Petra update Neuren Pharmaceuticals (NEU) - Growing revenue with...

Petra update

Neuren Pharmaceuticals (NEU) - Growing revenue with a strong balance sheet In 1H24, NEU grew its recurring royalty revenue from Daybue vs pcp and reported NPAT of $8m.

This without any one-off milestone payments and despite an increase in its cost base to support pipeline development. While US Daybue trends remain the key focus for investors currently, we note that near-term ex-US approvals will expand the revenue potential of the drug.

Progress of the second asset (NNZ-2591) into registrational trials remains the key forward value driver. Positive results now across 3 indications and a strong cash position supporting this effort. In support, we now see a modestly elevated cost base so trim our TP to $30.25/sh.

We re-iterate our BUY rating.NPAT miss on higher opex and reporting changes· 1H24 Daybue royalty revenue of $24.3m (vs. $3.5m in pcp) was in-line with PCe $24.7m. There were no milestone payments in 1H24(vs. A$59.4m in pcp), however NEU expects a $77m sales milestone in 2H24.· NPAT of $8.0m was lower than PCe NPAT of $14.4m.

The variance was driven by higher opex in preparation for Phase 3 for NNZ-2591 and a change in NEU’s functional currency to USD, resulting in re-classification of non-cash FX gain from P&L to currency reserve.· Cash and short-term investments of A$213.2m were in-line.

A further boost to cash reserves is expected, with NEU guiding to A$108-$113m in 2H24 (including $31-$36m in Daybue royalties and a first sales milestone of $77m). We are at the low end of Daybue revenue guidance for 2H24, but also include ~$50m (share on sale of Priority Review Voucher by Acadia) in 4Q24.TP lowered to $30.25/sh (was $31.48/sh), retain BUY·

Our FY24 NPAT forecast reduces by 6%, with changes to FY25-FY26 NPAT forecasts immaterial (1-2%) and primarily driven by a $3.0-$3.8m increase in our annual opex forecasts. Our TP reduces by ~4% to $30.25/sh.· Cash (A$213.2m) and Daybue are worth ~$15/sh on our SOTP DCF valuation.

At the current price, NNZ-2591 is a call option offering meaningful upside.
Key Dates Ahead· Sep’24 – Potential re-authorisation of PRV program.·
Oct’24 – Update on NNZ-2591 development plans following Sep’24 FDA meeting on Phase 3 Phelan Mc-Dermid (PMS) Trial design.·
Nov’24 – Acadia 3Q24 results.·
4QCY24 – Daybue Canada approval.·
2HCY24 – Trigger of US$50m Daybue sales milestone.