Updated MST report - target of $3.68 a share, page-196

Whatever and whenever the decision is on the ROW deal/s, one thing has been made consistently clear - there has been a lot of interest. And this is what is most important. It means that Neuren has options and it means that financial terms will be strengthened through competition.

Jon Pilcher said during the MST Access webinar that we shouldn’t expect the ROW deal/s will be with a “massive” pharma.

I don’t think he’s foxing. I think it’s more likely that he’s trying to manage shareholder expectations.

Biotech shareholders can have a fixation on doing deals with the well-known names of “big pharma”, which is generally accepted to be the top 15-20 pharma in the world, measured by market cap or revenue. The list includes the likes of Pfizer, Novartis, Roche and Sanofi. Therefore, I’m taking Jon at his word and am not expecting any of these to be our ROW partner.

That’s fine with me because, from my point of view, it can often be advantageous for a biotech not to partner with big pharma. These are huge organisations that buy and sell divisions at the drop of a hat. They will sometimes in-license drugs and then fail to develop them or fail to promote them. They often license drugs, only to return them. Don't try to sue them - remember, they have the big bucks!

Now if Neuren was wanting to enter global markets with, say, a new blood pressure lowering drug, then a big pharma with major marketing muscle could be advantageous. But in a rare disease indication such as Rett syndrome, that kind of marketing muscle isn’t required.

What is required, in my view, is a decent-size pharma of the right fit, one with decent resources, one that has a focus on neurology and/or rare disease and is ambitious, ethical and committed.

So, forgetting big pharma for the time being, here are three examples of decent-size European-based pharmas that might fit the bill.

UCB is a Belgian-based pharma with market cap of A$30 bn+ and sales of A$8 bn pa. It has a focus on both CNS and rare disease and has a global presence.

Ipsen is French, has over 5,000 employees and sales of A$4.5 bn+ pa. Like UCB, it has a global presence and a focus on CNS and rare disease.

Neuraxpharm is a German company aiming to establish itself as Europe’s CNS specialist company. It has recently bought a Sanofi portfolio of CNS drugs as well as forged a licensing deal for European rights to a rare disease CNS drug. Current annual sales are ~A$950m.

Looking towards Asia, there are multiple decent-sized pharma with a global presence and capability. Examples of Japanese pharma that fit this profile are Otsuka and Sumitomo which both have market caps in the A$20-30 bn range.

Doubtlessly some will still have a preference for the validating embrace of a big pharma partner but I say, be careful what you wish for!