Baldwidx
Another way of looking at this…
Firstly, I believe that Neuren’s trofinetide ROW rights announcement of 14 July last year supports your reading, and mine, of the 2023 JV and Licence contract
Neuren has an obligation not to develop NNZ-2591 or any other product for North America in an indication for which Acadia develops trofinetide, except for Phelan-McDermid, Pitt Hopkins, Angelman and Prader-Willi syndromes.
There appears to be general consensus here that the probability of Acadia attempting to develop trofinetide in the same indication as Neuren is low – Acadia would need to (i) steer around the steering committee (ii) actually commence clinical trials and (iii) risk its partner claiming “bad faith” and contract breach. And though Jon Pilcher has acknowledged that the wording of the contract does restrict Neuren, he has also said that he deems the risk is so low that it is almost theoretical.
The worst case scenario for Neuren is that any pharma, other than Acadia, which is interested in acquisition, might either be completely deterred by the wording of the contract or simply apply a discounted value to any future indications of NNZ-2591 to reflect the potential risk implied by the contract.
While Neuren shareholders were once advised by Jon Pilcher that Big Pharma only has interest in global rights, they were subsequently told that larger pharma had expressed late interest in acquiring ROW rights for trofinetide. This suggests to me that Big Pharma would likely still have interest in acquiring Neuren, even if development and commercialisation of future indications of NNZ-2591 was considered to be restricted to ROW territories.
So, I think that the worst-case scenario valuation of Neuren, by a pharma other than Acadia, would still need to assign value to:
(i) the licence fees/milestone payments payable by Acadia to Neuren from trofinetide in Rett.
(ii) the four current NNZ-2591 indications, which are globally free from any Acadia restriction.
(iii)~50% value (i.e. ROW value) for any further indications of NNZ-2591.
If you do your calculations of this “worst case scenario”, I think you will find that you arrive at a valuation for Neuren well north of its current A$2.4bn market cap. So, it makes sense, even allowing for the “worst-case scenario”, to continue to hold.
Another potential scenario exists in which Neuren or a potential acquirer successfully negotiated with Acadia to exempt further NNZ-2591 drug candidates. After all, Neuren did manage to successfully have PMS, PHS, Angelman and PWS exempted from this restriction.
Ignoring the issue of the contract for a moment, NOTHING has changed for Neuren recently other than it had highly positive Phase 2 results for NNZ-2591 in both PMS and PHS which
(i) increased the likelihood of clinical success and approval and hence the value of these two assets.
(ii) increased the likelihood that further NNZ-2591 indications will also be successful and hence increased the value of those assets.
(iii) provided early evidence that NNZ-2591 is indeed a platform drug/drug-in-a-pipeline, hence increasing the drug’s attraction and value.
(iv) increased the likelihood of NNZ-2591 efficacy in Rett and Fragile-X, and therefore the likelihood of Acadia choosing to develop NNZ-2591 in these indications and therefore the likelihood of Neuren standing to financially benefit from this. Hence, even further value was added.
Finally, ignoring the recent drop in shareprice, the only thing that has recently changed for Neuren is that its attraction and value as an acquisition target has increased markedly. And it is very likely that this is precisely why there has been the recent drop in shareprice, a drop engineered to scare nervous shareholders out of their wits and secure more cheap shares.
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