Neuren Pharmaceuticals Ltd (ASX: NEU) shares are ending the week deep in the red.
The ASX 200 healthcare share was down 13% to $20.04 before being paused from trade.
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What's going on with this ASX 200 healthcare share?
Investors have been heading to the exits today after a short seller targeted its US partner Acadia Pharmaceuticals Inc (NASDAQ: ACAD).
According to a note out of Culper Research, it is shorting Acadia due to concerns over the Daybue product which is licenced to it from Neuren Pharmaceuticals.
Culper Research believes that key stakeholders have turned "sour" on Daybue, which could be bad news for the ASX 200 healthcare share.
It has been generating significant revenue from royalties and milestone payments over the last 12 months amid strong demand for the only approved treatment for Rett Syndrome.
But this revenue generation may not last, with the short seller describing Daybue as a "flop". It said:
We believe ACADIA's April 2023 launch of Daybue – the Company's highly-anticipated "first and only" drug to treat Ret Syndrome – has been a total flop.
Despite an initial outburst of interest in the drug, our research reveals that patients, caregivers, physicians, and insurers have all soured on the drug.
The sell-side sell calls for over $800 million in peak Daybue revenues, but our research suggests that Daybue new patient starts already topped this past summer, peak revenues will be a mere fraction of sell-side estimates, and Daybue's flop will have knock-on effects as ACADIA remains a cash-burning machine.
Insiders see the writing on the wall: ACADIA's Head of R&D, its Chief Science Officer, and its General Counsel have all left in the past 3 months. We think shares are headed much lower.
'Horror stories'
Culper Research also alleges that Acadia has misrepresented Daybue's safety profile and that there are "horror stories" being reported by users. It adds:
We think ACADIA has misrepresented Daybue's safety profile, and in turn, patient retention rates. The Company has constantly characterized Daybue's side effects as mild and manageable, but our analysis of FAERS data suggests that roughly 1 of every 10 to 11 Daybue patients end up hospitalized.
These horror stories have now made their way through the Ret community. Multiple high-prescribing physicians collectively told us that collectively, close to half of their patients are now no longer even interested in trying Daybue.
Neuren hasn't revealed why its shares are paused from trade. But it's quite likely the ASX 200 healthcare share is preparing a response to these allegations.
