I can see quite a number of HC contributors do hold NEU (Neuren...

I can see quite a number of HC contributors do hold NEU (Neuren Pharmaceuticals) shares, If we could borrow the trajectory of NEU's share price before and after FDA approval, we might have a better idea of how PYC's SP would track from here.

Is PYC's share price going to behave like NEU before and after FDA approval?

In a nutshell, yes, but much better! The devil's in the detail.

First, the burning question -
To sell or not to sell one of the drug assets in the pipeline?

A few months ago, most of us were very concerned that a Cap Raise is coming. It would be much preferred to sell a drug asset in a BD to fund the ongoing clinical trails. Well NEU is a good example! Let's see if it is a good idea.

NEU sold its North American distribution rights for their Rett syndrome drug Trofinetide to Acadia in 04/2023, to be marketed as DAYBUE. In 07/2023 the deal was expanded to cover Europe, Japan and rest of the world.

https://acadia.com/media/news-releases/acadia-pharmaceuticals-acquires-ex-north-american-rights-to-trofinetide-and-global-rights-to-neurens-nnz-2591-in-rett-syndrome-and-fragile-x-syndrome/

Who is making more money - NEU or Acadia?
29/02/2024
Acadia announced fourth-quarter net sales of DAYBUE (trofinetide) in the US of US$87.1 million.Neuren said this was the second full quarter of sales since launch in April 2024. Net sales for 2023 since April were US$177.2 million. Acadia also provided guidance for full-year net sales in 2024 of between US$370 million and US$420 million.Neuren said it anticipates royalties of A$12.8 million for the fourth quarter of 2023, up from A$10.4 million for the third quarter and A$26.8 million for the full year 2023. It said it anticipates royalties of between A$61 million and A$70 million for the full year 2024.

So NEU is only getting A$12.8M out of the 4th Quarter sale of A134M, i.e. 9.55% in royalty. Is that a good deal ???

https://biotechdispatch.com.au/news/neuren-pharmaceuticals-reports-fourth-quarter-royalties-from-day

Now let us study the trajectory of NEU's share price before and after FDA approval. In the past 10 years, SP had been basing at the $1.00 mark. For ease of calculation, $1.00 was used as the base line where the SP had jumped due to major news.

Recent major events and their effect on NEU's SP:
(See NEU's weekly chart below)

• 19/02/2020 3X @ 3.04Rett syndrome drug TrofinetidePhase 3 trial timetable released
• 23/03/2020 dropped to 1X @ 0.97Share price artificially pushed down for accumulation on confirmation of Phase 3trail timetable and details
• 08/12/2021 3.8X @ 3.85DAYBUE (Trofinetide) forRett syndrome Phase 3shows stunning efficacy [It took 22 months to do a12-month trial due to Covid]
• 13/09/2022 7X @ 7.18DAYBUE submitted for FDAApproval and receivedPriority Review
• 13/03/2023 13X @ 13.23FDA Approval of DAYBUE(Trofinetide) treating RettSyndrome. NEU to get US$40Mfrom Acadia for 1st commercial sale
• 13/11/2023Phelan-McDemid syndromdrug Phase 2 completed
• 18/12/2023 24X @ 24.04Phelan-McDermidsyndrome drug Phase 2efficacy "significant"
• 29/02/2024NEU reportedannual net profitof A$157M, P/E=17(All from Acadia)

Observations:

1. With only 1 drug, good efficacy would move the SP by 4X
2. FDA Approval would make the SP jump by another 3X (or 13X from baseline)
3. Adding the 2nd drug's good Phase 2 efficacy caused SP to be nearly another 2X (or 24X from baseline) ****** Note that the BIG JUMP in SP is due to the fact that the Phelan-McDermid drug is 100% owned by NEU. Whereas the Rett syndrome drug is already sold to Acadia and NEU is only earning % royalty. Now you would appreciate selling the crown jewel is not a good idea and a Cap Raise is painful and dilutive, but it's only a short term pain for long term gain!
4. With 1st drug FDA approved and 2nd drug showing good efficacy in Phase 2 trial, the P/E is already at 17. This would bow well for PYC.
5. Beware! The SP could be artificially pushed savagely back down to baseline for accumulation BEFORE efficacy data is released.

PYC Valuation:

If all goes well, the ADPKD drug would be commercialized in 2028 with an estimated recurring annual earnings of US$10b. This would translate to an earning of around A$3.64 per share. If 10% of which is ploughed back to new drug discovery and 90% distributed as dividend, say A$3.28/share and investors are happy with 6% dividend yield, the share price should be A$54 at P/E=1. Try P/E=10. It would be a mega bonza! This is only based on one drug being approved and there are 3 more to come.



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