Boost for ASX healthcare sector as Neuren gets US FDA approval for drug to treats Rett Syndrome

Neuren’s compound trofinetide has been granted US FDA approval for the treatment of Rett syndrome
Trofinetide has been given brand name DAYBUE and is expected to be available in the US by end of April 2023
Healthcare analysts welcome news as a much-needed win for the out-of-favour ASX healthcare sector

Aussie biotech Neuren Pharmaceuticals (ASX:NEU) is expected to bounce after the US Food and Drug Administration (FDA) approved its compound trofinetide for Rett Syndrome, the first drug for the treatment of the rare neurological disorder which emerges in infancy.

NEU’s large pharmaceutical partner Acadia (Nasdaq:ACAD) announced over the weekend that the FDA had approved trofinetide for the treatment of Rett syndrome in adult and paediatric patients two years of age and older.

Trofinetide has been given brand name DAYBUE and is expected to be available in the US by end of April 2023. Acadia ran a positive Phase 3 trial called LAVENDAR and submitted the results to the FDA for approval last year.

“As the first FDA-approved drug for the treatment of Rett syndrome, DAYBUE now offers the potential to make meaningful differences in the lives of patients and their families who have lacked options to treat the diverse and debilitating array of symptoms caused by Rett syndrome,” said Acadia CEO Steve Davis.

Rett syndrome is a complex, rare, neurodevelopmental disorder caused by a genetic mutation on the MECP2 gene and affects ~6,000 to 9,000 patients in the US alone.

NEU CEO Jon Pilcher told Stockhead after the announcement was made many people have shown great determination over the long journey to reach this historic outcome.

“The greatest has been shown by the Rett syndrome community and I am delighted for them,” he said.

“For Neuren, this is a transforming milestone that places us in a position to make the most of the great opportunities ahead of us, as we work with the communities to make a difference in four other neurodevelopmental disorders.”

Morgans healthcare analyst Iain Wilkie told Stockhead the LAVENDER study showed treatment with DAYBUE demonstrated statistically significant improvement compared to placebo on both co-primary efficacy endpoints and the FDA approval should see the share price bounce.

“Commercialisation ahead is rapid, with availability from April,” he said.

“It’s a huge catalyst for Neuren and triggers milestone payments, royalties, potential Priority Review Voucher (PRV) sale.”

Game-changing economics for NEU

Trofinetide’s approval has triggered game-changing milestone payments and royalties to the NEU, which received a payment of $10 million upon the FDA accepting Acadia’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.”

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

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

Pilcher said the approval will 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 Acadia 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.

Analysts welcome good news for NEU and biotech sector

Petra Capital healthcare analyst Tanushree Jain told Stockhead the approval is a watershed event for Neuren and transforms them both from a risk perspective and financially because of the various cash injections from their existing partner and royalty revenues.

Jain said the US approval and the pricing in the US will form an impetus to licensing discussions NEU is having in other markets for trofinetide.

“The terms there to be finalised would help with having the US reference price in hand,” she said.

“For investors looking at Neuren now this is probably another big catalyst.”

Morgan’s Healthcare and life sciences expert Scott Power told Stockhead said the NEU approval was a welcome news to the sector, which had been out of favour for 12 months or more.

“These types of major events can result in a rotation into a sector – It’s a big day for NEU and the Rett’s community,” he said.

“This is a terrible disease with no current treatment options until now.

“Apart from the benefits for Rett’s patients, NEU will benefit with an expected A$104m in milestone payments plus double digit royalties on net sales with NEU having a current cash position of $40m. “

Jain agrees the NEU approval is a milestone for both the company and ASX healthcare sector.

“We’ve got very few companies who have actually crossed the finished line and be able to get an FDA approval,” she said.

“Technically CSL (ASX:CSL) as a stand alone biotech company is probably the biggest success we’ve had but following that there’s not many and I can probably count a handful of companies that have who got FDA approved products in the market and are still stand alone.

“This is going to be a win for the sector definitely and I will expect with this type of a win we will find more generalist investors to want to play and invest in the sector.”

“It’s important for the sector because the US is the biggest market, the FDA is known to be the most stringent regulators so getting approval also speaks for the whole Australian biotech sector with the quality of the data, trials which have been run and the assets.”

Set up for second drug in Phase-2 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, which grants tax credits for qualified clinical trials, exemptions from user fees and a potential seven years of market exclusivity after approval.

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,” Pilcher 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.

“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,” Pilcher said.

Jain said the FDA approval of trofinetide helps de-risk NNZ-2591.

“It has some similarities to trofinetide which is the de-risking effect because it has worked in a disease with no approved treatment and the end-point was very challenging without a pre-defined pathway,” she said.

“Having that similarity is one de-risking aspect but NNZ-2591 has some differentiating characteristics which enhance its prospects and is targeting indications which cumulatively are probably five times the size of trofinetide.

“I think that is asset is unlocking further value in the stock.”

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 NEU share price today:

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.