BP update, page-4

Extract for you arnies:

Phase II TBI results reaffirm safety, miss on efficacy

Results from NEU’s Phase II Traumatic Brain Injury (TBI) trial reaffirmed the safety profile of trofinetide, however the drug failed to impress on efficacy measures, with no difference observed between drug and placebo on 3 core efficacy end-points. Key confounding factors attributed by NEU include higher proportion of patients in drug arm with severe injury and lower levels of drug exposure in patients than targeted. The US Army has supported and provided funding of US$24.5m for the TBI program. Further
development for TBI will be contingent upon their continued support and funding. Detailed analysis of the trial data will help to determine if a feasible path forward exists. Discussions will be mainly on trial design, optimum dose levels and patient population.

Licensing prospects of trofinetide intact, Stock oversold
In our view, the licensing prospects for trofinetide have not been impacted by the weak results from the TBI trial. We note that both the Rett and Fragile X Phase II results have provided proof of concept and have positioned trofinetide to be trialled across other autism spectrum disorders (ASDs), strengthening its value proposition. Trofinetide is attracting industry interest and US healthcare specialist Leerink Partners have been engaged to assist in evaluating strategic options. On analysing comparable deals in the CNS orphan space, we believe that trofinetide can be licensed for US$680m (unchanged) on the strength of its opportunity in the orphan ASD space alone. Accordingly, we have reallocated the deal revenue to Rett and Fragile X indications. However, we now forecast a US$70m upfront (was US$90m) in 2HCY16. We see attractive risk/reward buying at these levels in view of the licensing prospects.

Valuation reduced to $0.25, retain Buy
Revision to our model has led to change in our NPAT est. as follows -25% FY16 & - 51% FY17, primarily driven by the reduced upfront and near term milestone payments following removal of TBI and concussion indications from our model. This was partially offset by increased milestones related to Rett and Fragile X in outer years. Our valuation of NEU has decreased by ~12% to A$0.25/sh (was A$0.285). We retain Buy.