On Thursday, Neuren Pharmaceuticals Ltd (ASX: NEU) shares were sold off and finished the day 10% lower.
While this is disappointing for shareholders, the team at Bell Potter thinks that it has created an attractive entry point for investors.
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What is the broker saying?
Although the market responded negatively to the ASX pharma stock's trading update, Bell Potter was pleased with what it reported. It said:
NEU's partner Acadia Pharmaceutical's reported another solid quarter of Daybue commercialisation in the US, reporting US$101m sales (up +11% on pcp and 5% sequential growth), 1% below BPe and VA consensus at US$102m. Sales growth was solely due to volume increases (no net price change). CY25 Daybue sales guidance was narrowed toward the midpoint of the range at US$385-400m from US$380-405m previously.
NEU has now received ~A$45m in royalty income across the first 9 months of CY25 and this will increase to ~A$64m for the full year based on our Daybue sales forecast of US$390m. Real-world persistency rates remain unchanged at >50% after 12 months and >45% after 18 months.
In light of this, Bell Potter believes that Neuren Pharmaceuticals is positioned to deliver another solid result in FY 2025. It adds:
There are negligible changes to our forecasts considering the 3Q25 result was broadly in line with expectations. We continue to expect NEU will report another profitable CY25 result, driven by ~$76m in royalty and interest income more than offsetting R&D spend on the company's second asset, NNZ-2591.
ASX stock tipped to rise strongly
According to the note, Bell Potter has responded to the update by retaining its buy rating and $25.00 price target on the ASX stock.
Based on its current share price of $18.12, this suggests that upside of 38% is possible for investors between now and this time next year.
Commenting on its bullish view of the stock, Bell Potter said:
Our valuation is derived from a risk-adjusted DCF of Daybue and clinical-stage asset NNZ-2591. We maintain our BUY recommendation and $25.00 PT. The breakdown of our $25.00 PT is evenly split between value ascribed to (1) Daybue licensing income + current cash balance of ~$300m, and (2) clinical-stage asset NNZ-2591. NNZ-2591 is expected to start dosing its first Phase 3 trial imminently, followed by the topline readout in ~18-24 months.
We view today's share price response more likely reflective of the timeframe to NEU's next Phase 3 readout catalyst, rather than a disappointing quarterly result per se; nevertheless, the European CHMP decision remains a significant catalyst event and is just ~2-3 months away.
