This report is an updated version of the report published on 15 May 2024 at 03:12 PM AEST.
Neuren Pharmaceuticals Limited (ASX: NEU)
Neuren Pharmaceuticals Limited (ASX: NEU) is engaged in the development of new drug therapies targeting the treatment of neurological disorders. Approved by the US FDA, the company’s product DAYBUE™ (trofinetide) is designed for treat Rett syndrome in adult and pediatric patients two years of age and older. Another drug candidate, NNZ-2591, is undergoing Phase 2 trials.
Recommendation Rationale – SELL at AUD 21.60
- Profit Booking: NEU’s share price surpassed Resistance 1 level recommended on 1 May 2024; and thus, offered a profit booking opportunity.
- Financial Performance: NEU registered a profit after tax of AUD 157mn in FY23 ended 31 December 2023. Net cash from operating activities was AUD 185mn for the period.
- Outlook: NEU anticipates revenues from DAYBUE™, including AUD 11.6mn in royalties for 1QFY24. Royalties of AUD 61-70mn and sales milestone revenue of AUD 77mn are expected for FY24.
- Key Risks: NEU is subject to risks due to its dependency on licensee sales. Few of the other material risks are intellectual property risk and competition risk.
- Overvalued Multiples: On a forward 12-month basis, key valuation multiples, such as P/E, EV/EBITDA, EV/Sales, Price/Cash Flow and Price/Book Value are higher than median of the pharmaceutical industry.
NEU Daily Chart
Considering that the stock has surpassed its R1 level, current trading levels, rally in share price movement, and risks associated, it is prudent to book at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 21.60, at 11:50 AM, as of 15 May 2024.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is neither an indicator nor a guarantee of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 16 May 2024. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.