Neuren Pharmaceuticals shares plunge on claims its flagship drug is a ‘flop’

Neuren Pharmaceuticals has issued a cautious rebuttal to a short seller’s claims its flagship Rett Syndrome treatment Daybue is a “total flop’’.

Patrick Davies, chairman of Neuren Pharmaceuticals and chief executive Jon Pilcher.

Neuren Pharmaceuticals shares have plunged more than 13 per cent after a short seller claimed its Rett syndrome treatment Daybue was shaping up as a “total flop’’.

The company’s shares went into a trading halt on Friday following Culper Research’s short attack on US firm Acadia Pharmaceuticals, which has the exclusive licence to market the drug.

Neuren then issued a response to the report, failing to directly rebut its major points while asserting that “there are numerous analyst research reports published on Acadia and on Neuren, many incorporating surveys of US physicians, that present a different view to Culper’’.

Neuren chief executive Jon Pilcher told The Australian that responding to the finer points of the report was for Acadia to contemplate, and reiterated that both Neuren and Acadia were widely covered by analysts, who themselves had surveyed physicians prescribing the drug, who “all come to a different view’’.

He also made the point that the Acadia share price closed up in US trade overnight, reflecting the weight investors were placing on the report.

He said he did not expect Acadia to respond directly to the claims.

The Culper report alleges that Daybue, which was launched in April last year and marketed in the US as the only drug available to treat Rett syndrome, has been a “total flop’’, with serious issues around patient retention.

“The sell-side still calls for over $US800m 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,’’ the report says.

“We think Acadia has misrepresented Daybue’s safety profile, and in turn, patient retention rates.

“The company has constantly characterised Daybue’s side effects as mild and manageable, but our analysis of FDA Adverse Event Reporting System data suggests that roughly one of every 10 to 11 Daybue patients end up hospitalised.

“These horror stories have now made their way through the Rett 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.’’

Culper says Acadia’s reported patient retention rates are based on “confirmed discontinuations only’’, which its says misrepresents the reality, and says Acadia’s time frame for reporting aids in this misrepresentation.

“Physicians told us that they often don’t learn that their patients have discontinued until their six-month follow-up appointments, and it is often at these six-month appointments that patients decide to discontinue on a go-forward basis.

“Acadia’s reporting of retention rates up to four and six months cleverly sidesteps this dynamic.’’

Culper has taken up a short position in Acadia stock and stands to benefit should it fall.

In its most recent quarterly report Neuren said net sales of Daybue were $US66.9m in the third quarter of 2023 with fourth quarter guidance coming in at $US80m-$87.5m.

Neuren currently receives a 10 per cent royalty of net sales, with milestone p[payments at various revenue tiers as well as increasing royalty rates should the annual sales hit targets.

Neuren is also eligible for milestone payments if the drug is cleared for sale in Europe, japan and the rest of the world.

Daybue accounts for virtually all of Neuren’s revenue, with the company also progressing other orphan drug candidates.

In a research note released this week Canaccord ascribes $17 of the value in Neuren to Daybue.

Acadia is due to report its fourth quarter earnings on February 27.

Neuren shares were 16.5 per cent lower at $19.25 in afternoon trade.