Neuren Pharmaceuticals Ltd (ASX: NEU) shares are having a positive start to the week.
In afternoon trade, the ASX 200 pharmaceutical stock is up almost 2% to $14.93.
Why is this ASX 200 stock rising?
The catalyst for the rise in Neuren's shares on Monday appears to be a broker note out of Bell Potter.
According to the note, the broker has retained its buy rating and $17.50 price target on the ASX 200 stock.
This implies a potential upside of over 17% for investors over the next 12 months.
What did the broker say?
Bell Potter highlights that the company's commercial partner, ACADIA Pharmaceuticals Inc (NASDAQ: ACAD), has provided guidance for DAYBUE sales in 2023.
As a reminder, DAYBUE is a product developed by Neuren to treat Rett syndrome and licensed to ACADIA.
ACADIA's guidance implies that some major royalty payments will be heading to Neuren. It commented:
Neuren's commercial partner Acadia is guiding to ~US$175m in DAYBUE sales for CY23 after only 8 months on the US market. This impressive launch will translate into large sums of ongoing royalties and one-off sales milestones to NEU.
The rapid uptake of DAYBUE is reflected in the 800 patients on treatment as of 30th September (~18% of the 4,500 currently identified Rett patients). Also promising is that 80% of US patients are now covered by insurers and treatment persistence of ~75-80% after 4 months is higher than the clinical trial setting.
Based on current sales rates, the broker believes that DAYBUE sales will reach US$460 million in FY 2024 and grow further from there. It said:
DAYBUE's implied 4Q23 annualised sales is US$336m at the guidance midpoint, which all but guarantees NEU will receive the first US$50m sales milestone in CY24. We forecast CY24e DAYBUE sales of ~US$460m which would result in NEU receiving US$50m in royalties plus the US$50m sales milestone. Longer-term, as the only approved treatment for Rett patients, we see potential for DAYBUE to ramp up to ~2k US patients after ~5 years, triggering further sales-based milestones and royalties to NEU.
All in all, this product looks set to be a real cash cow for the ASX 200 stock. And, importantly, it's all profit.
