1st page of the BP updated report Neuren (NEU) Focus remains on...

1st page of the BP updated report


Neuren (NEU) Focus remains on FDA meeting in October Recommendation Buy (unchanged) Price $0.061 Valuation $0.13 (unchanged) Risk Speculative Analyst Tanushree Jain 612 8224 2849 Authorisation TS Lim 612 8224 2810 GICS Sector Pharmaceuticals & Biotechnology Expected Return Capital growth 113.1% Dividend yield 0.0% Total expected return 113.1% Company Data & Ratios Enterprise value $116.1m Market cap $120.4m Issued capital 1973.22m Free float 89% Avg. daily val. (52wk) $94,526 12 month price range $0.041- $0.094 Price Performance BELL POTTER SECURITIES LIMITED ABN 25 006 390 7721 AFSL 243480 DISCLAIMER: THIS REPORT MUST BE READ WITH THE DISCLAIMER ON PAGE 7 THAT FORMS PART OF IT INCLUDING THE FOLLOWING DISCLOSURE. DISCLOSURE: BELL POTTER SECURITIES ACTED AS LEAD MANAGER IN THE JULY 2011 AND OCTOBER 2013 PLACEMENT AND RECEIVED FEES FOR THAT SERVICE. Page 1 (1m) (3m) (12m) Price (A$) 0.06 0.06 0.05 Absolute (%) 1.69 0.00 22.45 Rel market (%) 1.94 0.80 19.90 Speculative See Key risks on Page 5 & Biotechnology Risk Warning on Page 7 Speculative securities may not be suitable for Retail clients 1H17 – Key highlights 1H17 underlying Net loss of $3.2m (down 53% y/y) was ~6% lower than our forecast of $3.5m and was driven primarily by lower operating costs, partially offset by an Fx loss of $0.1m. Reported net loss of $3.6m (down 52% y/y) was in-line with our forecast of $3.7m, with the variance reduced from the underlying result due to higher non-cash share based compensation expense. Opex was below due to lower R&D costs. We believe the lower spend in 1H17 is timing related due to NEU completing its recent financing in July’17, which likely deferred the start of some activities to 2H17. We also expect the second tox study may be started now following the October FDA meeting, which would push some of the related costs from 2H17 to 1H18. Focus on FDA meeting in October for Rett Syndrome Neuren has an end of Phase 2 Type B meeting scheduled with the FDA in October’17 to clarify the Phase 3 development programme for trofinetide for Rett. An agreement with FDA on the Phase 3 trial design would be a key de-risking event and we expect NEU’s partnering discussions to accelerate following the FDA meeting. Neuren had cash balance at end of 1H17 of $1.3m, which was further bolstered by the $3m received in July’17 from its recent financing. NEU is due to receive another $8.5m over 18 months starting in Sep’17 via a sharing agreement with UK fund Lanstead Capital. Neuren’s strengthened cash position should support its ongoing and future partnering discussions and allow the company to progress with preparatory key activities required ahead of a Phase 3 trial for Rett. Retain Buy (speculative) and Valuation of $0.13 Following modest revisions to our model, the net result is a 1% decrease in our Net loss forecast for FY17 and a 2% decrease in our NPAT forecast for FY18, which were driven by reallocating some R&D costs from 2H17 to 1H18 and revised currency estimates. There was no change to our FY19 NPAT forecast. Our valuation remains unchanged at A$0.13/sh. We retain Buy (spec). Next catalyst: Clarification of path forward for Rett with FDA at meeting scheduled in October’17.