New Pitt Street Report, page-2

If Neuren is so good, how come the share price came down markedly with the Acadia deal?

After the announcement of the Acadia deal, Neuren’s share price declined from the $2.65 level of early August to a low of $1.04 by 28 August. We believe that the market was disappointed with the Acadia partnering because the headline upfront in the deal was only US$10m. We also believe such disappointment is unwarranted. Firstly, US$455m in development and sales milestones plus double-digit royalties is a large deal in anyone’s book when it comes to Pharma partnering, and the deal also removed a heavy development funding burden from Neuren.

Secondly, Trofinetide is moving into Phase 3, in which it has to repeat the result that was obtained in Phase 2, so the risk of clinical failure is considerably lower than was the case in Phase 2.

Thirdly, there is potential for Trofinetide to become a blockbuster once it comes on the market after 2022.
And fourthly, Neuren’s partner Acadia is a well-regarded US drug developer with a track record of success as demonstrated by Nuplazid (pimavanserin), which the FDA designated a Breakthrough Therapy for Parkinson’s Disease Psychosis in 2014 and which gained marketing approval in April 2016. Nuplazid enjoyed US$125m in net sales in 2017, its first full year of commercial release, and US$224m in 2018. We see strong potential for Neuren to re-rate as the market starts to appreciate the quality of its August 2018 deal.