Kjt1969, using well-considered analysis, you have highlighted the enormous value of Neuren’s pipeline.
However, your post also highlights the complexity and restriction that weighs on Neuren under its Joint Venture (JV) and Licence Agreement with Acadia.
Here is my summary of what I see as the highly relevant clauses in the JV and Licence contract:
Clause 6.2Acadia must inform and seek the approval from the Joint Steering Committee (JSC) for development of trofinetide in any indications other than Rett syndrome and Fragile-X syndrome.
The JSC will review the proposal in detail and assess the potential studies and development activities in that new indication to identify a basis for proceeding.
If the JSC gives approval, Acadia can proceed with the indication but must keep the JSC informed of the progress of the development activities.
Once the JSC is provided with evidence of the commencement of clinical trials of the new indication, and provided that indication is not PMS, PHS, AS or PWS, the indication is classified as a New Indication.
Clause 11.1 (c -e)If Neuren has already commenced clinical development in North America of a product for an indication that subsequently becomes an Acadia New Indication for trofinetide, Neuren must halt clinical development for the New Indication, excepting that
- Neuren and ACADIA agree on the terms on which that product and New Indication can be included in the JV.
- Acadia ceases development of trofinetide in that indication.
- Neuren develops and commercialises the new indication only outside North America.
If Neuren wishes to pursue an indication in North America which it is prevented from developing or commercializing and Acadia doesn’t want to or doesn’t agree the terms on which that product and indication can be included in the JV, Neuren must not pursue that indication.
One might conclude:
- The price paid to acquire Neuren will largely hinge on the highest bid by a potential acquirer other than Acadia.
- A potential acquirer other than Acadia would be reluctant to assign value to NNZ-2591 in either Fragile-X or Rett syndrome because there is no certainty Acadia will choose to develop NNZ-2591 in these indications. Similarly, it would not wish to assign value to Acadia’s licence to develop trofinetide in Fragile-X. And if Acadia holds ambitions to acquire Neuren itself, which is almost a given, it is unlikely to commence any development of either trofinetide in Fragile-X or NNZ-2591 in Rett syndrome or Fragile-X until any acquisition is finalised.
- A potential acquirer other than Acadia will also be reluctant to assign full value to any of the new undisclosed indications being developed by Neuren because of the uncertainty and lack of control over whether Acadia will opt to develop trofinetide in the same indications. Under the 2023 Joint Venture and Licence Agreement, Acadia is able to halt further development of those indications in North America, irrespective of how advanced those programs are. Other potential acquirers are likely to halve the value of these assets on the basis that they would only have unrestricted rights in ROW territories.
- Thus, a potential acquirer, other than Acadia, will likely only assign value to
(a) the licence fees/milestones payable by Acadia to Neuren from trofinetide in Rett.
(b) the four current NNZ-2591 indications, which are globally free from Acadia restriction.
(c) ~50% value (i.e, ROW value) for any further indications of NNZ-2591.
Obviously, this would diminish what a potential acquirer might be willing to pay for Neuren. Yet, interest might still remain, especially by European-based pharmas with rare disease divisions and global capabilities, such as Roche, Novartis, UCB or Ipsen.
- The question could be asked, why would Neuren bother with adding new NNZ-2591 indications to its pipeline if Acadia has the right to stop these programs?
- The answer is that if Acadia wishes to acquire Neuren, it will need to assign full value to any new indications being taken into clinic by Neuren because, for Acadia, these assets would be globally unrestricted. Additionally, any new NNZ-2591 indications would still have value to a pharma other than Acadia, albeit roughly halved. But, given competitor bids for Neuren are likely to be lowered by the “Acadia” factor, this places Acadia in a comfortably strategic position to outbid other pharma while still snagging a bargain.
- If the best bid on offer is unacceptable to Neuren, it will need to advance alone.
- While another party sidestepping the potential restrictions by acquiring both Acadia and Neuren makes sense on one level, I believe it would be too difficult to pull off with any confidence given that both are publicly-listed companies.
- A merger offer by Acadia is a definite possibility and possibly hinted at by the new “Joint Venture” agreement. Acadia could opt for a dual listing structure such as that used by Block in its acquisition of ASX-listed Afterpay.
- Acadia has good reason to move sooner rather than later.
Simply food for thought....
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