Shares in Neuren Pharmaceuticals Ltd (ASX: NEU) have roared back into focus this week. The ASX biotech stock gained around 35% at the time of writing on Monday, making it one of the standout performers on the market in recent trading sessions.
Despite the strong bounce, Neuren shares remain down approximately 15% year to date. Over the past 12 months, however, the stock has still delivered a solid gain of about 17%.
So what's driving renewed investor interest – and is the rally justified?
Here are three reasons investors may be warming back to Neuren Pharmaceuticals.
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Two drug assets, one already delivering royalties
Neuren isn't a one-product story. The ASX biotech stock has two novel therapies targeting rare neurological disorders, giving it both near-term cash flow and long-term upside potential.
Its most advanced asset is DAYBUE (trofinetide), which has been out-licensed to Acadia Pharmaceuticals Inc (NASDAQ: ACAD) for commercialisation in major markets.
DAYBUE is already generating meaningful royalty income for Neuren, forming the backbone of its current earnings base.
At its FY25 results, Neuren reported around $65 million in royalty income, with further growth expected as global sales expand.
According to Acadia's guidance, DAYBUE net sales are projected to reach US$460 million to US$490 million this year, pointing to another strong period of royalty growth for Neuren shareholders.
A second pipeline the market may be ignoring
Beyond DAYBUE, Neuren also has a second key program: NNZ-2591.
This investigational drug is being developed across multiple rare neurological conditions, with its most advanced focus on Phelan-McDermid syndrome.
The company is currently running a Phase 3 trial in that indication and has already completed Phase 2 studies in several other rare disorders.
Broker research from Bell Potter suggests the market may be significantly undervaluing this asset of the ASX biotech stock.
In fact, Bell Potter believes investors are currently ascribing little to no value to NNZ-2591. This potentially could create a compelling long-term opportunity if clinical progress continues.
European approval could unlock fresh growth
Sentiment around Neuren received a major boost following a key regulatory milestone on Monday.
The Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending marketing authorisation for DAYBUE following a re-examination process.
The decision now moves to the European Commission, which is expected to make a final ruling in the coming months.
If approved, DAYBUE would become the first treatment for neurobehavioral symptoms of Rett syndrome across all 27 EU member states, plus Iceland, Liechtenstein, and Norway.
That approval would also trigger a US$35 million milestone payment to Neuren and open the door to ongoing royalties from European sales.
What are analysts saying?
Broker sentiment remains broadly positive on the ASX biotech stock. TradingView data shows that all analysts covering Neuren rate the share as a buy or strong buy.
The average price target sits at around $22.54, implying potential upside of roughly 35% from current levels.
Meanwhile, Bell Potter recently upgraded its valuation target from $22 to $23.50. This points to a potential upside of approximately 40% from the current share price of $16.68.
