Newron Pharmaceuticals — Positive readout highlights evenamide potential

Newron Pharmaceuticals (SIX: NWRN)

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Research: Healthcare

Newron Pharmaceuticals — Positive readout highlights evenamide potential

Newron has announced encouraging interim six-month data from its Phase II trial (study 014/015) of evenamide in 161 patients with treatment-resistant schizophrenia (TRS). The six-month interval data for treatment at all dose levels showed evenamide was well-tolerated and efficacious, with statistically significant responses (p-value <0.001) across the key efficacy measures (PANSS, CGI-S and LOF). The interim data also provide inputs for the potentially pivotal Phase III trial (study 003), which we expect to start in Q124. We note that one-year data was reported on the first 100 participants of study 014/015 in May 2023, and we now await the complete one-year data from the full 161-patient cohort, expected in Q124. If favourable, this could be a significant inflection point for the company.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Newron Pharmaceuticals

Positive readout highlights evenamide potential

Clinical update

Pharma and biotech

11 October 2023

Price

CHF5.64

Market cap

CHF100m

€1.02/CHF

Net debt (€m) at end-June 2023

29.5

Shares in issue

17.8m

Free float

99%

Code

NWRN

Primary exchange

SIX Swiss Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.4)

(4.4)

396.9

Rel (local)

(3.9)

(5.1)

363.5

52-week high/low

CHF8.0

CHF1.1

Business description

Newron Pharmaceuticals is focused on the central nervous system. Xadago for Parkinson’s disease is sold in Europe, Japan and the United States. Evenamide, a novel schizophrenia add-on therapy, is involved in a Phase III trial programme targeting schizophrenia.

Next events

Evenamide study 003 initiation

Q124

Evenamide study 015 readouts

Q124

Evenamide study 008A readouts

Q423 or Q124

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Zoe Karamanoli

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Newron Pharmaceuticals is a research client of Edison Investment Research Limited

Newron has announced encouraging interim six-month data from its Phase II trial (study 014/015) of evenamide in 161 patients with treatment-resistant schizophrenia (TRS). The six-month interval data for treatment at all dose levels showed evenamide was well-tolerated and efficacious, with statistically significant responses (p-value <0.001) across the key efficacy measures (PANSS, CGI-S and LOF). The interim data also provide inputs for the potentially pivotal Phase III trial (study 003), which we expect to start in Q124. We note that one-year data was reported on the first 100 participants of study 014/015 in May 2023, and we now await the complete one-year data from the full 161-patient cohort, expected in Q124. If favourable, this could be a significant inflection point for the company.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

5.76

(14.12)

(0.79)

0.0

N/A

N/A

12/22

6.09

(16.99)

(0.95)

0.0

N/A

N/A

12/23e

8.95

(14.62)

(0.82)

0.0

N/A

N/A

12/24e

6.85

(22.27)

(1.25)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Clinically meaningful six-month Phase II data

Newron has reported six-month readouts from the ongoing Phase II trial (study 014 – six weeks and study 015 – extension study) at the ECNP Congress, assessing treatment of evenamide in patients with moderate to severe TRS. After six months of treatment, change from baseline in the PANSS, the CGI-S as well as the Strauss Carpenter LOF each showed a statistically significant improvement (p-value <0.001: paired t-test, LOCF) with no incidents of psychotic worsening during the study. Evenamide was well tolerated, with low incidence of treatment-emergent adverse events. 95% of patients completed six weeks of treatment, 94% of the completers chose to continue with evenamide treatment into the long-term extension study (study 015) and 92% of them reached six months of treatment. As we await full one-year data in Q124, the company is preparing to conduct a pivotal Phase III trial (study 003), which is likely to commence in Q124.

Top-line results for study 008A on the horizon

Beyond TRS, Newron is also assessing evenamide as a twice daily treatment (30mg) for schizophrenia patients already receiving antipsychotics, but who are not classed as having TRS, in study 008A. This Phase III clinical trial is a potentially pivotal, randomised, double-blind, placebo-controlled study to assess evenamide’s safety, tolerability and efficacy as a potential add-on treatment for this patient sub-population. Management plans to report full results for this study in late-2023 or early-2024, potentially representing a significant catalyst for the company.

Valuation: CHF137.4m or CHF7.7 per share

We maintain our valuation of Newron at CHF137.4m or CHF7.7 per share based on a risk-adjusted net present value calculation for Xadago in Parkinson’s disease and evenamide in schizophrenia.

Encouraging six-month data provide headway

In the latest clinical development, Newron has presented six-month clinical data at the ECNP Congress from its ongoing Phase II evenamide trial. It encompasses study 014 (six weeks) and its extension, study 015, which is evaluating evenamide at three fixed doses (7.5mg, 15mg and 30mg twice daily) in combination with antipsychotic medications (excluding clozapine) for patients with moderate to severe TRS.

After six months of treatment, there was a statistically significant improvement (p-value <0.001: paired t-test, LOCF (last observation carried forward)) observed in the change from baseline scores for the Positive and Negative Syndrome Scale (PANSS), the Clinical Global Impression of Severity (CGI-S), and the Strauss Carpenter Levels of Functioning (LOF). Importantly, no patients experienced a worsening of their psychotic symptoms, and there were no instances of relapse.

Moreover, management reported that a large proportion (precise percentage not disclosed) of patients who initially responded to the treatment at the six-week timepoint (defined as having a ≥20% reduction compared to baseline on the PANSS total score) maintained their positive response after six months of treatment. In summary, treatment with evenamide led to c 40% of patients no longer meeting the criteria for severe treatment resistance at six months, versus c 26% at six weeks.

The treatment was well-tolerated, with a low incidence of treatment-emergent adverse events and no instances of discontinuation due to intolerance. There was no discernible pattern of abnormalities in the central nervous system. Notably, 95% of patients completed six weeks of treatment, and 94% of those completers chose to continue with evenamide treatment in the long-term extension study (study 015), with 92% of them reaching the six-month treatment milestone.

As a reminder, the prior interim readout for study 014/015 was presented in May 2023, relating to the first 100 patient cohort who completed one year of treatment. The results showed an increased reduction in the PANSS total score at all timepoints versus baseline, with a PANSS responder rate (defined as showing a >20% improvement) of 47%, a 3x increase from 16% at week six. The Clinical Global Impression of Change (CGI-C) scale measurements showed that 41% of patients were rated as ‘much’ or ‘very much’ improved versus baseline. CGI-S measurements showed improvements of 1.1 units versus baseline, with 29% of patients observing two or three category improvements. Overall, 38% of patients met the threshold for being classified as ‘super/full responders’ (defined as a PANSS total score improvement of at least 20%; a CGI-C of at least ‘much improved’; and a CGI-S of an at least one-point improvement and at most ‘mildly ill’). This represented a 2.5x increase from week six for this cohort.

With data now reported for the full 161-patient cohort at the six-month timepoint, we believe that complete one-year data from this cohort could represent a major catalyst for investor attention. Given the encouraging readouts for the 161-patient cohort at six months and the first 100-patient cohort at one year, we believe there is a good probability that the efficacy trends observed to date will be maintained; the top-line results are on track to be shared in Q124. We note that management is also preparing for a potentially pivotal Phase III trial (study 003) in TRS patients, which we expect to commence in Q124. This Phase III trial is likely to be a one-year, randomised, double-blind, placebo-controlled study, which will primarily aim to confirm the favourable results in Phase II.

Understanding the assessment parameters

For Newron’s ongoing clinical trials, efficacy scales used to assess the effectiveness of evenamide include:

Positive and Negative Syndrome Scale (PANSS), which is the primary efficacy indicator in study 014/015.

The PANSS is a 30-item scale that was developed to provide a balanced representation of positive (seven items) and negative (seven items) symptoms of schizophrenia, and understand their relationship to one another, as well as to general symptoms of psychopathology (16 items). The PANSS is intended to be a brief interview (c 1 hour), and to ensure standardisation, interviewers must be trained to a sufficient level of reliability.

Clinical Global Impressions (CGI).

The CGI scales are established rating tools that can be used for all psychiatric disorders, not limited to schizophrenia. The CGI are intended to provide an overall clinician-determined summary assessment (c 10 minutes) based on an overall view (observations and reported symptoms) of the global functioning of a patient population across a treatment period.

Strauss-Carpenter Level of Functioning (LOF).

The LOF scale uses a semi-structured interview (c 20 minutes) focused on quality of life across four domains: social contacts, work, symptomatology and function.

Evenamide offers a unique mechanism of action

Schizophrenia as a therapeutic area is seeing a resurgence of clinical interest as it has been relatively stagnant since the 1950s, when typical antipsychotics were developed (such as chlorpromazine, haloperidol, pimozide and loxapine). Typical antipsychotics are designed to inhibit the dopamine type 2 receptor, based on a historical understanding that the condition is caused by an imbalance in the levels of this neurotransmitter. The 1970s then saw the development of atypical antipsychotic drugs (such as clozapine, olanzapine, risperidone and quetiapine), which target serotoninergic receptors 5-HT2A, and are associated with fewer side effects. While typical and atypical antipsychotics have shown effectiveness for the management of positive symptoms (those abnormally present, such as hallucinations, paranoia and delusions) of schizophrenia, many patients find that they have limited efficacy against the negative (those abnormally absent, such as facial expressions, emotional responses and interest in the world) and cognitive symptoms (such as difficulties with concentration, memory and decision making). We therefore believe that there is significant opportunity for new treatment options to address this unmet medical need.

Newron’s lead asset in the schizophrenia space is evenamide, currently involved in clinical trials for both poorly managed schizophrenia and TRS. We note that TRS is characterised by significant clinical symptoms, despite adequate doses of two standard antipsychotics (other than clozapine) from two different chemical classes, including at least one atypical antipsychotic, for at least six weeks of treatment. Evenamide does not target the same dopamine pathways as the aforementioned antipsychotic drugs. Rather, it is designed for voltage-gated sodium channel (VGSC) blockade and modulation of post-synaptic glutamate release. VGSCs play an important role in the central nervous systems, as they mediate neuronal signal transduction by cycling through three states: closed (resting), open and inactive. Conformational changes that occur between these states offer the opportunity to design inhibitors that target one of these states preferentially. Rapidly firing channels will exist longer in an inactive state than a resting state, and, therefore, inhibitors can preferentially modulate a channel based on the frequency it is firing. Evenamide has been designed to exploit these features to attenuate excessive signalling in glutamatergic systems. This has been demonstrated by preclinical research conducted by the company. Evenamide has been shown to selectively attenuate high frequency firing neurons over low frequency (Exhibit 1). This was found to translate to an in vivo reduction in excessive glutamate release caused by high frequency firing (induced by veratridine), without causing a reduction of normal levels of glutamate release (Exhibit 2). To our knowledge, this is a novel mechanism of action for drug candidates in development for schizophrenia.

Exhibit 1: Evenamide modulates sustained repetitive firing without inducing impairment of the normal neuronal excitability

Exhibit 2: Dose-dependent demonstration of evenamide’s mechanism of action as a glutamate modulator

Exhibit 1: Evenamide modulates sustained repetitive firing without inducing impairment of the normal neuronal excitability

Exhibit 2: Dose-dependent demonstration of evenamide’s mechanism of action as a glutamate modulator

Xadago continues to support top-line growth

Royalties from the company’s marketed drug, Xadago (safinamide), an adjunctive treatment for patients with Parkinson’s disease (PD), continue to provide steady support to its top-line growth. In H123, Newron recorded total revenue of €5.5m, which was primarily driven by €3.2m royalty income for Xadago and an additional €2.3m in other income related to contracts with customers.

As a reminder, Xadago has marketing authorisation in key markets including the EU, Switzerland, the UK, the US, Australia, Canada, Brazil, Colombia, Israel, the United Arab Emirates, Japan and South Korea, and is out-licensed to Zambon, a private Italian company, for all regions excluding Japan and Asia. While Zambon continues to commercialise Xadago in Europe, Supernus Pharmaceuticals holds selling/sublicensing rights in the US. Supernus has been selling the product in the US since 2020 and Newron shares 50% of Zambon’s US royalties (US-specific royalties to Newron have not been disclosed). While Newron entered into a licensing agreement with Meiji Seika in 2011 to develop, commercialise and manufacture Xadago in Japan and Asia, Meiji sold the exclusive rights to Eisai to market safinamide in Japan, as well as to develop and market safinamide in seven countries in Asia (South Korea, Taiwan, Brunei, Cambodia, Laos, Malaysia and the Philippines) as part of a 2017 agreement.


Financials and valuation

We assessed Newron’s H123 financial performance in our recent note. Newron had a cash position of €7.7m at end H123, plus €9.4m in other current financial and liquid assets. Based on our forecasted operating cash burn, we estimate a cash runway into 2024, consistent with management guidance. Assuming a positive readout from study 008A in Q423 or Q124, we expect Newron will pursue a partnership deal for evenamide in schizophrenia, a payment from which may extend our estimated cash runway further. In the absence of a partnership deal for evenamide in schizophrenia, we continue to expect that the company would need to raise additional capital of €30m in FY24, which we have modelled as illustrative debt. We model that a licensing transaction will be realised by the end of FY24 and assuming our €30m funding forecast requirement is met, the company would no longer require further capital for evenamide to reach commercialisation and for the company to reach operating profitability.

If the €30m projected funding is realised through an equity issue instead of debt (and at the 10 October 2023 closing trading price of CHF5.64 per share), Newron would have to issue 4.9m shares, resulting in our per share valuation reducing to CHF7.4 per share from CHF7.7 currently (shares outstanding would increase from 17.8m to 22.7m).

We maintain our valuation for Newron at CHF137.4m or CHF7.7 per share. Our valuation is based on a risk-adjusted net present value (rNPV) calculation for Xadago in PD and evenamide in schizophrenia (Exhibit 3).

Exhibit 3: Newron valuation breakdown

Product

Indication

Launch

Probability of success

rNPV
(CHFm)

rNPV/share (CHF/share)

Xadago

Parkinson’s disease

2015

100%

34.0

1.9

Evenamide

Schizophrenia

2025

60%

252.2

14.1

Total direct product value

 

 

 

286.3

16.0

 

Direct costs to 2033 less tax

(120.5)

(6.8)

Cash at end-June 2023

16.5

0.9

Loans (fair value June 2023)

(44.8)

(2.5)

Valuation

 

 

 

137.4

7.7

Source: Edison Investment Research

Exhibit 4: Financial summary

Accounts: IFRS; year end 31 December; €000s

 

 

2021

2022

2023e

2024e

PROFIT & LOSS

 

 

 

 

 

 

Total revenues

 

 

5,762

6,094

8,947

6,847

Cost of sales

 

 

0

0

0

0

Gross profit

 

 

5,762

6,094

8,947

6,847

Total operating expenses

 

 

(18,119)

(19,396)

(20,881)

(26,043)

Research and development expenses

 

 

(10,725)

(12,005)

(13,434)

(18,521)

SG&A

 

 

(7,394)

(7,391)

(7,448)

(7,522)

EBITDA (normalized)

 

 

(11,386)

(12,620)

(11,747)

(19,078)

Operating income (reported)

 

 

(12,357)

(13,302)

(11,935)

(19,196)

Finance income/(expense)

 

 

(2,527)

(4,170)

(2,681)

(3,070)

Exceptionals and adjustments

 

 

0

0

0

0

Profit before tax (reported)

 

 

(14,884)

(17,472)

(14,615)

(22,266)

Profit before tax (normalised)

 

 

(14,122)

(16,992)

(14,615)

(22,266)

Income tax expense (includes exceptionals)

 

 

(17)

(21,000)

0

0

Net income (reported)

 

 

(14,901)

(17,493)

(14,615)

(22,266)

Net income (normalised)

 

 

(14,139)

(17,013)

(14,615)

(22,266)

Basic average number of shares, m

 

 

17,845.0

17,845.0

17,845.0

17,845.0

Basic EPS (€)

 

 

(0.84)

(0.98)

(0.82)

(1.25)

Adjusted EPS (€)

 

 

(0.79)

(0.95)

(0.82)

(1.25)

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

Property, Plant and Equipment

 

 

87

72

72

72

Right of use assets (leases)

 

 

490

455

285

186

Intangible Assets

 

 

2

0

0

0

Non-current receivables (Tax credits)

 

 

10,480

8,175

5,774

3,087

Total non-current assets

 

 

11,059

8,702

6,131

3,345

Cash and equivalents

 

 

25,019

13,424

10,908

4,313

Current financial assets

 

 

9,575

9,350

0

0

Inventories

 

 

0

0

0

0

Trade Accounts Receivable

 

 

4,833

5,719

5,276

5,498

Total current assets

 

 

39,427

28,493

16,184

9,810

Trade Accounts Payable

 

 

3,504

4,869

4,605

5,211

Other Current Liabilities

 

 

150

172

172

172

Total current liabilities

 

 

3,654

5,041

4,777

5,383

Long-term Debt

 

 

42,542

45,165

32,756

57,665

Leasing Obligations

 

 

389

325

325

325

Share based liabilities

 

 

213

220

220

220

Long-term Provisions

 

 

581

474

474

474

Total non-current liabilities

 

 

43,725

46,184

33,775

58,684

Equity attributable to company

 

 

3,107

(14,030)

(28,645)

(50,911)

 

 

 

 

 

 

 

CASH FLOW STATEMENT

 

 

Pre-tax profit

 

 

(14,884)

(17,472)

(14,615)

(22,266)

Net Financial Income

 

 

(792)

(1,183)

0

0

Depreciation and amortisation

 

 

209

202

188

118

Share based payments

 

 

762

480

0

0

Other adjustments

 

 

3,524

4,996

2,401

2,687

Movements in working capital

 

 

(264)

1,885

179

384

Cash from operations (CFO)

 

 

(11,445)

(11,092)

(11,848)

(19,077)

Capex

 

 

(20)

(18)

(18)

(18)

Acquisitions & disposals net

 

 

0

0

0

0

Other investing activities

 

 

8,440

(299)

9,350

0

Cash used in investing activities (CFIA)

 

 

8,420

(317)

9,332

(18)

Loans received

 

 

15,000

0

0

0

Illustrative debt

 

 

0

0

0

30,000

Loan repayments

 

 

0

0

0

0

Equity issued

 

 

0

0

0

0

Other Financing Cash Flows (leases)

 

 

(169)

(186)

0

0

Cash from financing activities (CFF)

 

 

14,831

(186)

0

30,000

Cash and equivalents at beginning of period

 

 

13,213

25,019

13,424

10,908

Increase/(decrease) in cash and equivalents

 

 

11,806

(11,595)

(2,516)

10,905

Effect of FX on cash and equivalents

 

 

0

0

0

0

Cash and equivalents at end of period

 

 

25,019

13,424

10,908

21,813

Net (debt)/cash (including liquid resources)

 

 

(7,948)

(22,391)

(21,848)

(35,852)

Source: Company reports, Edison Investment Research


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This report has been commissioned by Newron Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Newron Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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General disclaimer and copyright

This report has been commissioned by Newron Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Newron Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Oryzon Genomics — Favorable safety reported in PORTICO Phase II

Oryzon presented a positive update on vafidemstat’s ongoing Phase IIb PORTICO trial in borderline personality disorder (BPD) at the ECNP Congress. The aggregated blinded safety data, as of 23 August, demonstrated a well-tolerated safety profile for a cohort with baseline characteristics reflecting real-world demographics of a typical BPD population. This is a critical consideration for therapies to progress and be successful once commercialised. We also note a low rate of discontinuations (2%) due to treatment-emergent adverse events (TEAEs) and zero discontinuations attributed to serious TEAEs. Screen failure and dropout rates, at 37% and 21%, respectively, were also favourable compared to other agents in development for BPD, such as brexpiprazole, which had higher rates (62% and 27%). As a reminder, the primary objective of the PORTICO trial is efficacy of vafidemstat, and we anticipate top-line data in Q124. Although the shared data was blinded, the overall results suggest a favourable safety profile for vafidemstat and we await next year’s efficacy readout as (if positive) it will be a key catalyst and potentially increase the probability of success for vafidemstat in BPD.

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