Regional licensing deals de-risk clinical plans

We are encouraged by the licensing deal terms in Japan, with the front-end-loaded nature of the agreement (€44m upfront payment) providing capital for Newron to independently commence the planned Phase III programme. We believe this will support the company in maximising the commercial potential of evenamide. While we do not rule out the possibility of Newron announcing further regional deals, we now expect any decision regarding the largest US and European markets to be made following the completion of Phase III.

Phase III evenamide study to commence imminently

With funds in hand, we expect Phase III to commence within the targeted H125 timeline. The registrational study will be a randomised, double-blind, placebo-controlled, one-year trial, assessing evenamide as an add-on treatment for TRS (n≥600). We expect clinical trial costs to be c €45m and we estimate that EA Pharma will contribute c €10m as part of the overall €117m deal. The South Korean partner will contribute 10% of the Phase III patient population and related costs, further reducing the net trial costs for Newron.

Valuation: CHF368.5m or CHF18.5 per share

We update our valuation to CHF368.5m or CHF18.5 per share (CHF219.1m or CHF12.3/share previously) to reflect the contribution from Japan and our revised estimates for a US/Europe licensing deal for evenamide. We now expect a partnering agreement in these markets after Phase III completion and upgrade our total deal value estimate to US$1bn (previously US$650m). We estimate peak sales of c US$1.5bn and keep our probability of success (PoS) unchanged at 70%. Given the target study population (>600 vs our previous assumption of c 400), we anticipate trial completion in H127, with market launch in H128 (previously 2027).

Regional deals de-risk evenamide’s clinical pathway

While Newron is a commercial-stage company with its asset Xadago (safinamide) targeting Parkinson’s disease (PD) already on the market, its business case rests on its first-in-class, late-stage clinical programme, evenamide. Following the encouraging Phase II and Phase II/III data (discussed in further detail later) in TRS and inadequate responders, we believe there is significant market interest in the impending one-year pivotal Phase III trial, which, if successful, may potentially establish evenamide as a standard of care (SoC) add-on treatment in TRS, a poorly served subset of schizophrenia patients (at least 30% of the entire schizophrenia population), with further potential upside from patients responding poorly to current antipsychotics. The initiation of the upcoming registrational study was contingent on Newron securing a partnership deal, and we believe that the recent licensing deals in Japan and South Korea provide sufficient headroom for the company to start the Phase III trial independently, while offering flexibility on its commercial plans for the larger US and European markets.

Attractive deal structure in Japan...

In December 2024, Newron signed a licensing agreement with EA Pharma, a subsidiary of Eisai, to develop, manufacture and commercialise evenamide in Japan and certain other Asian territories, including Vietnam, Cambodia, Indonesia and the Philippines. We view the deal consideration and the front-end-loaded nature of the agreement (€117m, including an upfront payment of €44m, financial contributions to the pivotal Phase III study, regulatory and commercialisation milestones and tiered royalties up to a double-digit percentage of net sales) as particularly attractive and indicative of the industry’s opinion of the drug’s potential. Japan is a key market for Newron and, according to a report by Delve Insight, it accounted for c 18% of all schizophrenia cases and c 8.5% of the market value among the top seven major markets in 2022. Regulatory approval in Japan would require a separate and independent Phase III trial, which we expect EA Pharma to initiate and fully fund in 2026, leveraging insights from Newron’s planned international ex-Japan Phase III pivotal study, which is due to commence in H125. In addition to the upfront payment, EA Pharma will also contribute to the costs of the international pivotal study, and we estimate this consideration to be c €10m.

...further supported by licensing agreement in South Korea

In January 2025, Newron announced another regional licensing deal, in South Korea with the country’s leading central nervous system (CNS) specialist, Myung In Pharm. While the specific deal terms were not disclosed, we understand that in addition to the typical upfront, milestone and royalty payments, Myung In Pharm will also contribute 10% of the total patient population (c 60 patients) to Newron’s international Phase III trial, and will bear the costs related to the trial in South Korea, in addition to the regulatory, registration, marketing and commercialisation costs in the country.

Evenamide: Potential backed by promising clinical data

Unique mechanism of action…

Evenamide’s potential, in our view, stems from its differentiated mechanism of action, which targets glutamatergic dysfunction (believed to be a key contributor to TRS) through its effects on voltage-gated sodium channels (VGSCs) and glutamate signalling. By inhibiting VGSCs, evenamide is designed to reduce the increased activity of neurons. It is also expected to normalise the amount of glutamate released by neurons, which is implicated in the pathophysiology of TRS. It has been designed with the intention of advancing past the more traditional dopamine hypothesis of schizophrenia pathophysiology, which has focused on regulating the levels of dopamine and serotonin signalling by inhibiting the D2 and 5-HT2 receptors. Evenamide’s differentiated mechanism of action potentially allows it to target a wider pool of schizophrenia patients, including those who are poor responders, or suffer from TRS, as well as those whose current antipsychotic medication may have limited efficacy against negative and cognitive symptoms (such as lack of motivation, social withdrawal and cognitive decline), as opposed to the positive symptoms alone (such as hallucinations, delusions and paranoia).

…endorsed by positive clinical data

The efficacy of evenamide’s differentiated mechanism of action has been validated by positive clinical data generated to date by the drug candidate. In January 2024, Newron announced the final results of the Phase II study (015, extension of the six-week study 014; n=161), an open-label, rater-blinded, multi-centre (India, Italy and Sri Lanka) trial to assess the long-term efficacy, safety and tolerability of evenamide (7.5mg, 15mg and 30mg bid) as an add-on treatment (to any single antipsychotic drug, excluding clozapine) in TRS patients. The trial results were highly encouraging, with statistically significant improvements across all standard efficacy measurements, including the Positive and Negative Syndrome Scale (PANSS), Clinical Global Impressions-Severity (CGI-S) Scale as well as Level of Functioning (LOF) measures compared to baseline. Over 70% of the patients treated with evenamide experienced a clinically meaningful reduction in schizophrenia severity and, furthermore, at 12 months approximately 50% of patients no longer met the protocol severity criteria for a diagnosis of treatment-resistance. In addition, 25% of patients achieved remission, which, to our knowledge, has not previously been observed in TRS patients. Evenamide also demonstrated a favourable safety and tolerability profile, with low incidence of treatment-emergent adverse dropouts.

In April/May 2024, Newron reported the outcome of the Phase II/III trial (008A) in a population of patients with poorly managed schizophrenia, but not defined as having TRS. The study was a randomised, double-blind, placebo-controlled trial to assess the safety, efficacy and tolerability of evenamide following a four-week 30mg bid treatment regimen (n=291). This study also met the primary endpoint of improvement on the PANSS score from baseline, as well as the key secondary endpoint of improvement on the CGI-S Scale. 31.3% of patients treated with evenamide were rated as ‘much improved’, compared to 17.3% with the placebo group on the CGI-C Scale.

All eyes now on the pivotal Phase III study in TRS

With regional deals in place and increased capital at hand, we believe that Newron is on track to commence the Phase III registrational study within the targeted timeline of H125. This pivotal trial will be a randomised, double-blind, multinational study comparing evenamide as an add-on treatment to placebo in at least 600 TRS patients. The primary endpoint will be the change from baseline in PANSS scores at week 12 and the goal will be to reproduce or improve on the results from the previous two trials (which had initial cutoffs of six and four weeks, respectively) given the sustained improvement in symptoms seen with continued usage. The initial 12-week study period for the Phase III trial will be followed by a continuation to week 26, and to week 52, to assess long-term efficacy, safety and tolerability. We expect Newron to file for regulatory approval in H127, with a potential US launch in 2028, should data continue to be positive.

TRS: Unmet need with sizeable commercial opportunity

Schizophrenia is a chronic and severe neurological disorder characterised by disruptions in thought processes, perception, emotions and social functioning. It is categorised by three main symptom domains:

1. Positive symptoms – hallucinations (such as hearing voices); delusions (fixed, false beliefs); disorganised speech or behaviour.
2. Negative symptoms – affective flattening (reduced emotional expression); alogia (reduced speech output); anhedonia (inability to experience pleasure); social withdrawal.
3. Cognitive symptoms – impaired memory and attention; reduced executive function (such as planning and decision-making).

While schizophrenia is highly heterogeneous, key contributors include dopaminergic dysregulation (dopamine hyperactivity in the mesolimbic pathway causes positive symptoms and hypoactivity in the mesocortical pathway causes negative/cognitive symptoms), glutamatergic dysfunction (abnormalities in glutamate neurotransmission, particularly at NMDA (N-methyl-D-aspartate) receptors), as well as genetic and environmental factors.

The SoC treatment is antipsychotics (first, second and third generation), which typically work by targeting the dopamine D2 receptor. While first-generation antipsychotics (such as haloperidol and chlorpromazine) work by blocking the D2 receptor, second-generation or atypical antipsychotics (such as clozapine, risperidone and olanzapine) inhibit both the dopamine D2 and serotonin 5-HT2A receptors. In contrast, the latest third-generation drugs (such as aripiprazole, brexpiprazole, cariprazine and lumateperone) are partial agonists of the dopamine D2 receptor, with the aim to modulate, rather than block, dopamine activity in the brain They have a superior side-effects profile to second-generation drugs, in particular motor-related symptoms. While currently approved antipsychotics work on managing positive symptoms, their efficacy on negative and cognitive symptoms has been limited to date.

Schizophrenia affects c 1% of the global population, but despite over 30 available treatment options, at least 30% of the population remains treatment-resistant (defined as schizophrenia that does not respond to two or more medications, each with at least six weeks of treatment duration) and a further 40% respond poorly to prescribed medication; hence only c 30% respond adequately to first-line antipsychotic treatment. Research suggests that the issue with TRS may not be dysregulated dopamine levels (and instead be related abnormalities in the glutamatergic system), and therefore traditional antipsychotics have not been effective in treating the condition. Only one drug, clozapine, has been approved for TRS since 1989, although usage remains limited (only used by c 5% of treated schizophrenia patients with physicians more likely to utilise polypharmacy in cases of TRS), due to a strong side-effect profile (such as agranulocytosis, cardiomyopathy and pneumonia) and requirement of weekly blood tests (for the first 18 weeks and monthly tests thereafter) under the FDA-mandated ‘risk evaluation and mitigation strategy’ monitoring.

We therefore believe that TRS and poorly responding patients remain areas with significant unmet need, requiring new treatment modalities with a differentiated mechanism of action, such as evenamide.

Recent global deals suggest renewed interest in CNS

With the resurgence of activity in the biotech sector over the past year, schizophrenia in particular has been in the spotlight, with several notable movements in the past few months. Most recently, the acquisition of Intra-Cellular Therapies by Johnson & Johnson in January 2025 has received significant market interest. At US$14.6bn (at a c 40% premium to Intra-Cellular’s pre-deal trading levels) this is the largest biotech deal since March 2022. US-listed Intra-Cellular is focused exclusively on CNS, with one marketed asset, Caplyta (lumateperone), approved for schizophrenia and bipolar disorder (sales of US$481m in 9M24). This follows two other major deals in December 2023: AbbVie’s acquisition of Cerevel for US$8.7bn (for its clinical-stage schizophrenia asset emraclidine, which subsequently was unsuccessful in clearing the Phase II trial) and Bristol Myers Squibb’s acquisition of Karuna Therapeutics for c US$14bn for its now FDA-approved asset KarXT (Cobenfy). While Caplyta is a third-generation antipsychotic, Cobenfy and emraclidine have novel mechanisms of actions – both are muscarinic receptor modulators. While this new class of drug claims to improve negative and cognitive symptoms, they do not currently target TRS, to our knowledge, and are therefore not direct competitors to evenamide at the present time, in our view.

Financials

We make certain adjustments to our FY24 and FY25 estimates to reflect the revised assumptions following the deals for evenamide in Japan and South Korea. We assume Newron will recognise the entire €44m in upfront payment from EA Pharma in 2024 and accordingly update our FY24 revenue estimate to €50.9m (€24.3m previously) to reflect this payment, along with €6.9m in projected Xadago royalties. We note that in our last update, we had assumed a risk-adjusted licensing fee of €17.5m to be received in late-2024, as well as €6.7m in royalty income for Xadago. For FY25 we keep our revenue assumption broadly unchanged at €7.5m, made up solely of Xadago royalties (€7.3m previously). We also update our R&D assumptions for FY25 as we now expect the company to undertake the Phase III pivotal study independently. We estimate the total Phase III trial costs to be c €45m, of which we assume EA Pharma and Myung In Pharm to contribute €10m and €3m, respectively, This translates to a net outgo of €32m required from Newron, which we split 40:50:10 between 2025, 2026 and 2027. Accordingly, we revise our R&D expense estimate for FY25 to €13.4m (€3.6m previously). For FY24, our R&D estimate remains unchanged at €10.4m. Overall, we now estimate an operating income of €31.4m in FY24 and an operating loss of €15.1m in FY25 (previously an operating income of €5.7m in FY24 and operating loss of €4.5m in FY25).

At end-H124, Newron had a gross cash position of €7.9m, plus €4.3m in other current financial and liquid assets. This had been supported by inflows from the private placement of up to 2.05m shares (for proceeds of up to €15m at €7.3/share) to an institutional investor in March 2024. According to the H124 report, the investor had subscribed for 1.35m of the 2.05m shares (as of September 2024), for total proceeds of €9.9m. Given the current shares outstanding, we believe that the remaining 700,000 shares have also been subscribed to, with €5.1m in corresponding cash inflows. On this, we estimate the pro-forma gross cash balance to be €18.7m (cash and cash equivalents of €12.2m at end-H124 plus €1.5m received between July and September related to the conversion of 200k shares by the private investor, followed by another €5.1m raised in Q424 from the private investor). The company also has €48.5m of debt on its books, comprising the €40m loan from the European Investment Bank (EIB) as well as accrued interest. Following Newron’s renegotiations with the EIB in March 2024, the deal maturity for the first three tranches (of the total five) will now be in late-2025/26. The first €10m tranche is due in November 2025 (versus June 2024 previously), with the other four tranches maturing in 2026.

Valuation

We update our valuation for Newron to reflect the new licensing deals and our revised assumptions for commercialisation plans in the US and Europe, resulting from these regional agreements.

While we previously valued evenamide solely on its commercial opportunity in the US and Europe (in both TRS and poorly responding patients), we now include Japan as another key market in our model. Our market assumptions for the Japanese market are listed in Exhibit 1, based on which, we derive a risk-adjusted net present value (rNPV) of €57.9m or CHF54.4m from the geography.

Based on the two licensing deals and latest market data, we also adjust our modelling assumptions for the core US and European markets. We had previously assumed a licensing deal in these markets in late-2024 with a total deal value of US$650m. However, following the receipt of €44m as upfront payment and another c €10m in trial-related expenses expected from EA Pharma, as well as South Korean licensing partner Myung In Pharm agreeing to bear costs related to 10% of the Phase III patient population, we expect Newron to be well funded to commence the pivotal study on its own. While this allows the company to modify its commercialisation plan (including different regional deal(s) following Phase III completion), for our model we now assume a single deal covering both the US and European markets to take place in 2027, prior to a potential market launch in 2028. Note that while we had previously assumed a commercial launch in 2027, this was based on our assumption of a c 400 patient registration study. With more clarity available on the study design (larger number of expected patient enrolments, >600), we have conservatively revised our trial completion and launch expectations to H127 and H128, respectively.

We also modify the deal terms to US$1bn given the more advanced expected stage of development at our assumed deal time frame. We note that given the deal size in Japan (c 10% of the global schizophrenia market), evenamide’s likely commercial readiness in 2027 and the recent enhanced interest in the schizophrenia and CNS space, this assumption may turn out to be conservative, which could support further upside optionality.

We keep all other market assumptions unchanged (with the exception of the US list price, which we raise to US$20k, from US$15k previously) and continue to assume a PoS of 70% for evenamide. We also maintain our estimates for the other marketed asset, Xadago.

Based on the aforementioned changes and incorporating the latest pro-forma net debt position, our valuation for Newron upgrades to CHF368.5m or CHF18.5/share (CHF219.1m or CHF12.3/share). A breakdown of our rNPV valuation for Newron is presented in Exhibit 2.

Based on current cash at hand and expected inflows, we project the company to be funded into H226 (not accounting for the possibility of any further regional licensing deals in the interim). Note that this includes debt repayment of €30m to the EIB in 2026 (including €15m in September 2026). We estimate that Newron will be required to raise a further €30m in capital in H226 to service this debt and continue funding the Phase III study.

As noted previously, our model assumes Newron will sign a larger licensing deal in 2027 for the US and/or European market prior to market launch in 2028. However, in the absence of any further deal(s), we estimate that Newron will be required to raise another €10m in 2027, prior to the commercialisation of evenamide. If these funds were to be raised through an equity issue, the company would need to issue 4.4m shares (at the last trading price of CHF9.18/share), which will dilute our per-share valuation to CHF16.8, from CHF18.5 currently (shares outstanding will increase from 19.96 to 24.32). We note that if Newron was successful in renegotiating its repayment terms with the EIB, the requirement for external capital would reduce proportionately.