In a major boost to its bottom line, Neuren Pharmaceuticals (ASX: NEU) has reported a stellar third-quarter performance for 2024, highlighted by significant royalty income from its flagship product DAYBUE™ (trofinetide). DAYBUE™, the first FDA-approved treatment for Rett syndrome, continues to outperform expectations in North America, with nine-month net sales exceeding US$250 million. This impressive sales performance has triggered Neuren’s first milestone payment of US$50 million, while ongoing royalty income and additional income from a recently sold Priority Review Voucher (PRV) look set to push Neuren’s full-year revenue into record territory.
In addition to the milestone payment, Neuren has been steadily reaping royalties from DAYBUE™ sales. For Q3 alone, Neuren earned royalties amounting to A$13.2 million, bringing the nine-month total to A$37.5 million. The company expects Q4 royalties to come in between A$16 million and A$18 million, which would drive total royalty income to roughly A$56 million for the year. Neuren’s royalty income structure is tiered, with rates increasing as sales exceed certain thresholds. For the year’s net sales so far, Neuren has been receiving a 10% royalty on sales up to US$250 million, with royalties above that threshold set at 12%—an arrangement that could continue to pay dividends as sales grow.
Adding to Neuren’s financial strength, Acadia recently sold its Rare Pediatric Disease Priority Review Voucher (PRV) for US$150 million. Neuren, which holds a one-third share in the PRV, stands to gain US$50 million from the sale, which is expected to close in Q4 2024. This windfall further solidifies Neuren’s cash position and underscores the value of its partnership with Acadia. The PRV income, like the milestone payment, will be recorded in Q1 2025, contributing significantly to the company’s liquidity as it gears up for the next stages of growth.
DAYBUE™’s journey is not limited to North America. In October, Health Canada approved trofinetide for treating Rett syndrome in patients aged two and older, opening the door to another market where unmet demand for Rett syndrome treatment is high. Acadia, which holds worldwide rights to DAYBUE™, is also preparing for a European launch, with regulatory filings expected in early 2025. To support this, Acadia has been building its launch teams across Europe, with Japan also in the pipeline as Acadia progresses regulatory discussions.
These international expansions represent major potential for Neuren, which is set to receive additional milestone payments upon first commercial sales in key markets. In Europe alone, a commercial launch would trigger a milestone of US$35 million, while Japan would unlock a further US$15 million. Royalties in these regions are also structured to be in the mid-teens to low twenties on net sales, ensuring that Neuren’s income stream could grow substantially as new markets come online.
With cash and short-term investments of A$210 million as of 30 September 2024, Neuren is in a strong financial position. This cash reserve, coupled with expected milestone and PRV income, is setting the company up for a full-year revenue projection of between A$216 million and A$218 million—a significant leap from last year. CEO Jon Pilcher highlighted the financial progress, noting, “This quarter has clearly emphasised the value to Neuren of DAYBUE™ and our partnership with Acadia… we are in the enviable position that our share of the large global market opportunity for DAYBUE™ provides such a strong financial foundation to optimise the potential upside of NNZ-2591 in multiple indications.”
Adding further to Neuren’s cash position, a deferred tax credit of approximately A$17 million will be applied in 2024, reflecting the utilisation of New Zealand tax losses that had previously gone unrecognised. This one-off credit will partially offset the tax liabilities stemming from Neuren’s substantial royalty and milestone income.
Neuren’s strong cash flow from DAYBUE™ has provided a stable foundation for the continued development of its second drug candidate, NNZ-2591, which is being trialled for multiple neurodevelopmental disorders, including Angelman, Phelan-McDermid, and Pitt Hopkins syndromes. Recent Phase 2 trials have shown promising results, with participants demonstrating improvements in key areas such as communication, behaviour, and motor skills.
Neuren recently held an End of Phase 2 meeting with the FDA for NNZ-2591 in Phelan-McDermid syndrome, with the agency providing guidance on a Phase 3 trial structure. The proposed Phase 3 trial is expected to be the first pivotal trial for Phelan-McDermid syndrome, marking a milestone in the development of therapies for rare neurodevelopmental disorders. With strong backing and streamlined Phase 3 trial planning, Neuren is poised to advance this candidate through its clinical pipeline.
Neuren’s Q3 results reinforce the significant financial and strategic value it has unlocked through DAYBUE™, with strong sales performance and international expansion setting the company on a path for sustained revenue growth. As the company pushes forward with NNZ-2591 and prepares for DAYBUE™’s global launch, Neuren is positioned as a compelling player in the pharmaceutical sector, addressing rare and underserved neurological disorders with potential for high-impact treatments. For shareholders, the outlook remains promising, backed by a diversified revenue base, milestone-driven income, and a product portfolio with clear potential for further breakthroughs.