Ann: NEU confirms primary endpoints for Phase 3 trial in PMS, page-132

I’ll try to explain my thinking at greater length.

Firstly, it’s not as if Acadia has an empty active pipeline at the moment.

There’s ACP-101 in Willi-Prader which is in Phase 3 at the moment. Acadia announced this asset and its advancement into Phase 3 around the same time that they signed the licensing deal with Neuren which included global rights to NNZ-2591 in Rett and Fragile-X. Acadia owns the PWS asset, after acquiring Levo Therapeutics for just US$10m in 2022. If this asset is successful, Acadia doesn’t have to pay any milestones or royalties. This provides a financial motivation to move this asset up the queue.

Then there’s ACP-204, currently in Phase 2 for two indications – Alzheimer’s disease Psychosis (ADP) and Lewy Body Dementia with Psychosis (LBDP). This is an in-house asset, so also not subject to milestones and royalty payments if successful. There is a potential US market of 800,000-850,000 for ADP and no approved treatments. For Lewy Body Dementia with Psychosis, there is a potential US market of 500,000-750,000 and no currently approved treatments. Acadia has already designed a seamless Phase 2/3 program for both of these indications.

More recently (in November last year) Acadia licensed Saniona’s drug, now known as ACP-711, for multiple indications, with the lead indication being Essential Tremor. Acadia has stated its intention to commence Phase 2 in this indication next year. There are 7 million people in the US with Essential Tremor of which 1 million are currently on meds. The only therapy already approved in this indication is already 50 years old. For the first two indications combined for ACP-711, if successful, Acadia stands to pay just $147m in milestones and royalties from mid-single to low-double digits. Considerably less than what it would need to pay for development of NNZ-2591.

Not yet in the Acadia pipeline is a non-CNS asset. But Catherine Owen Adams has made it fairly clear that this is her next business development target. And she is probably spoilt for choice at the moment, given that 25% of listed US biotechs are currently trading at below their cash holdings.

Lingering in Acadia’s pipeline is Stoke Therapeutics’ three pre-clinical assets, licensed over 3 years ago. These antisense therapies all target neurodevelopmental diseases –SYNGAP1 syndrome, Rett syndrome and another undisclosed indication. Under the licensing agreement, Stoke would receive up to US$907m in milestones, mid-single to mid-teen royalties. it would also receive 50% of profits in the lead indication in return for a 50/50 split of development costs. More than 3 years later, nothing has even entered Phase 1. But in the meantime, Acadia has managed to lock up a potential competitor product to trofinetide in Rett syndrome.

Also lingering in Acadia’s pipeline is trofinetide or NNZ-2591 in Fragile-X and NNZ-2591 in Rett syndrome. No action nor even talk here either.

If Acadia chooses to develop NNZ-2591 in either Rett or Fragile-X, it will need to complete both Phase 2 and Phase 3 trials and pay full development costs. Milestone and royalty payments identical to those for trofinetide in the US and globally would also be payable. There are currently two Fragile-X programs ahead in clinical development. Zynerba is currently conducting a Phase 3 in 250 patients with Fragile-X with results perhaps later this year. Metformin is also being studied in a Phase 2 program in 120 patients. The potential US patient population in Fragile-X is estimated to be ~ 40,000 - 90,000.

For Acadia, I believe that commencement of a Phase 2 trial of NNZ-2591 in Fragile-X would likely have minimal impact on its company valuation. If the market pays any attention at all, it is likely to be focused on the size of the potential US patient population, near-term development costs, the many years until any market approval and the milestones and royalties that would be payable.

For Neuren, I believe that commencement by Acadia of NNZ-2591 in Phase 2 Fragile-X would likely have a greater positive impact on its company valuation. The market would note that Neuren bears no development costs and has a solid chance of repeating/improving on the economic success of trofinetide in Rett syndrome. In addition, a Phase 2 program in a smaller biotech will always be seen as a bigger deal than in a larger biotech with more advanced programs in larger indications. Also, Acadia commencing development of NNZ-2591 would likely be viewed by the market as further validation of NNZ-2591 (given that Acadia has conducted detailed due diligence). Further, some investors are likely to see shortened odds for an Acadia acquisition of Neuren.

While it can be argued that Acadia theoretically has little control over whether it can successfully acquire Neuren, and it runs the risk that a low market cap might also increase the attractiveness of Neuren for other suitors, it nonetheless has some advantages over other potential suitors and I have no doubt that in going into any acquisition/merger talks, it would prefer Neuren’s market cap to be lower rather than higher.

In summary, Acadia already has multiple other assets in development, with a seeming preference to prioritise development of assets with more attractive economics - either large patient populations and/or which it owns outright. Bigger fish to fry, as it were.

Meanwhile, I believe that there is strategic benefit for Acadia in locking up licensing rights to NNZ-2591 in Rett syndrome and Fragile-X and keeping its options open.