Good points you raise reggie78. I would suggest there is another...

Good points you raise reggie78. I would suggest there is another way to view these comparisons. That PME and NAN are highly overvalued and will therefore drop until Neuren is worth more than them (or more likely a combination of them falling and Neuren rising)

According to Investopia the current average PE for US pharmaceutical companies is 22, with a 10 year average of 41. I think most investors would agree that PE's of 50-100 for any business or sector are completely unsustainable long term and normally represent unusual circumstances (e.g. huge revenues, but temporarily low profit - like Amazon used to be) or irrational exuberance (Tesla having a PE of >1,000 in 2020).

With the era of free money coming to an end and facing the potential of a global recession I'd guess some of these irrationally high P/Es (PME and NAN) will be corrected.

Perhaps a safe PE to look at Neuren from is 20x forward earnings. Alternatively, you can use the 'gold standard' of a DCF, which helps to also take into account that pharma companies are a little unusual in that their drugs may be super profitable, but they also have a huge patent cliff after which revenue may completely crash. DCF can account for that, but PE won't.




A slightly more upbeat view might be to look at the Australian Biotech industry - which shows a 10 year average of 41 with a current PE of 62. However, this may reflect the fact that there are very few money making biotechs (multiple a tiny profit and you get a huge PE). Price to Sales averages 8.

On these metrics in the Australian market Neuren would be valued at AU$2.2b (8x revenue) to AU$10b (63x profit) using the FY 2025 estimates you've provided.

I have a DCF model I put together some years ago and updating it with the latest info (ROW & FragileX still guesses) using a discount factor of 12% and patent expiry extension to 2037 I get AU$2.2b for Retts ($24 a share), AU$1.7B ($18 a share) for Fragile-X (if given 50% chance of success) and AU$5.5B ($59 a share) for NNZ-2591 4 current target diseases (if each given a 50% independent likelihood of success), giving a current net present value of Neuren of AU$9.4B ($102 per share).

I note these success likelihoods are similar to other orphan drugs and I'd argue are reasonable considering the success of Trof.

Nice co-incidence that the DCF and forward PE both give almost the same valuation of AU$10B.

The above also suggests that in a coming potential recession when irrationally high PEs will be dealt with the safer place to put your money will be either in the bank (or perhaps not...) or in a low PE company. Again, Neuren seems a good choice here - tho probably not as safe as your local power company, airport or supermarket chain.