Neuren’s shares surge on ASX

Shares of Neuren Pharmaceuticals shot up 25 per cent on the Australian Stock Exchange on news that the Auckland-based company has permission to skip phase II testing of its brain drug glypromate.

Yesterday's surge took the company's market capitalisation to A$41.5 million ($44.9 million) - still a minnow, but a significantly larger one than it was just the day before.

The US Food and Drug Administration (FDA) ruling means that Neuren can proceed to phase III testing - the final stage before releasing the drug to the market - by 2006, or two years earlier than planned.

The company must still complete a phase IIa safety trial, but can skip the longer and expensive phase IIb.

Neuren says this will save the company A$6 million.

It expects to bring glypromate to market by 2009.

Glypromate helps stem the loss of brain function after coronary artery bypass grafting surgery.

Neuren says the FDA has acknowledged that there is currently no other treatment available, and the company is projecting a target global market of US$2 billion ($2.8 billion).

Neuren also says the drug can be used after strokes or other brain injuries - markets totalling a further US$4.5 billion.

"A 10 per cent share of those markets will do us quite nicely, thank you," said chief executive David Clarke.

"This a major business opportunity for Neuren on a number of levels.

"Our phase III trial programme is not only advanced to 2006, but the overall drug development programme should now cost many millions of dollars less because of this decision."

Clarke said the company's potential to licence and generate nearer-term revenue had increased "substantially".

He said the FDA recognised no treatments existed to prevent the loss of brain function in the circumstances relevant to the use of glypromate "and we will be working with the FDA to refine the final design of the new study".

More than 400,000 patients have coronary artery bypass grafting surgery in the United States each year and some loss of brain function had been reported in up to 70 per cent of patients.

Sharemarket analysts were bullish about the news.

"I'm not aware of the FDA ever allowing a company to forego efficacy trials in phase II and move directly into phase III," said Thomas Duthy, biotech equities analyst with Taylor Collison in Sydney.

"I think that's very unique and highlights the very elegant technological data that was supplied to the FDA by Neuren."

Duthy rated the stock a "strong buy," and said there would be a re-rating of the stock in the short term.

"It's quite a big deal for Australian biotech as well," he said. "We've been lacking any sort of good news flow over the last six to 12 months, and this could actually be a shot in the arm for the whole sector."

Patrick Potts, senior analyst with Emerging Growth Capital in Sydney, said Neuren was "one of the region's most promising biotechnology companies", and rated the stock a strong buy, with a valuation of 55Ac.

Neuren shares closed yesterday at 41.5Ac.

The company has operations in Auckland, where most of its 20 employees and consultants are based, and offices in Australia and the United States.

Who owns it

Auckland-based and Australian-listed Neuren is 50 per cent owned by New Zealanders.

Major shareholders include: University of Auckland (10 per cent), New Zealand Seed Fund (11.4 per cent) and Stephen Tindall's K1W1 (6.3 per cent).

Foreign shareholders include: Pfizer (8.1 per cent) and Australia's Macquarie Bank (9.6 per cent).