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RESEARCH: Neuren Keeps Rest-of-World Rights For Trofinetide

FYI | Mar 07 2019

By Pitt Street Research

Trofinetide goes to Phase 3 this year
Last year Neuren Pharmaceuticals ((NEU)) partnered its lead molecule, called Trofinetide, to Acadia Pharmaceuticals.

That company will start the Phase 3 trial with Trofinetide in Rett Syndrome in the second half of 2019. Neuren has declined to license the Rest-of-World rights to Acadia and is now free to explore other options for a commercial partner.

Investment case: A fast path to market
Acadia expects to take Trofinetide into Phase 3 in the second half of this year and file for FDA approval in Rett Syndrome potentially in 2021.

We believe the market has misunderstood the massive opportunity Neuren and Acadia are working on with Trofinetide, particularly with regard to its speed to market. Since Orphan drugs often sell for very high prices, we see potential for Trofinetide to become a

Neuren has a great North American partner in Acadia for Trofinetide
Acadia Pharmaceuticals is a significant player on the US biotechnology scene, with a current market capitalisation of >US$3.8bn and membership in the elite Nasdaq Biotechnology Index. The company gained FDA approval for its first drug, Nuplazid for Parkinson's disease psychosis, in 2016 and is now seeking to grow into other indications based on strong focus and expertise in neurology.

Valuation range of $4.17–$6.31 per share
As per the methodology followed in our 5 December 2018 initiuation report on Neuren, we value Neuren at $4.17 per share base case and $6.31 per share optimistic case using a probability-weighted DCF approach. We believe the market has chosen to price Neuren like a Phase 2 company rather than the Phase 3 company which it really is.

We see Neuren being re-rated towards our valuation range as the market starts to appreciate the quality of the deal with Acadia, and as Acadia prepares for the US pivotal study. There also remains the potential for Neuren to negotiate a deal for the ex-North America rights for Trofinetide.

Currently our valuation does not include NNZ-2591, which is a further upside as Neuren provides more details on the development program.

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