Analysis - NEU - Neuren Pharmaceuticals

Price($) 0.24
NTA ($) 0.04
P/NTA 6.71
Team 6.4
BurnPeriod 0.39
ProductPipe 9.1
ForeignMarket 2.4
Cash:Debt DebtFree


Here's what Neuren (NEU) has to say about itself:
"...biopharmaceutical company developing novel therapeutics in the fields of brain injury and diseases and metabolic disorders. The Neuren portfolio comprises eight product families targeting markets with large unmet needs and limited competition.
Neuren has four lead candidate molecules—Glypromate , Motiva , NNZ-2566 and NNZ-2591— focused on a range of acute and chronic neurological conditions. The company also has a robust R&D program which includes drug discovery platforms addressing neurology, oncology and endocrinology."

NEU appears to be a strong drug developing company in the following aspects: broad product pipeline with several in advanced stage clinical trials - hence de-risked; a highly qualified scientific team and solid collaboration with overseas counterparts.

Recently purchased Hamilton Pharmaceuticals has added Motiva product line to its research. This product has passed Ph 2b but is now being retested for a new application - about to proceed to Ph 2.
It lead product Glypromate is undergoing Ph III. Its drug NNZ-2566 is in clinical trials with the support of the US Army. A collective score of 9.1 for products is far above the average.

Its management team consist of many scientific personnel which gives a high score of 6.4.Collaboration with foreign researchers such as US Army, Cambridge Uni produces a foreign market scor of 2.4 - almost the average. This is a positive factor considering NEU's products are not in market yet.

Although NEU looks like a scientific winner, its financial standing does not look healthy. Its burn rate for last financial year (Dec based, not June) is NZ$10. By the end of 3rd quarter 2007, cash reserve is only slightly more than NZ$1m. Hence cash flow is a serious problem. As part of its deal to acquire Hamilton Pharmaceuticals, CNF Investments and Vivo Ventures will invest US$3m via convertible notes - but this is only a short term solution to its heavy cash burn.

Another indicator is the price to NTA ratio at 6.71. At the level, the price for NEU is very expensive, even though the share prices has reduced significantly in the near past. For NEU to be inexpensive, all factors being equal, a fair price would be 10c. Watch out for the last quarter of the 2007 year to see the state of funding of NEU, i.e. whether it can raise more funding?

Recommendation: Sell until 15c