Friday, 24 February 2023

Why all eyes are on Neuren Pharmaceuticals as it awaits crucial FDA approval in March

by Berkeley Lovelace

  • The US FDA is expected to decide on March 12 whether it approves Neuren’s trofinetide for Rett’s syndrome
  • If the drug is approved it will be a game-changer financially for the biotech
  • Australia has had only a few FDA approvals for drugs/devices which can generate meaningful revenue

The countdown is on to March 12, 2023 for Aussie biotech Neuren Pharmaceuticals (ASX:NEU).

It is the day when the US Food and Drug Administration (FDA) is expected to decide whether it approves NEU’s compound trofinetide for Rett’s syndrome, the first drug for the treatment of the rare neurological disorder which emerges in infancy.

The biotech believes there are potential 10,000 patients in the US alone currently affected by Rett’s syndrome.

NEU’s large pharmaceutical partner Arcadia ran a positive Phase 3 trial and submitted the results to the FDA for approval last year with the regulator saying they’ll decide on March 12.

NEU’s share price has climbed 83% over the past year as the company jumps the hurdles needed to get a drug to market. The rise has seen it promoted to the S&P/ASX 300 in the September quarterly rebalancing.

NEU CEO Jon Pilcher told Stockhead he is quietly confident that the decision will be positive.

“The FDA approval would be a massive day for us and the industry,” he said.

“It has been a long journey to get here, and I’ve been at Neuren nine years along with a few of the management team and that’s about the time we did our first trial into Rett syndrome.”


FDA approval opens up attractive economics

If trofinetide is granted FDA approval, then it will trigger game-changing milestone payments and royalties to the NEU.

“The original deal we did with Arcadia to fund the Phase III trial meant we didn’t get much up front and we got heavily criticised at the time,” Pilcher said.

But he said approval will open some attractive economics, with the company already receiving a milestone payment of $10 million upon the FDA accepting Arcadia’s submission for review.

“US$40 million will come to us when they make the first commercial sale and then they get awarded a rare paediatric disease priority review voucher which is tradeable and we get a third of whatever they sell it for,” he said.

“They’ve consistently been sold for US$100 million so that’s another $33 million.

“And then we start getting royalties every quarter from Arcadia when they start selling it.”

Pilcher said the approval would be a massive financial transformation for the company, which is yet to make a profit but has other drugs in the pipeline.

He said under the original deal struck in 2018 Arcadia had rights to market in North America.

“We kept the rest with free access to everything they had done to use around the world and that was a big value of the deal for us,” he said.

Pilcher said while FDA doesn’t mean approval in other countries it reduces the risk and means you have an FDA-approved package to use elsewhere for regulatory applications elswhere.


Set up for second drug in Phase II trials

The FDA in January gave an IND approval for NEU to proceed with the planned Phase 2 clinical trial on another lead asset, NNZ-2591in children with Prader-Willi Syndrome (PWS).

Apart from PWS, NEU ’s Phase 2 trials on NNZ-2591 are focusing on three other serious neurological disorders that emerge in early childhood, including Angelman, Phelan-McDermid and Pitt Hopkins syndromes.

All four programs have been granted Orphan Drug designation by the FDA.

Neuren has previously reported positive results in the Magel2-null mouse model of PWS.

The study found that treatment with NNZ-2591 for six weeks normalised fat mass, insulin levels, IGF-1 levels, and all behavioural deficits.

“I’ve been saying for a long time it’s worth a lot more to us than trofinetide,” he said.

“They are both involved in the biology of IGF-1 in the brain, which is growth factor critical for normal brain development and maintenance.

“The number of patients we are looking to target with NNZ-2591 is five times the patients of Retts syndrome.”

Currently has three Phase II trials and a fourth due to start with first results expected in H2 CY 23.

“I am just as excited to see those results as I am to see the FDA approval of trofinetide,” he said.

“Phase II results are the first time you get a glimpse of the effectiveness in patients.

“The FDA approval of trofinetide and funds that will flow to us from that will put us in a great position for the future and mean we have choices when deciding the best way forward for NNZ-2591.”


NEU’s future hinges on FDA decision

Morgan’s Healthcare and life sciences expert Scott Power told Stockhead Australia has had only a few FDA approvals for drugs/devices which can generate meaningful revenue.

“The sector has been out of favour for 12 months or more,” he said.

“These types of major events can result in a rotation into a sector.

“Looks like resources maybe be rolling off, investors will look for the next sector to back.”

Power said the FDA’s decision on whether it approves trofinetide for Rett’s syndrome is a company defining event.

“After years of clinical trials, NEU’s future hinges on this key decision,” he said.

“There are no current treatments for Rett’s syndrome and subject to approval by the FDA, NEU is expected to receive milestone payments of $104m plus double-digit percentage royalties.”

NEU has a market capitalisation of $920 million at $7.30/share and Morgans estimate the share price could easily run through $10/share range on approval.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article

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