Intro: The following is my own work, It is not investment advice just a collection of facts and figures i have collated, as always Do your own research, but i hope this information may shed some new light on NEU regarding their current position. Enjoy.
Notes: A. This was done over the weekend so was rather rushed and there might by a few mistakes in there, if you spot one - fact check it and feel free to correct me.
B. In relation to the comparison chart i have created, It was rather difficult to do - reason being, NEU dont have a half yearly report, their annual report goes from calendar year rather than financial year, The other companies reports are from start to end of financial year, and i could not use quarterly reports as KZA dont seem to put them out for whatever reason.
NEU: Products:
Neuren Pharmaceuticals Limited currently have 2 drugs under development:
Trofinetide: Initially developed for the treatment of traumatic brain injury, Trofinetide is now due to commence phase 3 trials in the 4th quarter of 2019. These trials will focus on the treatment of Rett syndrome, which affects an estimated 1 in 10,000 females. A phase 2 clinical trial has also been conducted testing Trofinetide’s ability to treat Fragile X syndrome, which affects roughly 1 in 4000 males and 1 in 8000 females across the world. Both of these syndromes share common symptoms and both currently have no approved treatments.
NNZ-2591: At an earlier stage than Trofinetide, on Friday NEU announced that they will be “expediting the remaining tasks including the manufacturing development, toxicity studies and a Phase 1 clinical study that are required before commencing Phase 2 clinical studies with NNZ2591.” The announcement on Friday indicated NNZ-2591 has shown positive results in the treatment of Angelman syndrome and Pitt-Hopkins syndrome. Earlier in the year similar results were found in pre-clinical tests in the treatment of Phelan-McDermid syndrome. No approved treatment currently exists for any of these syndromes, and as such treatment tends to focus on alleviation of individual symptoms. The recent pre-clinical tests have been conducted using mouse models - Here is a brief explanation of the need for using animal models at this stage and how such studies are undertaken.
If NNZ-2591 can continue to show effectiveness in the treatment of syndromes caused by changes or mutation of the SHANK3 gene then there would be a case for it being applied broadly across many other cases within the autism spectrum.
Orphan Drug Status:
NEU's products fall under a category currently labelled as Orphan drugs, in the US the orphan drug program is ran by the FDA and provides incentives for the development of products that can be used in the treatment of rare diseases. The FDA definition of an orphan drug is a drug “intended for the safe and effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people in the U.S., or that affect more than 200,000 persons but are not expected to recover the costs of developing and marketing a treatment drug.”.
Trofinetide was granted orphan drug status in the US in October 2013, granting NEU 7 years of marketing exclusivity, tax credits on clinical testing costs, and a waiver of the prescription drug user fee. In addition to this, it allows an expedited priority review period of 6 months when making a submission for FDA approval.
NNZ-2591 appears to meet the criteria for orphan drug status, and NEU have stated that they intend to submit NNZ-2591 for orphan drug status this year.
In Europe the European Medicines Agency (EMA) deals with the granting of orphan status. They require that a drug meets the following criteria:
it must be intended for the treatment, prevention or diagnosis of a disease that is life-threatening or chronically debilitating;
the prevalence of the condition in the EU must not be more than 5 in 10,000 or it must be unlikely that marketing of the medicine would generate sufficient returns to justify the investment needed for its development;
no satisfactory method of diagnosis, prevention or treatment of the condition concerned can be authorised, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.
Trofinetide was designated an orphan drug by the EMA in August of 2015. This grants NEU 10 years of marketing exclusivity in Europe, with a 2 year extension when authorised for paediatric use.
In the US the median annual cost for an orphan drug is $46,800 (data from 2017), with drugs that treat smaller populations often being more expensive than drugs that treat large populations.
Orphan drugs are a growing market and account for a higher % of prescription sales than ever before:
ACADIA have estimated that Trofinetide’s sales potential for the treatment of Rett syndrome is in the vicinity of US$500m/year. It is estimated that there are 4 times more Fragile X syndrome patients than there are Rett syndrome patients.
ACADIA:
ACADIA pharmaceuticals are a US-based company with a current market cap of US$3.61bn (AU$5.26bn). They have historically focused on treatment of Central Nervous System(CNS) disorders specifically in treating symptoms of Parkinson’s disease, schizophrenia, and major depressive disorders.
ACADIA has partnered with NEU to fund and expedite the development of Trofinetide, During the initial negotiation period in May 2018 ACADIA purchased 1.33m NEU shares at $4 (NEU currently $1.18) – at the time a 33% premium to the 10-day VWAP -- as part of an exclusivity deed that allowed ACADIA an exclusive negotiation period of 3 months.
In August of 2018 NEU announced that they had signed an exclusive licensing agreement with ACADIA for the North American development and commercialisation of Trofinetide in Rett syndrome. The terms involved Neuren receiving US$10m up front, ACADIA funding the phase 3 study (expected cost US$55m), royalties (double digit %, but yet to have a solid figure put on it), one third of the value of any Rare Paediatric Disease Priority Review Voucher (these have been sold for up to US$350m - although normally sell for closer to US$100m), and future sales and development milestone payments (worth up to US$455m). At the current exchange rate the potential value of the deal is AU$759.2m, in addition to the royalties, and the 1/3rd value of the Rare Paediatric Disease Priority Review Voucher. The value of the initial fee and expected phase 3 study costs alone is AU$94.9m.
The lack of details regarding the exact royalty percentages and milestone payments is likely to have been frustrating to some investors and offers a possible explanation for the drop in the SP following what was otherwise an exceedingly positive deal for NEU.
Another factor to consider regarding the public perception of the headline value of the announcement may have been the US$10m fee received, this would have been the primary point of focus for many readers. However, if you take into account the funding of the phase 3 trial and assume this had been paid in cash alongside the US$10m, the headline could have been AU$94.9m (calculated with today’s exchange rate) received by NEU. This may have led to a different reaction from investors.
ACADIA plan to file for FDA approval of Trofinetide as a treatment for Rett syndrome in 2021, where they will receive a 6-month priority review due to the orphan status of the drug.
ACADIA have no other such partnerships with any other company and at a current market cap in excess of $3.6Billion USD, It shows the huge Confidence ACADIA has in Trofinetide and Neuren.
Torreya :
On 31/1/19 ACADIA’s exclusive negotiation period for the rights to develop and commercialise Trofinetide to non-North American territories expired.
The Neuren board rejected the offer from ACADIA and elected to appoint Torreya as a corporate advisor. Torreya will “assist the board in considering all potential corporate transactions including individual products, territories, or **Neuren’s entire business.**” As the emphasised words above suggest, Torreya have expertise in mergers and acquisitions, including multiple $1bn+ sales/acquisitions.
In the previous 2 years they have facilitated the sales of Avenue therapeutics, Midatech pharma, Bio-pharm, Zylera pharmaceuticals, and Alphora.
Torreya have also been involved in deals with the likes of Novo Nordisk, Pfizer, and Roche (By Market cap Pfizer and Roche are 2 of the largest 3 Biotech companies in the world, with Novo Nordisk being 10th globally). A.If ACADIA have a genuine intention to pursue the non-North American rights for Trofinetide then this would make it clear that awaiting the results of the phase 3 clinical trials is unlikely to be an option. B.If ACADIA do not intend to make an improved offer for these rights then NEU would have access to some of the largest Biotech firms in the planet when trying to negotiate the best possible deal.
Beyond Mergers and Acquisitions Torreya do also work in assisting at the trial stage or licensing deals and research collaborations (*see further reading for examples).
Finances:
Peer comparison:
Latest Research Report – Valuation - $4.17-$6.31 AUD
Top 20 notes:
I spent a long time looking into the top 20 last night, ill just state that the top 20 are very closely connected, in multiple companies and with other's in high positions within the same industry overseas.
Upcoming news:
In the upcoming weeks/months/years there are plenty of potential factors that could cause a significant increase in the NEU SP.
As previously mentioned, Neuren have stated that they will be applying for orphan drug status for NNZ-2591. This may not prove to be a significant catalyst in itself, but will be an important step in the development of NNZ-2591.
Following on from this there would be the potential for phase 1 clinical trials testing the treatment of Pitt Hopkins syndrome, Phelan-Mcdermid syndrome, and Angelman syndrome. Given how well the market responded to positive pre-clinical results, it could reasonably be expected that positive results in the phase 1 studies could prove to be a significant catalyst for the SP.
There is also the potential for this treatment to be applied across other disorders within the autism spectrum, thereby opening up multiple potentially lucrative markets for NEU.
Since rejecting ACADIA’s offer for non-North American rights for Trofinetide it would be logical to assume that other negotiations are either being sought or currently taking place. Securing a deal for these rights - particularly if on favourable terms - would add more certainty regarding future commercial activity.
With Torreya now operating as corporate advisor to Neuren there is an experienced team with a history of making large pharmaceutical deals seeking to realise the maximum value from any such deal.
The phase 3 study for Trofinetide’s treatment of Rett syndrome is due to commence in the 4th quarter of this year. This study will last for 6 months and is completely funded by ACADIA. Positive results from this study will see ACADIA submit Trofinetide for FDA approval.
When it was announced that the phase 3 trial was to be conducted the SP more than doubled over the course of the next 5 and a half weeks, including a 29% rise the day after the announcement was released.
Clearly the phase 3 study is of interest to the market and it is possible we see people looking to take a position in NEU ahead of the commencement of the study.
As a frame of reference; when it was announced that enrolment had been completed for the phase 2 study, the SP increased by over 30% between the time of that announcement and results being released (14/11/16-17/3/17), indicating there will be people/institutions looking to buy in anticipation of positive findings.
A further catalyst for growth will be the stage 3 trial for Trofinetide’s treatment of Fragile X. In their annual report Neuren stated that they are currently working with ACADIA in designing “the most efficient development program for Fragile X”.
There are 4 times as many patients with Fragile X as with Rett syndrome, so the advancement of testing Trofinetide as a treatment for Fragile X will be key in unlocking the full value of the drug. Any announcement regarding this progression will likely be seen as very positive.
In addition to these potential catalysts there is also the underlying possibility of a takeover, as alluded to in the announcement that confirmed Torreya being appointed as a corporate advisor. Whether anything develops regarding the sale of the company remains to be seen, but it should certainly be considered as a very real possibility.
(20min delay)