##{"id":59028,"date":"2011-10-21T11:10:40","date_gmt":"2011-10-21T00:10:40","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/10\/21\/neuren-pharma-could-be-the-only-one\/"},"modified":"2011-10-21T11:10:40","modified_gmt":"2011-10-21T00:10:40","slug":"neuren-pharma-could-be-the-only-one","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/10\/21\/neuren-pharma-could-be-the-only-one\/","title":{"rendered":"Neuren Pharma Could Be The Only One"},"content":{"rendered":"

\n\t– Neuren<\/span> developing compound for treating Traumatic Brain Injury
\n\t– Market is attractive as currently no suitable treatments
\n\t– Neuren<\/span> also developing other potentially attractive compounds
\n\t– Bell Potter initiates coverage with a Spec Buy rating<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tJunior biotech Neuren<\/span> Pharmaceuticals ((NEU<\/span>)) is developing the NNZ-2566<\/span> compound, aimed at treating Traumatic Brain Injury (TBI<\/span>). Development of NNZ-2566<\/span> is now in Phase II and is on track for FDA approval and marketing by 2017.<\/p>\n

\n\tAs Bell Potter notes in its initiation of coverage on Neuren<\/span>, the core NNZ-2566<\/span> compound is a synthetic analogue<\/span> of amino acids. The view is administering such a compound in the hours after a TBI<\/span> would prevent the subsequent death of brain cells that result in permanent brain damage.<\/p>\n

\n\tAn advantage of such a drug is the molecular cascade that follows a TBI<\/span> opens up various points for a drug-based intervention. There is currently no such drug available on the market as products developed by the likes of AstraZeneca<\/span> and Ono Pharma<\/span> of Japan have failed clinical tests.<\/p>\n

\n\tThe current Phase II trial should be completed by late next year notes Bell Potter, a development that could lead to a single pivotal Phase III trial in the US under Fast Track and SPA procedures. At present the drug is available only by infusion, with Neuren<\/span> also working on an orally-available formulation. This could potentially open up the compound to other uses such as aiding in stroke recovery and in treating Rett<\/span> Syndrome, which is an autism spectrum disorder.<\/p>\n

\n\tThe market for such a treatment is significant, Bell Potter noting in the US there are around 1.7 million TBIs<\/span> annually. At present there are no treatments considered neuro-protective<\/span>, which suggests a potential market in the US alone of around US$2 billion for mild TBIs<\/span> and a further US$2 billion for moderate to severe TBIs<\/span>.<\/p>\n

\n\tThe Phase II trial underway at present is being funded by the US army, reflecting a strong interest in developing neuro-protective<\/span> drugs given around 25,000 cases among active personnel in 2010. The US army has provided US$22.8 million for development of NNZ-2566<\/span>, Bell Potter noting this is enough to cover the Phase II trial.<\/p>\n

\n\tIn 2008 Neuren's<\/span> Glypromate<\/span> product failed in a Phase III trial measuring the ability of the drug to prevent cognitive decline following Coronary Artery Bypass Graft. But in the view of Bell Potter this failure reflected a poor choice of trial structure, the data indicating NNZ-2566<\/span> may have a better chance of a positive outcome, especially as evidence to date indicates NNZ-2566<\/span> delivers positive results.<\/p>\n

\n\tThis supports Bell Potter's view Neuren<\/span> is undervalued at current levels, based on the potential for NNZ-2566<\/span> alone. The broker's forecasts support this, as base case assumptions suggest a valuation of 12c<\/span> per share, while more optimistic assumptions imply a valuation of 21c<\/span> per share.<\/p>\n

\n\tThese assumptions include Neuren<\/span> raising an additional $20 million in working capital to fully develop its product pipeline and a 15% chance of clinical success for all products currently under development.<\/p>\n

\n\tThese other products include Phase II development for Motiva<\/span>, a cognition-enhancement drug acquired in 2007 that is expected to be used for treating Apathy Syndrome in patients recovering from strokes. Also in the development pipeline of Neuren<\/span> are NNZ-2591<\/span> for the treatment of Parkinson's Disease and peripheral neuropathy, while a subsidiary is working on antibodies for breast and other cancers.<\/p>\n

\n\tThe base case valuation of Bell Potter implies significant potential share price upside for Neuren<\/span>, as the share price at present is a little above the 2c mark. This underpins the broker's Spec Buy rating.<\/p>\n

\n\tAt current levels Neuren<\/span> is capitalised at less than $20 million, meaning little coverage from the broader market. None of the eight brokers in the FNArena database offer research on Neuren<\/span>.<\/p>\n

\n\tShares in Neuren<\/span> today are unchanged with a last sale of 2.4c. Over the past year the stock has traded in a range of 1.3-2.9c.<\/p>\n

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