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3rd March, 2025 | Sacha Krien, David Nayagam and Thomas WegnerFY24 | Following Acadia Pharmaceuticals' (NASDAQ:ACAD) FY24 result, NEU's results is a mere formality, but highlights the favourable economics that could equally apply to pipeline asset (NNZ-2591), contingent on successful clinical development. Total revenue of A$227.8M was received in FY24 (+5% vs pcp), of which A$213M was earned under the license agreement with ACAD (vs $232 in the pcp; noting an upfront payment in FY23 of A$146M for expanded licensing rights). A$56.2M in royalties was received (based on US$348.4M in net DAYBUE sales in CY24; +110% vs A$26.8 in FY23). In addition to licensing revenues, NEU booked a US$50M (A$80.5M) milestone payment from ACAD for surpassing US$250M in DAYBUE net sales during FY/CY24, as well as A$76.5M for its share of the net proceeds from ACADs sale of the rare paediatric disease priority review voucher. Profit after tax was A$142M (+10% vs pcp); representing a 62% profit margin highlights the impressive operational leverage in NEUs licensing model. Accounting for the mandated change in NEUs functional currency along with material fx moves during the period, NEU's comprehensive income was A$166M (CI margin: 73%). We note that R&D expenses were ~30% below our forecast, but this is expected to realign once the PMS pivotal trial commences pending final FDA alignment on primary efficacy endpoint(s).Guidance | Total FY25 royalty income of A$62-67M from DAYBUE licensing, assuming ACAD net sales of $380-405M and an assumed FX rate of 0.65.E&P Comments | Neuren is at a turning point in its evolution as it navigates a transition into a late-stage drug development company. Royalty and milestone revenue from ACAD for commercial sales of DAYBUE in North America remain solid with FY25 (likely conservative) guidance reducing uncertainty. New territories are anticipated to progressively come online in Canada, Europe and, subsequently, Japan (pending regulatory clearances). A 30% expansion to the ACAD field force has been flagged to help increase penetration outside COEs. We expect that net patient adds in 2H CY25 will primarily be driven by the Canadian launch. The cash from ACAD is earmarked to fund clinical development of NNZ-2591 in a range of existing neurodevelopmental, and new (yet to be disclosed), orphan indications. The current price of NEU is roughly aligned with our segmental valuation for the existing NEU-ACAD license, for which the core element (i.e. DAYBUE royalties) is now significantly derisked by solid DAYBUE guidance. As such, in our estimation, the non-ACAD-licensed indications for NNZ-2591 are essentially a free ~$7.6/share option (see figure; that could be worth ~$25/share fully derisked), with further upside from yet to be announced indications.Model Update / Valuation | We have remodeled NEU, taking the opportunity to refresh our assumptions (see list below). Taken together, our valuation increases by 8.4% to $20.60/share, and we maintain our Speculative Buy recommendation.