Buy this ASX 200 stock for big returns after 'impressive launch'

Bell Potter is feeling very bullish about this pharma stock.

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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.

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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