JP Morgan: Overweight PT $23

Share buyback surprise; focus on first NNZ-2591 Phase 3 trial to start in 2025

Emerging biotechs do not typically find themselves in a position to announce share buybacks. However, for Neuren, the early arrival of a higher-than-expected sale price of Acadia Pharmaceuticals’ Priority Review Voucher (PRV) let them do just that. Neuren announced a $50m share buyback this week, a surprising move but one which speaks to the company’s comfort with its current spending requirements. We are somewhat cautious on what the exact next cost of the phase 3 clinical trial of NNZ-2591 in Phelan-McDermid patients will be, however, Neuren’s current cash position and lean operating model should allow the company to meet requirements comfortably. At this stage, we remain focused on the nearterm catalysts in the development of NNZ-2591 to a late stage clinical asset and view the risk/reward as favourable. Retain Overweight, PT unchanged at $23

• Buyback driven by PRV sale. At Neuren’s current cash position of ~$210m and incoming steady royalties from Daybue, the company maintains it will have sufficient funds to execute on at least two Phase 3 trials (likely to be NNZ-2591 for Phelan-McDermid syndrome and Pitt Hopkins syndrome). We view the announcement of a share buyback as somewhat unnecessary, but understand the rationale of returning excess cash to shareholders

• Clinical trial preparation on track. We await the news of the defined endpoints for NNZ-2591’s first Phase 3 trial in Phelan-McDermid Syndrome patients, likely to be announced in early 2025, for commencement shortly thereafter. Management have maintained the line it will cost US$50-100m per trial and we expect to get a clearer picture once further details emerge of how large the patient size of the Phase 3 trial will be required to be

• Daybue patient adds now steady. Daybue September quarterly sales of US $91.2m was within our expectations, as full year guidance was unsurprisingly narrowed to the lower end at $340-350m. Sales reassuringly continue to grow, lifting 8% QoQ as discontinuations stabilise. Moving forward the focus will be on driving penetration outside the Rett’s Centres of Excellence (more than 70% of patients treated) in the US and abroad, the submission of the European dossier in 1Q CY25. We make limited changes to our Daybue forecasts

• Retain Overweight, PT unchanged. The overhang on Daybue sales volatility appears mostly removed, since the latest Acadia quarterly numbers suggest patient discontinuations have stabilised. Our focus remains on the progress of Neuren’s pipeline drug, NNZ-2591, as it enters late stage clinical trials which should over time demonstrate its platform potential. We continue to see the risk/reward as favourable for Neuren and retain our Overweight rating, PT unchanged at $23 p/share

DISC: Held in RL & SM

A 34% pop in SP in just the past week on the back of the good DAYBUE numbers - FWIW here's what one broker had to say

MST Marquee: Buy 12m PT $28

Daybue back: Bumper qtr for NEU

MST upgrades CY24 NPAT 13.4%

▪ Daybue grows Q/Q: active patient numbers show pos linear profile

▪ 3Q delivers NEU A$76m each for voucher sale + milestones (2xUS$50m)

▪ Positive progress in Qtr for NNZ-2591 puts NEU on cusp of Ph3 in PMS

▪ MSTe adjusts FY24e/FY25e EPS +13.4%/-9.4% PT $28ps. Buy rating

At 3QCY24, Acadia Pharmaceuticals (ACAD.US) demonstrated a consecutive qtr growth or ‘linear’ profile of active Daybue patients. Despite ACAD’s updated guidance pointing to the low-end of its previous range, NEUe royalties of $54-56m still landed modestly ahead of MSTe. ACAD’s CY24 YTD Daybue sales exceeded US$250m & triggered a further US$50m milestone payment (as MSTe). ACAD’s sale of the Daybue Priority Review Voucher (PRV) adds another US$50m to 2H. NEUe total CY24 rev at ~$216-218m (incl $11m interest). MSTe CY24 rev is increased +11%; we also update for Phelan-McDermid syndrome (PMS) Ph3 R&D costs from 2H25. Our FY24e EPS gains +13.4% but FY25e EPS falls -9.4%. MST PT A$28ps, with longer term FCF profile unchanged

Acadia (ACAD): 3Q royalties, milestone & Voucher sale

ACAD’s 3QCY24 (All US$) net sales for Daybue grew +36.3% on pcp to $91.2m (+7.8% on consec qtr) with growth in unit sales including patient on treatment at ~923 (was ~920 in 2Q). Based on 3Q result, NEU will receive royalties of ~A$13m (10% for sales ≤$250 and 12% between $250-500m). ACAD narrowed CY24 Daybue sales guidance to $340-350m (was $340-370m) implying 4Q royalty to NEU at ~$17m. For 9mths CYTD sales were $251m, above the >$250m for CY required to trigger a further $50m milestone. Separately ACAD sold its rare paediatric PRV for US$150m with NEU to receive ~US$50m

Cashed up: Bal sheet & cash-tax asset from NZ credit

At end 3QCY24, NEU cash and short-term investments totalled A$210.2m, with interest income covering corporate expenses. NEU expects to recognise a deferred tax asset of approximately A$17m in CY24 from New Zealand tax losses, partially offsetting its ‘cash-tax’ given A$12.5m was applied at CY23

Updates: Canada apvl & NNZ-2591 PMS progress

Daybue was approved in Canada in Oct to treat Rett syndrome in patients >2yrs. NEUe TAM for Rett in Canada at 600-900 patients & sales will add NEU royalty payments. On NNZ-2591 NEU says its FDA meeting on key aspects of its Ph3 trial for PMS was positive. NEU plan a 13wk randomised, double-blind, placebo controlled trial in 3-12yrs olds. Ph3 likely starts 2HCY25, but timing and costs remain subject to final efficacy & endpoints

DISC: Held in RL & SM

@mikebrisy @Nnyck777 FWIW this out from JP Morgan this morning - it basically highlights things you've already surfaced in your recent posts

Angelman results establish NNZ-2591 platform potential

Neuren has now delivered its third set of promising efficacy data for NNZ-2591, extending the range of rare genetic neurodevelopmental diseases potentially treatable with its key pipeline drug. The data presented for Angelman syndrome (AS) suggests it has potential to progress to the next clinical trial stage. However, current competitive dynamics in AS means it will be prioritised behind other indications. Of immediate focus will be NNZ-2591’s next steps in Phelan-McDermid, where Neuren will be engaging with the FDA next month in a post- phase 2 meeting, which we are hopeful will yield the progression of NNZ-2591 to a phase 3 trial. We continue to see upside in the NNZ-2591 platform and have lifted our DCF-based price target to $23, Overweight retained

NNZ-2591 “multi-indication platform” viability strengthened with promising Angelman results. NNZ-2591 delivered CIC and CGI-I mean scores which were clinically meaningful in its phase 2 trial of AS. This is the third neurodevelopmental disease to have shown early efficacy signs with NNZ-2591, following Phelan-McDermid in Dec-2023 and Pitt Hopkins syndrome in May-2024. The promising data set suggests the potential for other genetic neurodevelopmental diseases could be treated with this platform treatment

Two other competitors ahead in Angelman. As previously covered NNZ-2591 faces competition in AS with the potential of two competitors entering phase 3 clinical trials within the next 12 months (Ultragenyx & Ionis Therapeutics). It is too early to assess which treatment is leading and we caution comparing results across earlier trials. However, should NNZ-2591 progress, it has the administrative advantage of being an oral liquid dose vs the competitors intrathecal (in the spine) dosage

Competitive market dynamics mean Phelan-McDermid and Pitt Hopkins will be prioritised. Neuren have indicated it plans to focus on Phelan-McDermid and Pitt Hopkins after the good phase 2 trial results recognising the lack of competing therapies currently in trials. Neuren’s existing cash reserves will allow it to support two phase 3 trials itself (each to cost US$50-100m)

What’s ahead? While the newsflow has slowed with no further phase 2 trial read-outs for NNZ-2591, next month’s post-phase 2 meeting with the FDA for NNZ-2591 in Phelan-McDermid will be important. An ideal outcome would be the announcement of a phase 3 clinical trial noting Neuren will only comment once the meeting minutes are released. On Daybue, although the weaker guidance was a disappointment, we look to market expansion as sources of upside in the year ahead starting with the Canadian market later this year and Europe in early CY25

Retain Overweight. We lift our probability weighted valuation for Angelman syndrome which brings our Jun-25 price target to $23 

DISC: Held in RL & SM

FWIW from JPM this morning (before the Angelman results were released)

Softer Daybue sales, attention likely to shift to drug pipeline

Daybue royalties in the June quarter missed our estimates due to slower new patient starts than expected. We have cut our 2024 royalty estimate by 14%, but we do not expect the milestones payment to change, leading to a 7% reduction in 2024 revenues. The lower revenues were offset by lower costs and higher interest income, leading to minimal changes to our EPS estimates. While the slower Daybue uptake is disappointing, the reduced cashflow should have no bearing on Neuren’s R&D pipeline plans. We remain confident Neuren will progress its NNZ- 2591 pipeline, noting the impending phase 2 read-out for Angelman syndrome and End of Phase 2 meeting with the FDA for Phelan-McDermid syndrome next month. Our PT reduces to $22 (from $26.70) on lower Daybue royalties; retain Overweight 

DISC: Held in RL & SM

FWIW JP Morgan (Overweight with 12m PT $26.70 - so take this with the requisite grains of salt) have released an updated note with the following summary highlights ...

Thoughts ahead of the Angelman phase 2 results in 3Q24

Expectations are high ahead of the results from the phase 2 trial of NNZ-2591 for Angelman syndrome (AS) due early this quarter. A positive result will support the belief that NNZ-2591 is a “multi-indication platform”. In this note, we focus on what to look for when the phase 2 results are released, along with an assessment of the competitive landscape. AS is an attractive opportunity as there are currently no approved therapies but the competitive challenge is greater than for Phelan-McDermid and Pitt Hopkins syndrome where NNZ-2591 has the potential to be the first therapy to market. Beyond the phase 2 results for AS, Neuren remains well positioned with catalysts ahead including the quarterly result and an FDA meeting. We reiterate our Overweight rating

Focus on CGI-I and CIC endpoints for Angelman. These two efficacy endpoints will give a sense to how much NNZ-2591 reduces disease severity in AS patients. Neuren hopes to deliver scores below 4 and ideally less than 3. While the positive results from Neurens previous trials of NNZ-2591 in Phelan-McDermid and Pitt Hopkins syndrome were encouraging, we caution the read across to the Angelman trial is limited given its different etiology

Neuren’s Angelman trial has been completed with results due this quarter. The last patient enrolled for the AS trial was about two weeks after the last patient enrolled for the Pitt Hopkins trial, which reported results last May. However, we expect the collection of results and analysis of data to take longer with AS because the clinical trial sites were in Australia which have less experience compared to US sites

Several competitor trials for Angelman. AS presents a sizeable opportunity with no current therapies. We are aware there are other therapies in trial which are all at a similar stage to NNZ-2591, including Roche’s GABA-modulator alogabat and antisense-oligonucleotide candidates Ultragenyx’s GTX-102 and Ionis Pharmaceuticals’ ION582. These trials are also early stage but Ultragenyx indicated it plans to initiate a phase 3 trial by the end of 2024

FDA meeting for NNZ-2591 in Phelan-McDermid plus new indications. Also this quarter will be Neuren’s post phase 2 Phelan-McDermid meeting with the FDA. We expect the company to make an announcement once the minutes from this meeting are published. We are hopeful this will support the move to a company funded phase 3 trial starting in early CY25. We also expect the company to announce its plans for NNZ-2591 in the treatment of other rare neurodevelopmental diseases

Retain Overweight. Daybue sales in the June quarter (to be reported by Acadia Pharmaceuticals in early August) are difficult to predict after the volatility in the previous quarters (strong Dec but weak March) with this uncertainty weighing on share price. We are comfortable sales will lift over December but would see any disappointment as an opportunity ahead of the NNZ-2591 results

DISC: Held in RL & SM

On Livewire today: Backed by industry titans, this fundie is leveraging Australia's healthcare innovation

also includes a related video interview (of Hashan De Silva - KP Rx Healthcare Opportunities Fund) on Youtube: https://www.youtube.com/watch?v=BBXWHkI72UQ

both of which talk to Australia's innovative healthcare companies in general (with comparisons to the US) and speaks about NEU in particular

Disc: Held in RL & SM

From Fintel and Nasdaq

Neuren Pharmaceuticals (ASX:NEU) Price Target Increased by 5.30% to 20.42

The average one-year price target for Neuren Pharmaceuticals (ASX:NEU) has been revised to 20.42 / share. This is an increase of 5.30% from the prior estimate of 19.40 dated October 31, 2023

The price target is an average of many targets provided by analysts. The latest targets range from a low of 17.17 to a high of 23.93 / share. The average price target represents an increase of 37.07% from the latest reported closing price of 14.90 / share

What is the Fund Sentiment?

There are 25 funds or institutions reporting positions in Neuren Pharmaceuticals. This is an increase of 6 owner(s) or 31.58% in the last quarter. Average portfolio weight of all funds dedicated to NEU is 0.13%, a decrease of 4.72%. Total shares owned by institutions increased in the last three months by 8.99% to 4,880K shares

DISC: Small position Held in SM & RL

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