I think if we've got a blockbuster, world leading drug in 2591 for multiple neurological development disorders, and potentially for neuro-degenerative conditions as well, and the European and Asian markets are at least as big as North America, why wouldn't a major European pharmaceutical company be interested in rights to get our product licenced and marketed in the rest of the world, while Acadia develops the North American market.
Jon Pilcher has often described NNZ-2591 as Neuren’s “jewel in the crown”. In much the same way, US rights to a drug are considered to be the “jewel in the crown” for any biotech in the pharma world. If a biotech licenses out early the US rights to its major asset, it’s regarded as “selling the company without selling the company”. Hence, it is recommended that, if possible, biotechs should retain US rights for long as possible to maximise the company's future value.
Jon Pilcher said some time ago that the intention was to not licence out US rights for NNZ-2591 prior to Phase 3 as was done for Acadia. Longer term investors will remember how the market viewed that deal at the time and the long term impact on shareprice.
Jon Pilcher has also previously stated that he doesn’t want to split indications for NNZ-2591.
And at this year’s AGM he revealed that larger pharma had already expressed interest in NNZ-2591 because it offered global rights.
Recently, Tangentland posted an article by RBC Capital Markets about what Big Pharma looks for when forging deals. To quote
“large pharma tends to prefer worldwide rights. And they don’t like indication splitting….”
The reason that Big Pharma wants global rights, or at the very minimum, US rights, is because while the European and Asian markets may have larger populations than the United States, this doesn’t mean those markets have the potential to be as lucrative.
Even though the United States has recently introduced the Inflation Reduction Act to try to reduce healthcare expenditure, it is still well behind the aggressive management of drug prices that is found in the rest of the world.
A 2018 study found that prescription drugs available in the U.S. in 2018 were 256% the price of those in 32 OECD countries.
The following is from a recent posting on drug pricing I made on another stock
In Europe, pricing/reimbursement is negotiated on a country by country basis although countries will often reference other European countries’ drug prices when deciding their own. It has been estimated that European orphan drug prices are, on average, ~60% of US orphan drug prices. Some biotech/pharma (e.g. bluebird bio) have chosen to withdraw from the European market, claiming that they can’t get fair reimbursement for their drugs.
The European discount to US prices could deepen further as Germany has recently toughened its stance on drug pricing and the European Commission is aiming for Europe to become a single market for medicines. However, as the Biden administration has made its own attempt to tackle high drug prices with the recent introduction of the Inflation Reduction Act, the comparative bar might be lowered.
Countries like China are even tougher. While sheer market size in China is highly attractive to pharma, the Chinese government drives a hard bargain with pricing. For example, Biogen was pressured to cut the price of Spinraza to about RMB 30,000 (around $4,800 USD) per injection, representing a 95% discount to US pricing, just 4 years after entry to China.
Further proof of how difficult it can be for a pharma company to establish a footprint and/or make decent money outside of the US can be found by looking at some ASX-listed biotechs.
Aroa (ARX) was founded in New Zealand in 2008. It sells skin regeneration products. The company boasts that it has achieved market entry into 50 countries globally, one of which is the United States. Last financial year it declared US sales of NZ$58.7m. Ex-US sales were just NZ$1.7m.
Clinuvel (CUV) received an unsolicited takeover bid from a group of companies in 2014 which was rejected. The company took the route of going it alone and received European marketing approval for its lead asset, the orphan drug Scenesse, in December 2014 and FDA approval in October 2019. In the UK, CUV is still locked in a dispute with NICE, the gatekeeper authority that decides whether the product will be used within the NHS public health system. NICE has kept Scenesse “under review” for 250 weeks and counting. Excuses are given, but really, it just doesn’t want to pay. Clinuvel current market cap is A$802m.
Avita (AVH) tried twice to get NICE to be nice and recommend its skin repair product, RECELL. No success. AVH declared US sales of US$33.26 m last year, compared with $1.16m ex-US sales.
As for the argument that Acadia managed to go it alone and get their first drug approved; if they can do it, we can too – that’s true. But it first took a Phase 3 failure in 2009 before pimavanserin finally received FDA approval in 2016. I’d also point out that, just on 20 years since it listed on the NASDAQ, Acadia is still to record a profit and has an accumulated deficit of ~US$2.5bn.
The idea of going it alone, achieving glory, global domination and a $500bn+ market is, like winning Oz Lotto, an attractive vision. But one should never lose sight of the sheer enormity and risk of the task.
NEU Price at posting:
$25.01 Sentiment: Hold Disclosure: Held
(20min delay)