Hi Nikki,
Here is my valuation based on Neuren's current status.
MKT Cap 186 Million
1) Potential for Abbreviated Regulatory Pathways
With the enactment of health care reform legislation, Congress has authorized the Food and Drug Administration (“FDA”) to approve biological products through an abbreviated regulatory pathway that does not require such products to undergo full clinical testing. Although an abbreviated pathway has been in place for generic drug products under the Hatch-Waxman Amendments since 1984, Congress had not previously established an analogous scheme allowing for approval of so-called “follow-on biologics” or “biosimilars.” - See more at: http://www.ropesgray.com/zh-TW/news...biological-products.aspx#sthash.NUEeVwqo.dpuf
Source
This has an impact on FXS trial because if succesful with Rett than they will be taking this route to approval for FXS. meaning 1) Full guidance from FDA 2) Patent and IP protection from FDA 3) Exclusivity in the market. This is because the same compound is being used for FXS trial. Now consider even if the Rett doesn't get the BT granted, they can do a phase 3 trial and use the data from phase 3 to receive a ARP.
2) Orphan drug designation.
Approx 400 orphan drugs in Clinical trials and 300 in US. A Aussie Biotech to stake a claim at Orphan drug designation on the back of a successful trial is rare.
Here is
Novartis being granted orphan drug designation and the trial still failing. Link
Here is a bit of an overview.
Considering if Rett get's an Orphan drug designation then the FXS can be expediated to be granted the same on the back of a trial. The sequence of events are planned in such a way that FXS reports immediately with a 6 month gap so that the market time for FXS is exponentially reduced. They also have an advantage because they will be taking the same compound and under biosimiliars they will gain OD , BT and possibly to the market.
My speculation is that they will also not need Phase 3 trial in FXS.
How can I speculate that.
Here is a guidance from FDA
For priority reviews, FDA sets a goal of completing application reviews within 6 months compared to a standard review goal of 10 months. For orphan drug applications involving new molecular entities, a recent analysis reported that the proportion with priority review status increased from 35 percent for the period 2000 to 2002 to 50 percent in the period 2006-2008; for orphan products identified as “significant biologics,” the corresponding increase was from 17 to 67 percent (Tufts Center, 2010). In addition to granting priority review status directly, FDA may also award priority review vouchers when approving a drug for a neglected tropical disease; such vouchers can be used to obtain priority review for a subsequent drug application and can also be sold or otherwise transferred to another sponsor (21 USC 360n).
Read the last lines. Yes they give out
Vouchers. This you can transfer to partners as well. If they do get it via the rett well they will eventually make a move out of it in TBI.
FXS is both fast tracked and Orphan Drug dec granted.
3) Cash
NEU had 22 Mil cash on hand. Burn rate approx 700k/month. Fully funded for all 4 trials until 2015.
Here is where it gets tricky.
If they do have a BT designation, then that's where to the market comes into factor. Dr Treagus has mentioned no license till 18-24 months to manage expectations from shareholders. He also said that a large number of Pharma are monitoring our progress. I guarantee
Novartis will be one. The common link ? Dr Elizabeth Berry-Kravis who was is our Principal Investigator was also on that Novartis trial. A testimony from her would pretty much put FXS in bed and on to the market. Now let's see apart from Novartis who else could be interested ? Well one must only go back and read the board of NEU to get a glimpse into how many large companies have failed on this path.
Here is a nice document that I think Hottod provided.
Link
Post- Phase II is still the sweet spot for pharma licence deals in general and orphan drugs specifically. Pharma interest in orphan drugs is showing no signs of abating and competition for assets has been driving up both licensing deal values and royalty streams.
Since 2010, the average licence deal value for orphan drugs has exceeded that for other drugs. Last year the average deal value for orphan drugs approached US $250 million, compared with approximately US$150 million for non-orphan drug licence deals.
Payment of royalties is also on the rise. While just 7 % of orphan drug licensing deals involved a royalty component in 2010, this had increased to 24% by 2013. The average royalty rate attached to Phase 2 orphan assets is mid single-digit, however this rate almost doubles for Phase 3 assets
Source
Although Hottod has derived the averages I think Dr Treagus may be more interested in clubbing FXS and Rett for a
$1BIL + Payout. Yes you read it right. 7 years market exclusivity , at least 80% market penetration possible and given the nature of the drug the partner would end up adding billions to their bottom line in 7-15 years.
It is very difficult to break a monopoly that is so far ahead of the competition. In our case as much as 6-7 years. So there will certainly be a bidding war and a major one at that.
CR
Now worst case scenario if more trials are needed, then they will need a CR. They will most likely target this after OD designation. They would have a fair indication of how BT will progress by then. They will OPT to raise at least 80 Million to fund 2 phase 3 trials. The ideal time to raise might be around March/April as they would have announced a OD designation and the data from Rett would be compelling. at 35 cents minimum they will raise at about 30 cents.
This is again the most speculative base case. NEU has always pulled out a rabbit from the HAT so mid 60 to mid 80 is quite possible.
Largest holder selling - I don't believe the largest holder will sell but if that occurs we should still be at our base case in 2015 given that there will be more interest in US then AU.
Breakdown.
61% Substantial
16% Insto's
6% Directors
17% Retail.
Conclusion.
All in all, 4 trials fully funded + possibility of OD + BT --> market.
base case min 35-40 cents. Optimistic valuation mid 70's based on current status and IP.
There are other wide range of factors I have applied with my minimal knowledge of FDA approval but I think this should paint a good enough picture.
(20min delay)