nine key reasons to buy neuren

Nine key reasons to buy Neuren (Written by Bell Potter)

1 NNZ-2566 is a viable neuroprotection drug and a potential blockbuster. Neuren has gathered strong data on the neuroprotection properties of NNZ-2566, for the
treatment of Traumatic Brain Injury (TBI). NNZ-2566 is an analogue of glypromate or IGF-1(1-3), a naturally occurring neuropeptide with 20 years of R&D behind it. We see significant upside from this drug given that there are ~1.7 million TBIs per year in the US, no approved therapies in this indication, a potential US$2bn market opportunity on clinical success and strong support from the US Army and key opinion leaders.

2 Neuren is making progress with its Phase II trial in Traumatic Brain Injury. NNZ-2566 Phase II clinical trial initiated in May 2010. Recruitment continues to be slow,
however with the amended protocol and implementation of Exemption From Informed Consent (EFIC) we believe the pace of enrolment can improve. We expect that the trial
will complete in mid-2013, following which a single Phase III trial under Fast Track designation will be required for regulatory approval.

3 The US government is funding the Phase II NNZ-2566 (IV) trial in full. The US Army has provided significant funding for the NNZ-2566 Phase II trial (ie ~US$23m) as part of its efforts to get a neuroprotection drug onto the market that would be useful in treating TBI in its soldiers. This allows the company to conserve its shareholders’ funds.

4 There is strong potential upside from oral NNZ-2566 in Autism Spectrum Disorders and concussion. We believe the potential for oral formulation of NNZ-2566
to become a substantial opportunity in concussion and Rett Syndrome, as well as other Autism Spectrum Disorders, is a key driver of growth and value for Neuren. Neuren
recently held a successful pre-IND meeting for this drug’s Phase II trial in Rett Syndrome, which is expected to be initiated in the next quarter. We believe that oral
NNZ-2566 targeting Rett Syndrome will be the first indication, launching in 2016.

5 Phase II Motiva Trial will complete enrolment by end-2013. This drug targeting post stroke apathy has a strong safety and efficacy profile from seven clinical trials. The
current Phase II trial underway in Australia is fully funded by an NH&MRC grant. Given high industrialised world stroke incidence, and prevalence and the high number of
stroke survivors with Apathy Syndrome, we see a large market opportunity.

6 Neuren has an encouraging early-stage pipeline. Neuren has a robust pre-clinical pipeline with NNZ-2591 for Parkinson’s and peripheral neuropathy, while a subsidiary
called Perseis Therapeutics, in which Neuren has a majority stake, is working on anticancer antibodies. There is potential for upside from partnering.

7 Neuren has a solid management team. We have a high regard for the Neuren management team led by Larry Glass, who brings strong relationships with the Army Medical R&D command as well as strong business development skills. In August 2012 Neuren added Dr Joe Horrigan, formerly of Autism Speaks, to its team as VP of Clinical and Medical Affairs, considerably strengthening its capabilities to execute the clinical trials, especially with oral NNZ-2566. We think that the Neuren board under Chairman
Robin Congreve and including Dr John Holaday, the QRxPharma CEO, is a good one.

8 Neuren has a low burn rate. With US and Australian Government funding for its two lead molecules Neuren only burned around A$225,000 per month in the last twelve
months, so it is well funded for its current stage of clinical development.

9 Neuren is undervalued given the potential. We value Neuren on a probabilityweighted DCF valuation at 17 cents base case and 21 cents optimistic case. Our target
price is 17 cents which sits at the low point of this range. We see the market marking up Neuren as Motiva and NNZ-2566 IV near the end of their Phase II trials and oral
NNZ-2566’s opportunity across Autism Spectrum Disorders becomes substantial. Neuren’s Phase II trial of Motiva is
being funded by an NH&MRC grant of ~A$0.8m