Petra Capital report Neuren Pharmaceuticals (NEU) - Daybue...

Petra Capital report

Neuren Pharmaceuticals (NEU) - Daybue outlook still strong, 2591 is the Focus US Daybue sales in 1Q24 came in at the low end of guidance and a touch below consensus and our expectations. However, ACAD has reaffirmed its FY24 guidance, assuming sequential QoQ growth from here with net patient adds week-over-week following trend over last 6 weeks.

Daybue QoQ performance for the rest of the year in US bear watching for investors to regain confidence in its growth trajectory, however the lack of near-term competition and a growing rett diagnosed population of which 74% patients are yet to try Daybue underscore our confidence in its longer-term potential (peak sales US$1bn).

Our focus now turns completely to the upcoming trial results for NNZ-2591 in 2Q and 3Q24, which we believe will be significantly more important value drivers for NEU. Our TP is largely unchanged at $28.91/sh. We retain BUY.Low end of FY24 guidance achievable in our view1Q24 Daybue sales of US$75.9m declined 13% over 4Q23 (10% volume and 3% pricing), impacted by seasonal dynamics and a higher numerical discontinuation rate.

ACAD has called out a return to net patient adds in each of the last 6 weeks and re-affirmed its FY24 guidance of US$370m-US$420m.1300 rett patients (~26% of the 5,000 diagnosed) have tried Daybue, with >3,500 yet to try.

Daybue has penetrated 50% in Centers of Excellence, with new prescriptions mix now shifting 1:1:1 to COE, high-volume institutions and community practices.862 patients are on treatment (vs. 860 at Feb end & 900 end of 4Q). We now model FY24 sales of US$370m at low end of guidance (assuming net patient adds slightly below 2Q rate so far).

This translates to ~A$61m royalty to NEU and still triggers the first US$50m milestone.TP largely unchanged at $28.91/sh, Retain BUYOur FY25 and FY26 NPAT forecasts have decreased and increased by 39% and 42% respectively. These were driven by ~8% decrease in our US Daybue royalty revenue forecasts, which has also pushed out the timing of a second sales milestone (Figure 3 & Figure 4). Changes to our FY24 NPAT was not material.

Updating our DCF for the earning changes and time creep, leaves our TP largely unchanged at $28.91/sh (was $29.01/sh).Cash (A$243.1m) and Daybue (US & Ex-US) for rett are worth ~$16.4/sh on our SOTP DCF valuation. NNZ-2591 is worth ~$9.7/sh and offers meaningful upside.Key Dates Ahead2Q24 – NNZ-2591 Pitt Hopkins results (PCe May’24).3Q24 – NNZ-2591 Angelman trial results (PCe July’24).