neu = the best trading stock for 2011

1.6c current share price-$7m MC- $3m cash- Possible 62c/share NPV- $2b Potential Sales in the US alone- US Army funded trial- Possible AntiDepression drug- Possible Parkinsons drug- Global Top 5 Clinical Trials- US Fund buying in- Separate cancer vaccine subsidiary- US Congress mention- Massive target market.

I personally think this is one of the most undervalued little speculative stocks on the market. The question is: how low can it go? If it is close to its bottom then it may be a good trading stock with potentially a few trading opportunities in the 3c to 8c+ range in 2011 while the market waits for the possible big 10 times + increase at the end of 2011.

With the US Army being behind NEU's NNZ-2566 Traumatic Brain Injury (TBI) drug and no doubt aware of NEU's other potential drugs, and the US Congress mention pricking ears and possibly about to open doors, this could easily be much higher than it is now.

I note ten positives which may build a compelling investment case:

1- The US Army are funding the trial of Neuren's lead drug candidate NNZ-2566. This is a major vote of confidence in NEU. They would not do this without in-depth and professional due-diligence on Neuren. This should provide the market with some confidence too.

2- The recent NNZ-2566 Clinical Trial on women has been successful, continuing the path to proving up what could be a major company making product for Neuren.

3- An influential report places NNZ-2566 as one of the top five most promising drugs entering Phase II trials, mentioning the forecast potential sales market in the US alone of US$2b; (See: http://thomsonreuters.com/content/scientific/pdf/ls/pharma_matters/the_ones_to_watch.pdf ).

4- Neuren forecast potential NPV calculation of US$250 million upon successful registration (or approx 62c per NEU share undiluted) (See: http://www.neurenpharma.com/ssl/cms/files_cms/NNZ-2566%20Overview%20July%202009.pdf ).

5- I am sure the market is not fully aware of this yet but the market for NEUs TBI drug is huge: "The incidence of hospitalized cases of TBI is estimated to be higher than the annual incidence of several medical conditions including some cancer types, epilepsy, HIV/AIDS, multiple sclerosis and spinal cord injury. Therefore, developers of efficacious treatments for TBI stand to benefit from a sizeable patient population." (See: http://www.bioportfolio.com/store/product/2943/Stakeholder-Opinions-Traumatic-Brain-Injury-Hormonal-Therapy-Generates-Optimism.html ).

6- NEU's other major drug candidate Motiva appears to show promise in the massive market for anti-depression drugs as well as Parkinson's disease. "A previous Phase II study of Motiva in post-stroke patients with depression showed a statistically significant benefit for patients with apathy. Apathy is a potentially debilitating syndrome that occurs frequently among patients who have had a stroke as well as patients with depression, Parkinsons disease, traumatic brain injury, schizophrenia and many other neurological and psychiatric conditions." (http://www.neurenpharma.com/ssl/cms/files_cms/NEU%20UWA%20Motiva%20trial.pdf ).

The US military is very concerned about the effects of depression in its ranks. (See: http://www.army.mil/-news/2010/09/14/45152-focusing-on-the-silent-killer/index.html?ref=home-ata72-img ) and ( http://www.army.mil/-news/2010/09/30/45898-army-observes-national-depression-awareness-month/?ref=news-health-title3 ).

7- US Based fund Spring Tree continue to quietly build their stake in Neuren. Additionally the US based Cato group have initiated a relationship. Their peers may notice and this may attract some other big US buyers.

8- Neuren cancer subsidiary Perseus alone could potentially one day be worth more than NEU's current MC. (See: http://www.neurenpharma.com/corporate.asp?id=7 and http://www.perseis.co.nz/perseis/ ).

9-As waynesworlds post in this forum has noted: "It is not often that an Australian drug candidate is brought to the attention of the US Congress. The Defense Department provided testimony to the Congress on September 29, 2010 on the current state of neuroscience research for victims of traumatic brain injury (TBI)."(See: http://www.hotcopper.com.au/post_single.asp?fid=1&tid=1312482&msgid=7388976 ).

10- As mentioned in the Congessional hearing, Neurens NNZ-2566 is one of only two possible therapies for TBI: "Currently the only promising therapy for TBI in large clinical trials is progesterone and NNZ-2566," said Dr Terry Rauch, Director of Defense Medical Research and Development Program. (See: http://www.moonshot.org/testimony/092810%20Testimony%20Terry%20Rauch%20092910.pdf ).

It is possible that this recent mention of and setting apart of NNZ-2566 at the US Congress could cause the financial and media communities in the US to eventually look into Neuren. When they discover a tiny NZ based sleeper worth a fraction of what it could be the buying pressure could be overwhelming.

The downside: If NNZ-2566 fails, NEU would possibly halve. This would not be known for some time and may not be a total failure rather a case of temporary setbacks while changes are made to the drug makeup. Neuren would still also have other irons in the fire with Motiva and Perseus, so the price would possibly bounce back at some stage. If NEU wanted to sell NNZ-2566, even after a setback, there is every likelihood they would receive a very large figure.

The upside: With a current share price of 1.6c and a market value of approx. A$7 million, with A$3m in cash and a fully funded clinical trial, any re-rating could be quite explosive. At some point over the next year or so this could be a big performer, maybe even a few times during the year due to the expectations and anticipation. If NNZ-2566 succeeds the share price could quite possibly move above 62c per share given the global market potential (unless the management dilute substantially in the mean time).

Some possible catalysts I could think of are:

1- Early positive results at any one of the trial centres for the Phase II trial leaking out to the market.
2- Successful advancement with the Parkinsons research.
3- Successful advancement with the Anti-depression research.
4- A takeover of NEU by a US competitor or peer company.
5- Spring Tree and Cato market colleagues becoming aware of this gem and starting to invest.
6- Any one of dozens of influential stock market newsletters in the US could alert investors to NEU and cause a surge in buying at any time which could re-rate NEU quite dramatically.
7- Perseus could advance its cancer product or an ASX listing.
8- NEU shareholders may revolt and call for an EGM to appoint a new director with the responsibility of informing the market better through Investor Presentations to the market ie to industry funds in New York, Auckland, Sydney, Melbourne etc as well as within the biotech sector at industry events, or just even by informing shareholders better through an increased level of ASX disclosures and progress reports.
9- The mainstream, military and pharmaceutical media could respond to the US Congress mention of NNZ-2566. Suddenly Neuren could be on the radar of funds around the world.
10- NEU is close to bottoming and so even just technically it could re-rate any time now.
11- A major suitor or partner may also be encouraged to make their move sooner rather than later.
12- There are apparently other major applications for NEUs NNZ-2566. Any news about this could act as a catalyst.

I am sure you could think of other catalysts. And of course the one that does actually spark an explosive upward re-rating may be from left field and when we least expect it.

Note: As usual with speculative stocks: Caveat Emptor, Buyer Beware. There are always many risks, often unforeseen, in any investment. Please do your own research. Having done some research I am simply sharing my personal research with like minded people through this post as I know you are obviously interested in NEU. I am a current holder but may become a seller or trader at any time due to various reasons. I do not endorse or take responsibility for any material in any of the hyper-linked sites.