Guess which ASX All Ords stock is rocketing 27% on a new FDA approval

Rett Syndrome has finally got an approved treatment.

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Key points

  • The Neuren share price is rocketing higher on Monday morning
  • This follows news that the US FDA has approved its treatment for Rett Syndrome
  • The company has a lucrative agreement in place with its US partner

The Neuren Pharmaceuticals Ltd (ASX: NEU) share price is starting the week very positively.

In morning trade, the ASX All Ords biotech company's shares are up 27% to a multi-year high of $9.74.

Why is the ASX All Ords biotech stock jumping?

Investors have been scrambling to buy the ASX All Ords company's shares this morning after the United States Food and Drug Administration (FDA) gave the thumbs up to its treatment for Rett Syndrome.

According to the release, the company's North America partner Acadia Pharmaceuticals (NASDAQ: ACAD) has been given FDA approval for Daybue (trofinetide) for the treatment of Rett syndrome in adult and pediatric patients two years of age and older.

The good news is that it won't be long until revenue generation commences, with Acadia expecting Daybue to be available by the end of April 2023.

Daybue is the first and only approved treatment for Rett Syndrome. It is a rare genetic neurological and developmental disorder that affects the way the brain develops.

What does this mean for Neuren?

The release notes that Neuren will receive US$40 million following the first commercial sale.

It is also entitled to royalties on net sales, potential sales milestone payments, and one third of the market value of the Rare Pediatric Disease Priority Review Voucher (PRV). The latter is estimated to be worth US$33 million.

In respect to royalties, the two parties have agreed a tiered royalty rate. At the bottom end, it will receive 10% of net sales under US$250 million, whereas at the top end it will receive up to 15% of net sales above US$750 million.

Similarly, sales milestone payments have also been agreed. This includes US$50 million for sales greater than US$250 million and US$350 million (in total) for sales above US$1 billion in a calendar year.

And as no royalties or similar costs are payable by Neuren to third parties, this means that Neuren's revenue from Acadia will flow through to pre-tax profit.

Neuren CEO Jon Pilcher commented:

Many people have shown great determination over the long journey to reach this historic outcome. The greatest has been shown by the Rett syndrome community and I am delighted for them. For Neuren, this is a transforming milestone that places us in a position to make the most of the opportunities ahead of us, as we work with the communities to make a difference in four other neurodevelopmental disorders.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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