Neuren Pharmaceuticals (NEU: $5.45) has some very clear objectives set for the next 17 months. The most significant of these is gaining US approval of its lead drug candidate, trofinetide, which is being commercialised in North America under license from Neuren by Acadia Pharmaceuticals for the treatment of Rett syndrome in children and adults.
Acadia filed trofinetide for approval last month. The next stage is notice from the FDA that the application is in order and has been accepted (in September), which will trigger a US$10 million payment to Neuren from Acadia.
It's expected that priority review will be granted (as orphan drug designation has been granted), which can then expect an approval decision in six months from acceptance, which will be March 2023.
There are around 10,000 people living with Retts syndrome in the US. Assuming 50% adoption and a selling price of US$100,000 per annum, it translates to peak sales of US$500 million. Neuren will receive a double digit, unencumbered royalty from sales, which we estimate is between 10% - 15% of sales.
Neuren is also eligible to other multiple milestone payments. This includes US$40 million upon first product sales, and one third of the value of the Priority Review Voucher that Acadia will receive from the FDA upon approval (an incentive to develop products for small, neglected patient populations). These vouchers sell for around US$100 million, so Neuren also stands to receive US$33 million from this potential asset.
There are also four sales milestones that total US$350 million.
Unanimously Positive Phase III Efficacy
Acadia is filing trofinetide after unanimously positive efficacy data in a 173 patient Phase III study. In that study a statistically significant positive effect over placebo was measured on the two primary endpoints; one based on a caregiver assessment (p=0.0175) and the physician assessment (p=0.003) after 12 weeks of treatment. Statistical significance was also attained on a secondary efficacy measure which assessed improvements in communication (p=0.0064).
There were some gastrointestinal side effects / incidents (such as vomiting and diarrhea) although these should be manageable with 96% classified as mild-moderate.
One of Neuren's next tasks is to find licensing partners for regions outside of North America. Trofinetide has a high cost of goods for manufacture and part of the Acadia license is that Neuren can access all data as well as product for sale outside of North America, presumably on reasonable commercial terms.
The company has indicated that it has received strong interest from potential commercial licensees. However, this is a long process and we do not expect a licensing deal for other regions to be concluded prior to the FDA decision in March. Neuren may also seek to secure regional distribution deals. Acadia may be a candidate to license the remaining regional rights to trofinetide, although it should be noted that its lead product, Nuplazid for the treatment of Parkinson's disease psychosis, has yet to be filed for approval in Europe.
However, having two products may be an incentive for Acadia to expand operations into Europe, pending a positive US regulatory outcome. An outright acquisition of Neuren following a positive FDA decision may also be a possible outcome. Acadia is currently capitalised at US$2.6 billion. It generated product revenue of US$484 million in 2021 and a loss of US$168 million. It held cash and investment securities totalling US$446 million at the end of March this year.
Second Asset in Development, NNZ-2591
Following on from trofinetide, Neuren has a very active program for its second compound in development, NNZ-2591. Neuren has four different indications for this product. A trial started last month in Australia in Angelman syndrome. Three additional studies are also planned, with Phase II results from three of the studies due in the first half of next year and the fourth in the second half of the year.
The other three indications are: Phelan-McDermid syndrome, Pitt Hopkins syndrome and Prader-Willi syndrome.
All four disorders are caused by defective genes. In Angelman syndrome the defective gene is UBE3A on chromosome 15. What gives the company strong rationale for its drug development approach is that it has tested its drug candidates, including with trofinetide, on knock-out mice (i.e. mice genetically engineered to have the defective genetic fault).
In Angelman syndrome, a UBE3A knockout mouse model was used to test NNZ-2591 and it was found to normalise all deficits in the disorder.
Neuren is already making preparations for registration studies in the four new disease areas for NNZ-591 should the Phase II studies yield positive results next year. This includes toxicology to support longer clinical studies. Each of the Phase II studies will recruit up to 20 patients.
Neuren Pharmaceuticals is capitalised at $687 million with $31 million in cash at the end of June.
Bioshares recommendation: Speculative Buy Class A
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