Newron Pharmaceuticals — Positive readout highlights evenamide potential

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.

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

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.

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.

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).