NEU is materially undervalued, page-126

... they not only have to buy out NEU but also have the final development costs and approvals so it’s not just a buyout but pretty hefty approvals costs, can their current cash flow models support that?

Currently, NEU has ~A$350m cash.

Conservatively assuming North American Daybue sales of just US$380m in 2025 and US$420m in 2026, NEU could receive US$85m (A$135m) in royalties over the next two years.

EU approval of Daybue is expected next year. NEU should receive a milestone fee of US$35m (A$55m).

EU sales of Daybue, and hence royalty income, should commence from next quarter. Assuming EU sales of just US$65m over this year and next, and a royalty rate of 15%, NEU might receive another A$15m income here.

That represents a total of A$555m (US$350m) cash.

Jon Pilcher has provided a rough estimate of Phase 3 trial costs of US$50-$100m. So, conservatively, US$350m could potentially fund three trials.

Approval costs for drugs can be expensive with NDA submission (PDUFA) fees now at US$4.3m (A$6.8m). That would be a hefty US$13m (A$20.6m) for three drug submissions. But as Neuren’s are all orphan designated drugs, those fees would be waived in full.

In addition, because these are all orphan drugs, if Acadia conducted the Phase 3 trials, it would be eligible for a US Government tax credit equal to 25% of all clinical trial costs.

Finally, if the US Government gets around to reinstating the Pediatric Rare Disease Priority Review Voucher program (remembering that this has bipartisan support in both Houses), Acadia could potentially benefit by another US$100-150m.

In summary, were Acadia to buy out Neuren in the near future, it is actually Neuren’s cash flow model, in addition to generous support from the US Government, that would support final development costs and approvals of three NNZ-2591 indications.