Acadia Pharmaceuticals (ACAD) recently announced that it has expanded its current licensing agreement for trofinetide (DAYBUE) with Neuren Pharmaceuticals to acquire ex-North American rights to the drug as well as global rights for a new drug development candidate NNZ-2591 in Rett syndrome and Fragile X syndrome, writes John McCamant, editor of The Medical Technology Stock Letter.

The company also reported outstanding Daybue preliminary 2Q23 net sales of $21-23 million and provided 3Q23 net sales guidance of $45 to $55 million. This blows away Wall Street’s estimates, which had the drug’s annual net sales pegged at a consensus of $23.2 million. New peak sales estimates are now $675 up from $550. 

ACAD recently launched trofinetide in April in the US under the brand name DAYBUE as the first and only drug approved for the treatment of Rett syndrome and is executing brilliantly with their new drug sales growth. In our view, ACAD’s expanded agreement for trofinetide and the addition of NNZ-2591 provide the opportunity to expand in the worldwide rare disease space.

Under the terms of the expanded agreement, Neuren will receive an upfront payment of $100 million and is eligible to receive additional potential downstream milestone and royalty payments earned separately for trofinetide and NNZ-2591. Outside of North America, Neuren is eligible to receive additional payments for trofinetide upon the achievement of specified revenue milestones as follows:

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(1) Each region’s sales milestones are divided into four distinct milestones based upon escalating annual net sales thresholds as defined in the agreement.

Neuren will also receive tiered royalties from the mid-teens to low-twenties percent of trofinetide net sales outside of North America. In North America, all milestones and royalties for trofinetide remain unchanged from Acadia’s previously existing North American license agreement with Neuren. Potential future payments to Neuren related to NNZ-2591 in Rett syndrome and Fragile X syndrome are identical to the payments for trofinetide in each of North America and outside North America.

Recommended Action: Buy ACAD.

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