Neuren shares are in the bargain bin and could be worth at least twice as much, believe analysts. Pic via Getty.
Health & Biotech
Some healthcare analysts believe Neuren Pharmaceuticals (ASX:NEU) shares should be worth more than double their current soft valuation, on the back of promising take-up of its drug for Rett syndrome.
Neuren distributes the drug, Daybue, via its US distributor Acadia, which announced December quarter sales of US$348 million (in line with expectations).
Most common in girls, Rett syndrome is a rare genetic disorder that affects brain development and causes disability in early childhood.
Some investors have been concerned about the rate of take-up of Daybue and discontinuances because of side effects.
But Canaccord says the Acadia material provides a “a degree of confidence in a slow, linear increase in sales”.
Currently, 920 patients are on Daybue, which the US Food & Drug Administration (FDA) approved in March 2023.
The drug was launched shortly thereafter.
Patient numbers are expected to improve in the current half, given Acadia’s 30% increase in its on-the-ground sales force.
With $222 million of cash on hand, Neuren is well funded for at least two more phase III programs, starting with Phelin McDermid Syndrome.
The company expects a study to enroll 100 to 200 patients and cost US$50 million to US$100 million.
Canaccord says Neuren’s current share price of around $12.80 only factors in Daybue sales – and ascribes a $28.12 valuation if all goes well.
Meanwhile, broker Barrenjoey says the result “demonstrates consistency in the Daybue franchise”.
The firm notes that Daybue’s reach is likely to be extended to high-volume academic and family GPs, which are the point of care for 65% of patients.
Barrenjoey values the stock at $29.30 – an 120% uplift. Broker Wilsons ascribes a $26.50 valuation.
Neuren shares have lost one-third of their value over the last year, but the company is still valued at $1.7 billion.
Three years ago, the shares changed hands for $4 – but that was then and this is now.
The biotech sector’s share price “capitulation” in February’s reporting season has created other buying opportunities, according to Wilsons’ analyst Dr Shane Storey.
He describes the December half results (and some full-year results) as “one of the toughest seasons for healthcare in years”, with more downgrades and ‘sidegrades’ (a lack of revenue and earnings upgrades) than ever.
“There was a real sense of capitulation in how the market saw healthcare in February, which creates research [buying] opportunities … in March.”
He says stocks with the “most potential upside” include ResMed (ASX:RMD), Telix Pharmaceuticals (ASX:TLX) , Clarity Pharmaceuticals (ASX:CU6) , Integral Diagnostics (ASX:IDX) and sector big daddy CSL (ASX:CSL).
Many biotechs reported record revenue and earnings, but the sector went backwards share-price wise.
The ASX 200 healthcare sector tumbled 5.5% for the month (the index consists of mainly ‘grown-up’ commercialised companies).
Biotech Daily’s index of the top 40 biotechs shows the sector fell 3% in the month of February, slightly better than the overall market’s 4% retreat.
This excludes the four big caps – CSL, Resmed, ProMedicus (ASX:PME) and Cochlear (ASX:COH) – which tumbled a collective 7.6%. Cochlear shares lost a weighty 17.6%, while Resmed and CSL lost around 7%.
While the results were robust, they did not meet investor expectations.
The unfolding chaos around US healthy policy didn’t help either, notably the round of sackings and then re-hirings at the FDA.
Outside of the Big Four, radio imaging group Cyclopharm (ASX:CYC) led the falls, down 36%.
Wound care provider PolyNovo (ASX:PNV) lost 30% and imaging house 4D Medical (ASX:4DX) declined 27%.
Bucking the trend, shares in neurodegenerative disease group Actinogen Medical (ASX:ACW) surged 47%, followed by immune-oncology drug developer Imugene (ASX:IMU) (39%).
Kidney diseases specialist Dimerix (ASX:DXB) has banked an initial up-front payment of $3.2 million from its Japanese distribution partner, FUSO Pharmaceutical Industries.
The tie-up relates to Dimerix’s drug candidate for the rare disease focal segmental glomerulosclerosis, which is in phase III trial stage.
Dimerix is due for another $4.1 million milestone from FUSO, when the first Japanese trial site is initiated in the next six to 12 weeks.
The company is eligible for further potential development milestones of up to $30.6 million, sales milestones of $69.4 million and royalties on net sales of 15% to 20%.
And there’s more!
In October 2023 Dimerix struck a similar deal with Advanz Pharma (covering Europe, Canada and here), with a compact with Taiba (for the Middle East) signed in May 2024.
Collectively, the deals provide up to $458 million in upfront and milestone payments (plus royalties).
Notably, the company is yet to strike an agreement for the capacious US and Chinese markets.
Dubbed Action 3, the placebo-controlled trial expects to enroll 286 patients.
The company expects to complete dosing in the September quarter, with results next year.
Cancer drug developer Arovella Therapeutics (ASX:ALA) has bounced back from a capital-raising setback by extending a US tie-up to further one of its key programs.
The company has entered into a sponsored research agreement with Professor Gianpietro Dotti’s research group, at the University of North Carolina (UNC).
The collaboration relates to Arovella’s IL-12-TM and solid tumour programs.
IL-12-TM is a modified form of interleukin-12 and is part of the company’s invariant natural killer T (INKT) cell technology.
INKTs are a subtype of natural killer cells that have potent cancer-zapping qualities.
In January last year Arovella acquired an exclusive licence for Dotti’s IL-12-TM technology, developed at UNC.
The one-year research agreement is in lieu of an upfront fee, but Arovella expects the development work to cost US$280,000 a year.
Late last month, Arovella cancelled a $15 million placement after the subscriber, a local private investor, failed to come up with the funds.
The company executed a new $15 million raising, albeit not on the “excellent” terms (12.5 cents per share compared with 17 cents for the failed one).
“Whilst this was a disappointing outcome for Arovella, we wish to reassure you that the investor’s default should not be taken as indicative of any internal challenges within Arovella,” CEO Dr Michael Baker told holders yesterday.
The funds will support trials of the company’s light therapy for non-melanoma skins cancers and ano-gential cancers.
Stockhead, we tell it as it is. While Dimerix is a Stockhead advertiser the company did not sponsor this article.
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