Neuren Pharmaceuticals’ (ASX:NEU) drug to treat Rett syndrome gets US FDA approval; shares up 20%

Highlights:

• NEU shares jumped over 20% in early morning trade on Monday.
• The US drug regulator has approved its compound trofinetide for treating Rett syndrome.
• Neuren will receive milestone payments and royalties on the sale of the drug from its North American partner Acadia Pharmaceuticals.

ASX biotech company Neuren Pharmaceuticals' (ASX:NEU) shares skyrocketed on Monday, 13 March 2023, as its compound trofinetide got the US Food and Drug Administration’s (FDA) approval for the treatment of Rett syndrome.

As of 10:50 am, AEDT NEU shares traded 19.426% higher at AU$9.160, after touching an intraday high of AU$9.740.

In an ASX announcement, Neuren Pharmaceuticals today said its North American partner Acadia Pharmaceuticals (NASDAQ: ACAD) received the US drug regulator's approval for trofinetide for treating Rett syndrome, which is a rare neurological disorder that emerges in infancy. DAYBUE is the brand name given to trofinetide, the first drug for the treatment of Rett syndrome.  

DAYBUE is expected to be available in the US by the end of next month.

Acadia conducted a phase 3 trial known as LAVENDER to study the efficacy and safety of trofinetide in 187 female patients between five to 20 years of age with Rett syndrome. After the study showed positive results, it was sent to the US FDA for its approval.

Now, with the FDA approval for DAYBUE, Acadia has received a Rare Pediatric Disease Priority Review Voucher (PRV). This  PRV can be used to obtain priority review for a subsequent application, the company said.

Acadia entered into an exclusive license agreement in 2018 with Neuren for developing and commercialising trofinetide in North America, while Neuren retains the rights for all countries outside North America. Neuren intends to pursue registration and commercialisation of trofinetide through partners and is currently advancing discussions with a number of third parties.

Neuren Pharmaceuticals’ revenue outlook

Neuren will receive a milestone payment of US$40 million from Acadia after the first commercial sale of trofinetide in the United States. This is expected by the end of next month. The company received a milestone payment of US$10 million in October last year from Acadia after NDA was accepted for FDA review.

Neuren will also receive royalties on net sales of trofinetide in North America, plus milestone payments of up to US$350 million on achievement of a series of four thresholds of total annual net sales, plus one-third of the market value of the PRV, which was awarded to Acadia by the FDA upon approval of the NDA.

As per Neuren’s estimates, the value of the one-third share of PRV is likely to be around US$33 million. Also, Neuren is not required to pay any royalties or similar costs to third parties. This means Neuren’s revenue from Acadia will be directly added to pre-tax profit. The royalty rates and sales milestone payments are related to the total amount of annual net sales of trofinetide.