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clock Created with Sketch. 10/09/24
12:21
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Originally posted by TripAces:
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FY24 Result | Neuren has endured a turbulent half year, with market uncertainty persisting around the long-term value of the DAYBUE royalty and milestone revenue stream, despite improved clinical management of patients on drug and encouraging launch metrics from commercial partner, Acadia Pharmaceuticals. Total income of A$32.1 was earned in 1H24, with A$24.3M of that coming from royalties from the licensing of DAYBUE (trofinetide) to Acadia pharmaceuticals in North America. Profit after tax of A$8M was recorded, with increases in royalty revenues offset by the A$59.4M milestone payment received in 1H23. Cash used by operations of A$20.5M was mostly for the development of pipelines asset NNZ-2591. Outlook | Total FY24 guidance of A$132-138M from DAYBUE licensing, comprising a milestone payment of US$50M (expected in 2H24 CY) and royalties of US$36-40M. Acadia are advancing trofinetide outside the US, with Canadian approval expected at year-end 2024 E&P Comments | This 1H24 result is a mere formality, but highlights favourable economics that would equally apply to pipeline asset (NNZ-2591), contingent on successful clinical development (assuming a similar licensing arrangement to trofinetide). NNZ-2591 could be a significant opportunity for the company across a range of potential neurodevelopmental indications, but requires further placebo-controlled studies to validate its efficacy. The fact that opex (“foundational work to prepare for Phase 3 development of NNZ-2591”) has increased in 1H24 suggests that NEU are anticipating a company funded registrational program. We note that NEU have ample cash to fund randomised controlled studies of NNZ-2591 in one or more indication (we assume ~$40M US per indication). An end of Phase 2 meeting with the FDA for NNZ-2591 in Phelan-McDermid syndrome is scheduled for Sept-2024 to seek guidance on further clinical development. Valuation | Company guidance assumes a USD:AUD exchange rate of 1.54, however, our rDCF valuation utilises the current spot rate of 1.47 which reduces our forecast revenues by ~4% (we note that NEU's clinical development expenses are largely in USD, providing a partial natural hedge). Given the increasing likelihood that NEU will progress to in-house Phase 3 development of NNZ-2591, we move our assumed proportion of company:distributor profit share for this asset to 65% (from 50%). Together this leads to a ~15% reduction in the trofinetide/DAYBUE licensing stream, offset by a 19% increase in the NNZ-2591 pipeline value (refer figs. 2, 3 & 4). The net impact is a 40c increase in our price target to $22.90 / share, and we retain our Speculative Buy recommendation.
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priority voucher scheme may not be reauthorised by congress by the end of this month. While it means Neuren won’t be able to get it for NNZ2561 if appoved (need approval by 2026 to be eligible per current legislation), the value of the existing voucher could double to $300m USD or more. It was sold for $350m USD at the start of the program. That’s $100m USD for Neuren, enough for all sorts of capital management and divided schemes! Given the market is short term focused, that’s bloody good news!
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