Why haven’t big institutions shown interest in this stock?
Good question. Ideally someone who has worked in institutional investment will be able to answer. That's not me!
My suggested reasons are:
a risk-off market – even prior to Covid-19 there had been a flight of capital away from the ASX and away from the small end of the market.
low market cap – institutional investment mandates, for example, might limit investment to ASX 200/300- listed companies.
limited liquidity of NEU stock.
less favoured area – within Australia at least, I perceive there to be a fund bias towards investment in medical devices rather than drug therapies. This relates to speed of development and likelihood of approval. The few institutions that are willing to invest in drug development companies are unlikely to favour neurology indications, which are considered to be higher risk.
orphan diseases – while there are multiple reasons why orphan diseases are an attractive area for drug development and investment, I think there is still a prevailing attitude that the larger the end market is, the better.
strength of data – as already expressed by some here on this forum, trofinetide data to date has been “light green”. Those few funds which might be willing to invest in a low market cap biotech which is developing drugs in neurology indications are unlikely to be willing to invest in the absence of stellar Phase 2 data.
validation via investment – those assessing NEU as an investment might look at who else has backed the company. Is there already a well-respected biotech investment fund on board? Has any pharma demonstrated belief in likely success through taking a large equity stake or committing to a deal with a large upfront?
How much can patient advocacy groups influence the FDA decision?
Another great question.
Probably the best-known example of patient advocacy groups influencing an FDA drug approval, despite limited evidence of efficacy, is the one you’ve already referred to – the 2016 approval of Sarepta’s eteplirsen for DMD amenable to exon-51 skipping, at which wheelchair-bound patients pleaded their case.
That approval decision, as well as a more recent FDA turnaround decision to approve golodirsen, remains controversial, as can be seen in this blog by Derek Lowe.
Another example of patient advocacy successfully influencing the drug approval process occurred in 2015 when the FDA Advisory Panel recommended approval of Vertex’s Orkambi for the treatment of cystic fibrosis. Phase 3 trial data had demonstrated a mere 3 percentage-point improvement in lung function after six months. Here, the case in favour of approval put forward by 17 patient advocates was described by a Leerink analyst as perhaps the most effective and best organized plea for the need of the drug, the differences it made in some patients and for approval of the drug that we have ever seen at an FDA advisory panel.
Prompted by congressional demand, the FDA has moved towards recognising the importance of patient perspective and engaging patients in the drug development and approval process, especially with respect to life-threatening and rare diseases. The regulatory authority has now established multiple initiatives to improve patient engagement. One of these initiatives is the Patient Representative Program whereby patient representatives serve on FDA Advisory Committee panels as Special Government Employees.
Ultimately, the FDA evaluates drugs on a case-by-case basis. It will invite and listen to patient perspectives and it has demonstrated willingness to be flexible. But it also has its limits, as Janet Woodcock, ex- FDA Commissioner, has pointed out
The FDA walks a fine line. We must balance timely patient access to important new medicines with assuring they meet key standards. These standards exist to make sure that approved drugs have a high chance of helping those who use them. Medicines ultimately must lead to overall improvements in how patients feel, function or survive…..
FDA is charged with regulating new medicines, including novel ones like cell and gene therapies, and we make decisions about whether these can be marketed. We apply the same statutory standards for safety and efficacy to all new medicines, but the overall benefit-risk evaluation, and the clinical trial programs, vary depending on the circumstances. For fatal diseases without available treatments, the risk of more significant side effects may be acceptable. For rare diseases, we can’t expect very large trials. For potentially fatal diseases with existing life-saving treatments, we expect new therapies to be as good or better than those already approved, or to decrease the significant side effects…
However, in the end, the connection to clinical benefit needs to be made for the product to remain on the market.
Sometimes, strong and passionate patient advocacy doesn’t win the day, even before the FDA sits in judgement. Seaside Therapeutics/Roche’s cessation of development of arbaclofen is a heart-breaking example of what can happen when the primary outcome isn’t met, yet some patients experience life-changing benefit while on the drug (here and here).
NEU Price at posting:
$1.68 Sentiment: Hold Disclosure: Held
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