Small Caps | Sep 11 2012
– Neuren developing compound for Parkinson's Disease patients
– NNZ-2591 showing promise in treating both dementia and movement
– Parkinson's is a significant market opportunity
– Drug adds to Neuren's attractive development pipeline
– Bell Potter reiterates Buy rating
By Chris Shaw
Neuren Pharmaceuticals ((NEU)) previously attracted the attention of Bell Potter given the potential of the company's NNZ-2566 drug for treating Traumatic Brain Injury and for Autism Spectrum Disorders (see: Neuren Story Getting Better, FNArena, 25/5/12).
Bell Potter now sees another reason why the Neuren story is attractive, as the group's pre-clinical NNZ-2591 drug is showing promise in the treatment of Parkinson's Disease. The drug is a Glypromate-derived dipeptide, where Glycine and Proline are formed into a diketopiperazine (DKP).
Over the past 10 years Neuren's research has shown NNZ-2591 works in animal models of Parkinson's, is 100% orally-available and appears to have a clean safety profile. Additional studies have shown some success in addressing mild cognitive impairment, which implies the drug could be used to treat dementia in Parkinson's patients.
This is significant, as Bell Potter notes possibly 20-30% of patients with Parkinson's Disease develop dementia. At present only the Exelon drug of Novartis treats Parkinson's dementia, so given NNZ-2591 appears able to address both dementia and movement, it could become the first drug for Parkinson's patients to address both disease states.
Given around 900,000 Americans are estimates to have Parkinson's Disease and the disease impacts on 7-10 million people worldwide, Bell Potter sees a potential multi-billion dollar global market. Another attraction is a Parkinson's dementia drug could be very cost effective as at least one study has shown Parkinson's patients with dementia cost the healthcare system three times as much as non-demented patients.
One advantage of Neuren with respect to NNZ-2591, notes Bell Potter, is Parkinson's is not featured heavily in the late stage pipelines of Big Pharma companies. This opens up potential for Neuren with respect to partnering deals.
Given the early stage of work on NNZ-2591, none of the potential upside is factored into Bell Potter's valuation of Neuren. Valuation stands at $0.17 on a base-case basis and $0.21 on more optimistic assumptions.
The medium-term key for Neuren remains NNZ-2566, which continues to show promise in testing. Success in clinical trials for oral NNZ-2566 are likely to strengthen Neuren's value proposition in Bell Potter's view. This would also improve the attractiveness of the drug to potential licensees.
As current NNZ-2566 Phase II trials come to a close, a licensing deal becomes more likely. This, suspects Bell Potter, would trigger a significant re-rating for the stock. The next catalyst is likely to be a filing for an oral NNZ-2566 Phase II trial for treating Rett Syndrome, a type of Autism Spectrum Disorder, in October. Results from a recent Phase I trial are due in coming weeks.
Traumatic Brain Injury trials for NNZ-2566 continue, with Bell Potter expecting completion of the current trial by the middle of next year. The US government is funding the Phase II trial for NNZ-2566 in treating Traumatic Brain Injury.
A Phase II trial of Motiva,which targets post stroke apathy, is also continuing and is fully funded via a grant. Bell Potter also sees a large market opportunity for Motiva given a high number of stroke survivors suffer from Apathy Syndrome.
With a price target set in line with its base case valuation of $0.17, Bell Potter continues to see significant upside in Neuren. This means no change to the broker's Buy rating. With a market capitalisation of just over $25 million there is not a lot of coverage of Neuren, as none of the brokers in the FNArena database provide coverage on the company.
In a weaker overall market shares in Neuren today are up slightly, trading 0.1c higher at 2.4c as at 10.25am. This compares to a range over the past year of 1.4c to 3.7c.
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