Neuren's stock price doubles on groundbreaking drug trial, CEO says it's 'just getting started'

Rett Syndrome is a rare genetic neurological disorder that affects the way the brain develops, causing a progressive loss of motor skills and speech.

It’s a form of autism that primarily affects girls, or about one in every 10,000 to 15,000 female births globally.

Symptoms include smaller than normal head size, loss of normal movement, and lack of communication abilities. There are other problems such as fragile bones prone to fracture, and difficulties with chewing and swallowing.

There were no drugs in the market globally that could alleviate those symptoms, until yesterday.

In a groundbreaking announcement, Neuren Pharma (ASX:NEU) said that it was close to launching the first ever drug for Rett syndrome to the market.

The company announced that its North American partner, Acadia Pharma (Nasdaq: ACAD) reported positive top-line results from the Phase 3 Lavender study of trofinetide, Neuren’s lead asset.

These results were significant because the $400m-capped Neuren now has the potential to earn material revenues to the tune of hundreds of millions if the drug gets approved by the FDA.

A Pre-New Drug Application meeting with the FDA is planned for Q1 2022, and the all important New Drug Application (NDA) is slated for mid-year.

The Neuren stock price immediately shot up after the news, and by the day’s close, it was up by a massive 91%.

Only just getting started

Stockhead caught up with Neuren CEO Jon Pilcher, who said this was a groundbreaking event not only for the company, but also for Rett patients and the medical world.

“This was the final trial before the FDA submission, and we’ve got unambigiously positive results out of it,” Pilcher told Stockhead.

The 12-week placebo-controlled study evaluated Neuren’s leading compound trofinetide in 187 girls and young women aged 5-20 years with Rett syndrome.

The results demonstrated a statistically significant improvement of trofinetide over placebo for both (primary and secondary) endpoints.

Patients reported improvements in core symptoms, like being able to respond to a choice when asked by their parents. The study also observed that the girls were experiencing less repetitive hand movements, one of the known symptoms of Rett.

Pilcher said there are other products out there in development, but they are much further behind.

“All along, Neuren has led the way and there is really no precedent in this study,” he said.

“So we’ll be the first ever treatment that’s ever approved for Rett, and that’s groundbreaking.”

The market for Rett is estimated at around US$500m at peak sales, so tens of millions of dollars in royalties will be in the pipeline for Neuren over the coming years.

That’s on top of the $111m the company is set to earn over 2022 and 2023, if the FDA approves the drug and it launches in the US.

“The $111 million revenue is attached to those two milestone events and nothing else. It’s not dependant on sales.”

Despite today’s far-reaching achivement, Pilcher is adamant this was just the start of the journey for Neuren, and promised there will be plenty of news flow to come in 2022.

The company is currently undergoing adjacent trials for Phelan-Mcdermid, Angelman, Hopkins and Prader-Willy syndromes, which are all different forms of autism.

“They’re all similar in the fact that there’s no treatment approved, and so there’s a massive unmet need there,” said Pilcher.

“We’re just getting started, and there will be lots of news coming out of Neuren on those results looking into next year, so it’s going to be a massive year for us.”

Neuren’s valuation

The Neuren stock price doubled yesterday and is already up 170% over the past year.

Is it too late for investors to get into this stock?

Broker Morgans doesn’t have a formal coverage on NEU, but biotech analyst Scott Power believes that Neuren has a deep pipeline that could produce more positive results down the line.

“The company has been around for quite a long time, like 20 years, and they’ve had various ups and downs,” Power told Stockhead.

“But this result is very important for them and was an inflection point, and I agree when they said it would only be the starting line.”

Pilcher said the NEU stock price has been severely undervalued for a long time, because people had major doubts whether the company would be able to get positive results from the clinical trials.

“We’ve got three analysts covering the stock, and I’m confident that with the latest results, they’re going to update their models and come up with a valuation well north of where the share price is right now.”