Newron Pharmaceuticals — Evenamide licence agreement in Japan

Newron Pharmaceuticals (SIX: NWRN)

Last close As at 17/12/2024

CHF8.38

−0.82 (−8.91%)

Market capitalisation

CHF164m

More on this equity

Research: Healthcare

Newron Pharmaceuticals — Evenamide licence agreement in Japan

Newron has entered into a licence agreement with EA Pharma, a subsidiary of Eisai, to develop, manufacture and commercialise evenamide, Newron’s proprietary modulator of the excessive release of glutamate for the treatment of schizophrenia. The transaction covers Japan and other designated Asian territories, meeting management’s target of securing a deal in Q424. Newron will receive an upfront payment of €44m, up to €73m in contributions to development and milestones, and will be eligible to tiered royalties up to a double-digit percentage of net sales for evenamide in the covered regions. We expect the upfront payment to extend Newron’s operating cash runway, enabling it to maintain operations through 2026 at a minimum (versus through H125 previously). We place our estimates under review as we update our model to reflect the terms of the announcement.

Written by

Arron Aatkar

Analyst

Healthcare

Newron Pharmaceuticals

Evenamide licence agreement in Japan

Licensing transaction

Pharma and biotech

17 December 2024

Price

CHF8.38

Market cap

CHF163m

€1.12/CHF

Net debt (€m) at end June 2024

36.3

Shares in issue

19.46m

Free float

95%

Code

NWRN

Primary exchange

SIX SWISS Exchange

Secondary exchange

N/A

Share price performance

Business description

Newron Pharmaceuticals is focused on the central nervous system. Xadago for Parkinson’s disease is sold in Europe, Japan and the United States. Evenamide, a novel schizophrenia add-on therapy, is involved in a Phase III trial programme targeting schizophrenia.

Analysts

Dr Arron Aatkar

+44 (0)20 3077 5700

Jyoti Prakash CFA

+44 (0)20 3077 5700

Newron Pharmaceuticals is a research client of Edison Investment Research Limited

Newron has entered into a licence agreement with EA Pharma, a subsidiary of Eisai, to develop, manufacture and commercialise evenamide, Newron’s proprietary modulator of the excessive release of glutamate for the treatment of schizophrenia. The transaction covers Japan and other designated Asian territories, meeting management’s target of securing a deal in Q424. Newron will receive an upfront payment of €44m, up to €73m in contributions to development and milestones, and will be eligible to tiered royalties up to a double-digit percentage of net sales for evenamide in the covered regions. We expect the upfront payment to extend Newron’s operating cash runway, enabling it to maintain operations through 2026 at a minimum (versus through H125 previously). We place our estimates under review as we update our model to reflect the terms of the announcement.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

6.09

(16.99)

(0.95)

0.0

N/A

N/A

12/23

9.06

(16.00)

(0.90)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

As per the terms of the transaction, in addition to the upfront payments, Newron will also be eligible to receive up to €73m in additional payments from EA Pharma, including financial contributions to its upcoming Phase III one-year study to be performed outside of the licensed territories, as well as regulatory and commercialisation milestones. Newron reiterated its plans to start a Phase III trial in treatment-resistant schizophrenia (TRS) in H125, in line with our initial estimates.

Eisai has a well-recognised and established presence in neurology, notably known for its development and commercialisation on Leqembi for Alzheimer’s disease, and appears to be an ideal partner to optimise the development and the commercial trajectory for evenamide in the covered territories, in our view. We expect Eisai and EA Pharma to take a proactive role in running and funding any additional clinical trials (beyond the planned Phase III TRS study outside the covered territories discussed above) required for regulatory approval in Japan.

Evenamide has a robust track record in the clinic, offering durable responses and offering an innovative mechanism to treat schizophrenia, addressing a high unmet need despite the >40 treatments available to manage the condition. Historically, schizophrenia has been treated with typical (D2 receptor inhibitors) and atypical (target 5-HT2A receptors) antipsychotics and, while these can be effective for a portion of the schizophrenia population, they have limited efficacy in the majority of patients who are poor responders or treatment-resistant. Notably, the results of Newron’s study 015 (TRS) saw 25% of patients achieve remission, the first reported instance of remission, to our knowledge. More recently, the results from study 008A (poorly managed schizophrenia) confirmed the safety of evenamide as an adjuvant therapy, as well as its effectiveness in a randomised, placebo-controlled setting.

In addition to the positive validation from the partnership with EA Pharma, we also believe Newron is working on further developments for evenamide partnering in other regions, notably the US and Europe, which could further support Newron’s balance sheet with upfront payments and milestones, in addition to tiered royalties.

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General disclaimer and copyright

This report has been commissioned by Newron Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Newron Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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