaction executed to expand trofinetide partnership with Acadia from North America to worldwide:

• US$100 million up-front payment (received by Neuren on 27 July)

• Neuren to receive additional potential milestone payments of up to US$427 million, plus royalties on net sales ex-North America

• Expanded partnership leverages Acadia’s unique knowledge and expertise from the successful development and commercialisation of DAYBUE in the United States

Enrolment completed in Phase 2 clinical trial of NNZ-2591 in Phelan-McDermid syndrome, top-line results expected in December 2023

Commenced Phase 2 trial of NNZ-2591 in Prader-Willi syndrome

A$45 million net cash generated from operating activities in half-year to 30 June

A$87 million cash at 30 June 2023 (A$226 million adjusted to include US$100 million up-front payment received in July)

My Take Aways

I'll keep it brief, as we've covered a lot about $NEU here in recent weeks. This is really all about the key milestones in the 6 months ahead: sales by Adacia in Q3 and (hopefully) aQ4 forecast; sale or use by Acadia of the PRV; the progress on NNZ2591 Phase 2 CT with first potential milestone before year end; and any newsflow of filings for DAYBUE outside USA.

Starting the Q with $39m, with outflows excluding tax of less than $9 and receipts of alomst $60m (driven by deal and first sale milestones), $NEU ends the quarter in a strong case position of $86m and has, in recent days, received a further $100m, to now be sitting somewhere around $186m. With strong sales flowing and further milestones ahead, this should increase over the next year as they build the war chest to pursue further growth.

So, $NEU is where it needs to be to continue to execute its clearly articulated strategy.

Held: RL and SM

In March this year Skyclaris the new Freidrich’s Ataxia drug developed by Reata achieved FDA approval.

https://www.fiercepharma.com/pharma/reata-scores-first-fda-approval-its-21-year-history-pushing-rare-disease-drug-over-finish

The comparison is interesting like Neuren’s Daybue this was the first treatment for the condition. Like Daybue the numbers of potential patients was extremely similar in the US - around 5000. Estimates of 22,000 world wide were suggested.

Pricing is almost exact with Skyclaris costing $370,000 annually vs Daybue’s estimation of $375,000 annually per patient.

Reata’s share price jumped from $31 to $84 per share on the day of FDA approval with estimates of the drug revenue bringing in $1 billion to $1.5 billion by 2030.

As discussed here these revenue multiples are similar if not slightly lower than what Acadia is expecting to bring in based on Daybue alone. Yet the share price today for Acadia sits at US $29 per share and Neuren sits at AUD $13.00.

Why Reata is such an interesting comparative case study is that Biogen has announced today that it will by the company for $7.3 billion. Skyclaris is the only advanced drug in the companies pipeline, with other drugs in phase 1.

https://www.fiercepharma.com/pharma/biogen-ponies-73b-rare-disease-specialist-reata-and-potential-blockbuster-skyclarys

There is no doubt that Neuren’s phase 2 studies are pivotal in December. If Reata can command $7.3 billion for 1 drug with estimated revenue similar to Daybue in Rett’s alone. Imagine what Neuren could command for NNZ2591 a drug with 4x the population size across multiple conditions. Daybue will also have likely expanded use cases.

I have no doubt that Neuren is being watched very closely.

Money in the bank.

ASX Annoucements

$NEU announced receipt of US$100m from the expansion of the partnership annouced recently, and discussed extensively here.

There is a lot more to come in terms of various milestone payments and royalties. So serious cash is starting to flow.

To put this in context, 2022 total cash payments (operating and investing) were only c. A$14m.

It is clear from recent presentations that Jon wants to build a very strong balance sheet to both fund the ongoing Phase 2 programs that are running in parallel, and in the success case to move quickly into Phase 3 as (and if!) each individual milestone is achieved.

He would like to be able to do this more independently for NNZ-2591 and they were able to for trofinetide (subject to capability considerations) and, in that context, Jon has previously indicated that they are exploring acquisitions to help build the necessary capability.

This kind of cash receipt is a significant first step in building the necessary war chest. Global pharma requires deep pockets.

It is going to continue to be an interesting ride.

Disc: Held in RL and SM

Neuren Numbers

I recommend the following video to understand the significance of the new deal with Acadia:

 https://www.youtube.com/watch?v=_bMto7lvoEE

This slide presentation matches the video:

https://www.neurenpharma.com/pdf/3f24fae9-8cfc-463f-9e44-ec1c9f819643/Investor-web-conference-presentation-14-July-2023.pdf

Neuren Rett Syndrome Estimates in the US alone

5000 Currently identified people 

10,000 Potential 

Rett Estimates for the ROW (rest of the world)

Neuren has provided very rough estimates of potential Rett numbers in Europe, Japan, China Urban and Other Asia. 

To minimize complexity I am going to just concentrate on Europe and Japan. 

4000 Currently identified people Europe

13,000 Potential in Europe

1000 Currently identified people Japan

3000 Potential in Japan

Pricing Rett ROW for Models

I am keeping this very basic. Google tells me based on a 2021 study by Rand corporation that prescription prices of drugs in the US are 2.4 x higher than in Japan and other European Countries such as Germany. 

So I estimate $US150,000 per annum per child in Europe and Japan in my model (as opposed to $375K per annum in US). 

Also milestone payments accrue with the addition of ROW numbers, so milestones payments will be accrued faster. Milestones however are only paid once. The tiered royalties are exactly the same as the US percentages for Daybue. 

This will stay the same independent of whether Daybue is used for Rett or other indications such as Fragile X. 

Fragile X Estimates in the US alone (Figures sourced from Neuren)

30,000 potential people in the US with Fragile X

It is still unclear whether Daybue will be developed for Fragile X or whether Acadia will develop NNZ2591 for this condition instead. 

As this is unknown I have left it out of the model

Fragile X will need a Phase 3 study with Daybue so 1 year plus 6 months fast track FDA approval. So conservatively no revenue from Fragile X until 2025. 

Fragile X Estimates for the ROW (figures sourced from Neuren)

38,000 potential people in Europe

117,0000 potential in Asia 

Time Horizon for models

Daybue patent exclusivity to 2040 

My model assumes only Rett revenue until more details emerge around fragile X.

Important note on milestone payments

Jon Pilcher has confirmed that milestone payments are one off, once paid they are no longer factored into Neuren’s future revenue. 

Neuren’s Current Position Factoring new announcement. 

The first major rejig of models came on FDA approval when analysts estimated that Daybue would cost $180K per annum per child with Rett. 

The surprise to the upside was huge with cost estimate per child based on average weight of $357K per annum per child. 

Remember too that all these figures are in US dollars which of huge benefit to Neuren currently. I am assuming an exchange rate of 0.68c. 

*Converted to AUD above in Table 

So cash on hand for Neuren as of July 2023 is AUD $240 million

The PRV has not been factored in. If Acadia use or sell this soon this Cash on Hand balance increases to AUD $297 million.

My revenue model estimates prior to this new Acadia deal. 

I estimated Acadia was on track to receive $US 76,500,000 or $AUD 112,500,000

However this estimate already appears to have been exceeded according to Acadia with Q2 23 million Q3 55 million reported revenue estimates. Say conservatively Q4 sees 70 million. That suggests that they were able to rollout Daybue to approximately 400 people in the first 3 qrts since release. A first year estimate of 500 patients seems very possible. 

*All figure is US dollars

**0.68c currency conversion (I will guess at this but keep it consistent, although this will account for error in the model)

Remember Milestone Payments are triggered every calendar year. So 2024 is unlikely to trigger this. 

However my revenue estimates for 2024 for Neuren are $27 million (tiered royalties) + $146 million for the new ROW payment deal + $50 million with likely sale of PRV. 

I don’t believe that any ROW numbers will be rolled out in the calendar year of 2023 so this has been excluded from estimated revenues. I believe these will be involved in calendar year 2024.

FY 2024 Total Revenue = AUD $223 million which is well ahead of estimates of $120 million. 

Priority Revue Voucher (PRV) Notes

Acadia still retains the priority review voucher. 

Priority review vouchers are only valid for one drug molecule. 

Total resale value is approx. US$100 million. 

If Acadia uses this voucher themselves then will still need to pay Neuren 1/3 of the value.

If Acadia sells this voucher they will still need to pay Neuren 1/3 of the value of the voucher.

Neuren will receive US$33 million or approximately $50 million AUD. 

Unsure of the timing.  

With approval of NNZ2591 there will be a second PRV distributed by the FDA. Jon has mentioned that this is likely to go to Neuren as they are more advanced in their pipeline – up to phase 2 trials already for this molecule. So they perhaps will receive the full US$100million on approval. 

However if Acadia does somehow receive approval first for NNZ2591, say for Fragile X, Neuren will still receive 1/3 of the value of their voucher. 

The importance of the New ACADIA NEUREN DEAL just released.

Neuren and Acadia’s New Deal Payment Structure

1.    More cash in the bank immediately contributing to FY 24 revenue

2.    Upfront payments for commercial sales likely to be triggered in both Europe and Japan in calendar year 2024 as Daybue data is so comprehensive and well understood by ACADIA and there is an urgent unmet need for this condition. 

3.    Fragile X re-immerging as a new revenue stream for Acadia and hence Neuren

4.    The very significant removal of restriction of NNZ2591 being restricted for development by Neuren in Rett and Fragile X 

5.    Future payments for NNZ2591 for Rett and Fragile X from Acadia to Neuren, secured at a much higher % of royalties as are ROW for Daybue

6.    Neuren retains the full world rights for NNZ2591 for all other conditions including:

a.    Phelan McDermid (US 22,000 EU 28,0000, ASIA 81,000)

b.    Angelman Syndrome (US 14,000 EU 18,000 ASIA 52,000)

c.    Pitt Hopkins (US 7000 EU 9000 ASIA 25,000)

d.    Prader Willi (US 13,000 EU 18,000 ASIA 47,000)

Restrictions have been lifted on what can be developed by Neuren. 

NNZ2591- Due for Phase II readouts in Dec 2023. 

However it is an open label study so Acadia and Neuren would be well aware of the first signs of results during negotiations for this drug. 

New Models To Include Rett for US, EU and Japan 

Basic model for all sales and milestones and upfront payments by year

This does not take into account Fragile X or NNZ2591 development. 

Like all models I am plucking numbers of potential takers of the drug assuming that most will stay on it. It is a really hard thing to model. So I presume this is a very rough guideline only. 

Would be interested in others perspectives. 

However it might help with rough estimates of uptake in different territories.

Thanks

Nnyck

Based on the current share price and a few chats I've had (analysts, neuroscientists) I think investors should be fairly confident that Trofinetide will be approved for use in Rett Syndrome.

This is despite the dubious trial endpoints and an effect size that is highly questionable.

Unfortunately (or fortunately for shareholders) it's a case of TINA - there is no real alternative, give the pathophysiology of the disease we are unlikely to see a gene-based therapy or therapy that uses viral vectors.

it is very difficult for the FDA to deprive people of hope, as ineffective as this molecule may ultimately prove to be.

Given where the share price is at I would have thought approval is fairly baked in (not to say it won't pop). I think holders should be sharpening their pencils and shoring up the conviction they have in their valuation.

Could be wrong but that's my 2c.

EDIT: Well looks like I was wrong about the valuation! My bad.