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Transformational Trial Results For Neuren Pharmaceuticals

Small Caps | Dec 20 2023


Brokers raise valuations for Neuren Pharmaceuticals following positive Phase 2 clinical trial results.

-Trial results released for NNZ-2591 by Neuren Pharmaceuticals
-Wilsons increases the probability of success in Phelan McDermid syndrome
-Neuren conducting additional NNZ-2591 trials for three similar syndromes

By Mark Woodruff

Following the release by Neuren Pharmaceuticals ((NEU)) of positive Phase 2 clinical trial results for its drug to treat the cognitive disorder Phelan-McDermid syndrome in children, both Bell Potter and Wilsons materially raise their respective 12-month target prices for the company.

The data from the trial is transformational for Neuren Pharmaceuticals, suggests Wilsons, as it forces investors to value the company’s NNZ-2591 drug as a real, material asset, as opposed to a free option within the company’s share price. 

Importantly, the broker believes NNZ-2591 will be the driver of future strategic value creation.

On the day the trail results were released, shares in Neuren jumped by nearly 30% and rose a further 8% the following day (yesterday) to close at $23.96.

Neuren is a commercial stage biopharmaceutical company focused on development of novel therapies for orphan neurodevelopmental disorders. The company’s lead asset is Daybue (trofinetide), which was out-licensed in 2018 to Nasdaq-listed Acadia for distribution in North America.

In March this year, the US FDA approved Daybue for the treatment of Rett syndrome in adult and paediatric patients, and Acadia announced the US launch in April, triggering a US$40m milestone payment.

Commenting on the FDA approval at the time, Evans and Partners noted the valuation of Neuren was now partly dependent upon metrics around uptake of the drug and future discontinuation rates. Such factors determine what royalties are to be received as well as Neuren's ability to claim commercial milestones from its partner.

In July, Neuren expanded the Acadia agreement for all remaining global territories and received an upfront US$100m payment.

However, the company’s primary focus is on its second asset NNZ-2591, which is targeting multiple rare diseases and neurological indications. 

Earlier in the year, Wilsons outlined the opportunity for NNZ-2591 is at least five times as large as for Daybue. A significant de-risking for NNZ-2591 was noted when Daybue received FDA approval, as both treatments target a relevant signalling pathway integral to brain cell health and development.

Following the Phase 2 trial results, this broker has far greater confidence in NNZ-2591, and materially increases its probability of success against Phelan McDermid syndrome and for three additional syndromes, Angelman, Pitt-Hopkins and Prader-Willi, which are similarly characterised disorders.

Management at Neuren is currently conducting Phase 2 trials for the use of NNZ-2591 for those three syndromes, with top-line results expected over the next 12 months.

Phase 2 trial results

Endpoints in the latest Phase 2 trial included various clinician and caregiver assessments of symptomatic improvement from a baseline measurement.

The largest improvements were seen in communication, cognitive/learning abilities and social interactions. These domains are similar in nature to the traits most identified by caregivers as their top three concerns, explains Bell Potter.

The broker highlights that for 10 of the 14 efficacy endpoints, statistically significant improvements to week 13 of treatment from baseline were achieved. Importantly, note the analysts, NNZ-2591 was generally well tolerated by the 18 subjects.

Looking forward

Wilsons awaits notice of Neuren’s end of Phase 2 meeting (either the second or third quarters of 2024) with the US FDA, in which registrational trial design and endpoints will be discussed, after which timelines and costs will be clearer.

Bell Potter suggests Neuren has ample cash ($230m as at September 30) to commence the likely next step, which is a larger (potentially pivotal) placebo-controlled Phase 3 Phelan-McDermid Syndrome trial to confirm the initial Phase 2 results.

Over the next year, this broker expects additional catalysts including quarterly updates for Daybue in the US, Daybue submissions in Canada and Europe. Additional NNZ-2591 Phase 2 results and Phase 3 preparations are also expected.

Bell Potter upgrades its rating for Neuren Pharmaceuticals to Buy from Hold and raises its target to $27.00 from $17.50, given the trial results mark a material de-risking event for NNZ-2591.

For the same reason, Wilsons increases its target price to $27.23 from $22.79 and maintains an Overweight recommendation.

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