Extract from Bell potter today Neuren (NEU) All eyes on Rett...

Extract from Bell potter today

Neuren (NEU)
All eyes on Rett Syndrome Trial

Key catalyst approaching –Results from Rett Syndrome trial
Neuren completed enrolment in its Phase II Rett Syndrome trial on 26thJune 2014.
Top-line results from the trial are expected in CY4Q14 (BPe between mid-Oct to midNov). Positive results from this trial will be a crucial de-risking event for the company and likely to lead to a significant re-rating of the stock. NEU already has Fast Track designation from the US FDA for this indication and we expect them to obtain orphandrug designation as well following positive results from the trial. Neuren hopes that by correcting the Rett biology, its drug NNZ-2566 may be able to reverse some of the symptoms of the disease, therefore allowing the girls to have a better quality of life.

Our view on the trial
Our view is that the trial is unlikely to fail given that the primary endpoint is safety and tolerability. The key risk in our view is that the results may make it difficult to draw meaningful conclusions with respect to efficacy. However, we believe the risk is somewhat reduced based on a) mechanism of action of NNZ-2566 lends itself as a potential treatment based on pathobiology of Rett Syndrome, b) encouraging preclinical data as well as previous efficacy seen with the parent compound (whole IGF-1) in Phase I trials, c) our belief that the trial is well-designed with high quality and large number of meaningful outcome measures and d) ex-Autism Speaks (US based autism advocacy organization) experts are managing the trial.

Investment View – Well placed in CNS orphan drug market
Neuren is an attractive orphan drug play and is well placed to benefit from the heightened interest by big and specialty pharma in the space from a licensing andM&A perspective. In our view, NEU shares are poised to re-rate as the company develops and subsequently commercializes its NNZ-2566 product initially in two attractive orphan disease markets, Rett Syndrome and Fragile X Syndrome, with the potential to be useful in a wide variety of autism spectrum disorders. We also expect NNZ-2566’s utility in concussion and moderate-severe TBI to add value to a licensing package. We retain our Buy recommendation and valuation of A$0.19/sh.