Jon's powerpoint repeated the statement "current opportunity for NNZ-2591 is more than 5 times the Rett Syndrome opportunity". This is referring just to the 4 disorders they are doing Phase 2 for currently.
A sensible way of putting a lower bound on the potential value on NNZ-2591 could therefore be to multiply the Rett's opportunity x 5. For example, if Retts represents $13 a share, then NNZ-2591 potentially represents $65 per share (after FDA approval).
However, I think there are few factors that Jon and Neuren have not really emphasised.
Firstly, the mid-point estimates for available patients for these 4 indications in USA is 66,000. Acadia is estimating Retts at 6,000 to 9,000 patients. If we take 9,000 as the comparable number then 66,000 / 9,000 = 7.3x. So "more than 5 times" actually means "at least 7 times"
Secondly, Jon was at pains yesterday to point out that Acadia "own" Trofinitide, with Neuren getting just a small part of the pie, very different from the situation with NNZ-2591. This makes sense of course, as Neuren were in a weak position negotiating the original Acadia deal. Arguably the main value of this deal was getting something through Ph 3 and approval to prove their drug pipeline should be taken seriously.
if you include milestone payments, etc I'm not sure what the average royalty rate will work out at, but I suspect it won't be much over 20% in the end.
If Neuren goes it alone they'll have all the costs, but their end profit after costs could be perhaps 80%, 4x as much. If they license it out instead, then it seems reasonable to think they'd be able to nail a much sharper deal you'd think of at least 40%. In other words, the income/value of any NNZ-2591 deals is likely to be 2x more than Retts if comparing like-with-like.
Will the end drug price be lower or higher than Retts? To me there seems to be no reason not to assume a similar amount. Retts is a pretty rare and devastating disease, but the other 4 diseases being targeted are similarly so.
Thirdly, there is the issue of retention and dose. Bell Potter's recent analysis is assuming long term retention of 50% of patients, which does seem a reasonable conservative number. The main issue with retention appears to be diarrhea, which we know NNZ-2591 does not cause. Everything we've seen so far suggests the side-effect profile of NNZ-2591 is significantly lower than Trofinitide. It therefore doesn't seem unreasonable to suggest NNZ-2591 might achieve a 50% better retention rate e.g. 75% instead of 50%.
So, when comparing the current market potential of NNZ-2591 to Trofinitide we now have 7.2 x 2 x 1.5 = 21.6 x the potential value.
If Daybue is currently worth $13 a share as an FDA approved drug, then on a like-for-like basis the 4 currently planned indications would be worth $13 x 21.6 = $280.80 a share.
Wow!
Of course, there is a long way to go. For example, what is the risk of Ph 3 failure and non-approval. Hmmm - Trof got over the bar, and NNZ-2591 appears to be more effective with less side-effects. You'd have to say its better than even odds. I'd wager its 75% - 90% to be honest. But lets go with 50%.
Now lets discount for 5 years at 12% for time to get there = 53% discount. So we have $280 x 50% x 53% = $74 per share net present value.
Add to $13 a share for Daybue + $2 a share for cash on hand = $89 per share current value.
This attributes zero value to any other indications of course. If all four phase 2 trials show highly positive results you'd have to say another dozen or so potential other disorders (as Jon alluded to yesterday) would be on the table for consideration. These could be worth far more again, so I'd take a stab and say this should at least double our valuation for NNZ-2591.
So we could end up (after 4 successful phase 2s) at $13 + $2 + $74 x 2 = $163 a share as a reasonable valuation of Neuren.
I'm not saying the share price will be this - when has the share price ever reflected the current theoretical valuation of Neuren. But when it comes to fundamental value (which a company's value should ultimately settle towards) this seems to me a fair, and still conservative, number.
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