Neuren Pharmaceuticals Limited ANNUAL REPORT 2023 Improving the lives of people with neurodevelopmental disabilities
Neuren Pharmaceuticals is developing new therapies for debilitating neurodevelopmental disorders that emerge in early childhood and are characterised by impaired connections and signalling between brain cells. Incorporated in New Zealand and based in Melbourne, Australia, Neuren is listed on the ASX under the code NEU. 1 Neuren’s value proposition 2 Chair and CEO message 4 Operating Review 22 Board 23 Executive Team 24 Corporate Governance 30 Consolidated Statement of Comprehensive Income 31 Consolidated Statement of Financial Position 32 Consolidated Statement of Changes in Equity 33 Consolidated Statement of Cash Flows 34 Notes to the Consolidated Financial Statements 51 Independent Auditor’s Report 53 Additional Information Contents
NEUREN’S VALUE PROPOSITION Leading pipeline in neurodevelopmental disorders Three key drivers transforming near term value Indication Compound Geography Preclinical Phase 1 Phase 2 Phase 3 Registration Commercial rights Rett Trofinetide US RoW NNZ-2591 World Fragile X Trofinetide World NNZ-2591 World PhelanMcDermid NNZ-2591 World Pitt Hopkins NNZ-2591 World Angelman NNZ-2591 World PraderWilli NNZ-2591 World pharmaceuticals Realise Neuren’s share of trofinetide value in the US through Acadia’s successful commercialization of Confirm efficacy of NNZ-2591 in Phase 2 trials for four valuable indications, with global rights retained by Neuren Positive top-line results for Phelan-McDermid syndrome • Top-line results for Pitt Hopkins and Angelman syndromes in Q2 and Q3 2024 Realise Neuren’s share of trofinetide ex-US value through expanded global partnership with Acadia 1 2 3 Key achievements in 2023 A$157 million profit after tax for 2023 Approval and successful launch of DAYBUE™ (trofinetide) in the US as the first approved treatment for Rett syndrome, with net sales for 2023 since launch in April of US$177 million Expansion of DAYBUE™ (trofinetide) partnership with Acadia to include ex-North America, delivering A$146 million up-front plus attractive future royalties and milestone payments Highly encouraging positive results in Phase 2 trial of NNZ-2591 for Phelan-McDermid syndrome Completion of enrolment in Phase 2 trials of NNZ-2591 for Pitt Hopkins and Angelman syndromes Neuren Pharmaceuticals Limited Annual Report 2023 1
CHAIR AND CEO MESSAGE PATRICK DAVIES & JON PILCHER 2023 was a transformational year for Neuren. In all three areas of the business, we achieved the key planned milestones that generated very significant value for all stakeholders. The approval of DAYBUE™ by the US Food and Drug Administration (FDA) in March 2023 as the first ever treatment for Rett syndrome was a proud moment for the Neuren team. Our partner Acadia launched DAYBUE a month later. In our message to you last year, we stated that we were confident Acadia was very well placed for successful commercialisation. The launch was indeed highly successful and 2023 net sales of US$177 million in less than 9 months, with Acadia’s guidance for net sales to more than double in 2024, is an outstanding outcome. We are very encouraged by testimonials from families about the impact of treatment. In July 2023 we expanded our partnership with Acadia for DAYBUE from North America to worldwide, following a competitive partnering process. Acadia is in a unique position of being able to leverage knowledge of all aspects of the development, marketing and distribution of DAYBUE. The expanded agreement delivered to Neuren US$100 million up-front and very attractive future economics linked to launches and sales in key territories. In December 2023 we announced highly encouraging results from our Phase 2 clinical trial of NNZ-2591 in Phelan-McDermid syndrome. These results exceeded our expectations, both in the consistency of the findings and the magnitude of improvements seen across clinically important aspects of Phelan-McDermid syndrome, including communication, behaviour, cognition/learning and socialisation. Neuren is currently leading the way in striving to achieve the first approved treatment for PhelanMcDermid syndrome and the team is very excited by that prospect. We have noted before that Neuren has no cost attached to the royalty and milestone revenue we receive from Acadia, which therefore flows straight into pre-tax profit. The impact of this was evident in our financial results for 2023, the highlight of which was profit after tax of $157 million. This reflected revenue from Acadia of A$232 million, comprising royalty of A$27 million, a milestone payment of A$59 million and A$146 million from the expanded worldwide agreement. Neuren was promoted into the S&P/ASX 200 index in September 2023 and was the best performing ASX 200 stock in 2023, with a share price increase of 214%. We now have many more institutional shareholders and a high level of interest and engagement from the financial markets community. We continue to seek higher interest and investment, both in Australia and overseas, assisted by a wide range of intermediaries. In October 2023, Neuren was presented with the 2023 Australian Growth Company of the Year Award for Health and Life Sciences. Jon Pilcher CEO Patrick Davies Chair 2 Neuren Pharmaceuticals Limited Annual Report 2023
The Neuren team is far from complacent following the success of the last two years. We are acutely aware that it follows, and has been built on, a ten-year journey since our first clinical trial in Rett syndrome and that many loyal and committed shareholders have accompanied us on that journey. The experience we have gained on the ten-year journey is extremely valuable. Everything we have learnt from the development of trofinetide in Rett syndrome is directly relevant to our development of NNZ-2591 in other neurodevelopmental disorders, led by Phelan-McDermid syndrome. We believe that this and the connection of both drugs to IGF-1 enhances the risk profile of the NNZ-2591 programs. There is so much more to achieve and 2024 is another very important year for the business. We look forward to the continued progress of DAYBUE, both in the US and in other territories. We await the results of the Phase 2 trials of NNZ2591 for Pitt Hopkins syndrome in Q2 2024 and for Angelman syndrome in Q3 2024. In the meantime, the team is highly focused on advancing the Phelan-McDermid syndrome program. We are diligently preparing for an End of Phase 2 Meeting with the FDA and are commencing manufacture of the drug supplies that will be required for a Phase 3 program. We are also actively exploring further potential indications for NNZ-2591 and will say more about this as our assessment progresses. Patrick Davies Chair Jon Pilcher CEO CHAIR AND CEO MESSAGE CONTINUED Neuren is in a very strong financial position, with cash and short-term investments of more than A$200 million and the ongoing revenues from DAYBUE. This supports our commitment to achieving the best outcome for shareholders by pursuing value-adding opportunities to their fullest potential. For NNZ-2591, we will continue to evaluate all options to achieve this as the events of this year unfold. We are grateful to our shareholders, both longstanding and new, and all the patient communities for the support that is so critical for our success. We commend and thank the Neuren team for their achievements and dedication, assisted by a range of development partners. NEUREN’S VALUES We are passionate about making a difference to the lives of patients and their families We aim to earn the respect of everyone we deal with We are determined and creative to break through barriers We recognise the importance of all stakeholders and endeavour to use financial resources efficiently We harness the power of collaboration and different perspectives Neuren Pharmaceuticals Limited Annual Report 2023 3
OPERATING REVIEW THE IMPORTANCE OF ORPHAN DRUG DESIGNATION The US Food and Drug Administration (FDA) and European Medicines Agency (EMA) have both granted Orphan Drug designation for trofinetide in Rett syndrome and Fragile X syndrome and for NNZ-2591 in each of Phelan-McDermid, Angelman and Pitt Hopkins syndromes. The FDA has also granted orphan drug designation for NNZ-2591 in PraderWilli syndrome. Orphan Drug designation is a special status that the regulators may grant to a drug to treat a rare disease or condition. Amongst other incentives, Orphan Drug designation qualifies the sponsor of the drug for exclusivity periods during which the regulators will not approve a generic competitor product. These marketing exclusivity periods are extremely valuable for the commercialisation of Orphan Drugs. They provide additional protection, along with patents, against generic competitors and potentially can continue to provide protection after patent expiry. The exclusivity periods after marketing authorisation of products approved for pediatric use are 7.5 years in the United States and 12 years in the EMA region. Japan, South Korea and Taiwan also have Orphan Drug programs. NEUREN’S GROUND-BREAKING THERAPIES Neuren focuses on developing treatments for debilitating neurodevelopmental disorders that emerge in early childhood and stem from problems in brain development which lead to a wide range of serious issues affecting nearly every aspect of life. These neurodevelopmental disorders have severe life-long impact on the patients and their families. Each neurodevelopmental disorder is caused by a different genetic mutation, but in many cases, they share similar symptoms and the common characteristic of impaired connections and signalling between brain cells. Neuren currently has two novel patented drugs, trofinetide and NNZ-2591, which potentially have broad utility in the treatment of neurological disorders. Both drugs are synthetic analogues of important molecules that occur naturally in the brain, aiming to improve the impaired connections and signalling, meaning that the drug’s target is to have a broad impact on the disorder rather than aiming to treat one symptom. Both drugs can be administered orally in a patient-friendly liquid dose. A critical feature of Neuren’s work to develop therapies for each of these disorders is close collaboration with the leading specialist physicians and with the well-organised patient advocacy organisations. Severe impact on nearly every aspect of life walking and balance issues anxiety and hyperactivity seizures impaired communication intellectual disability impaired social interaction impaired hand use sleep disturbance gastrointestinal problems Impaired communication between neurons, abnormal formation/pruning of dendrites & chronic inflammation Neuren’s drugs target the critical role of IGF-1 in this upstream process, using analogs of peptides that can be taken orally as liquids Rett Fragile X PhelanMcDermid Angelman Pitt Hopkins Prader-Willi MECP2 FMR1 SHANK3 UBE3A TCF4 15q11-q13 Treating neurodevelopmental disorders Neuren Pharmaceuticals Limited Annual Report 2023 4
2023 net sales of US$177m 2024E net sales of US$370 – 420m Historical Acadia guidance # * Ba US$ ^ Ne reac 370 23 67 87 177 420 Q2 2023 Q3 2023 Q4 2023 CY2023 CY2024 Acadia Guidance DAYBUE Net Sales (US$m) 21-23 45-55 80-87.5 OPERATING REVIEW CONTINUED As well as the exclusivity periods, Orphan Drugs have many other commercial advantages compared with existing markets that have apparently attractive large sales in which established products and companies have to be displaced. The serious and urgent unmet need results in a more supportive regulatory and pricing environment and strong engagement from the patient community and leading physicians. Historical data indicates a higher probability of achieving regulatory approval and the potential for immediate access to known patients means that a large sales organisation is less important. In short, the Orphan Drug business model targets a leadership position in markets with urgent need, at an attractive price and with a higher probability of getting to market. The neurodevelopmental disorders that Neuren is aiming to treat are “rare diseases”, however they are not “ultrarare”, and in each disorder there are tens of thousands of potential patients. COMMERCIAL EXCLUSIVITY In addition to the primary protection of the important exclusivity periods from Orphan Drug designation explained above, Neuren has additional commercial protection from issued patents and pending patent applications, which extend as far as 2041. Since trofinetide and NNZ-2591 are new chemical entities, following the first marketing authorisation for each drug, the term of one patent may potentially be extended by up to 5 years in many countries, including the United States, Europe and Japan. TROFINETIDE FOR RETT SYNDROME Successful launch of DAYBUE™ (trofinetide) in the United States In March 2023, Neuren’s partner for trofinetide, Acadia Pharmaceuticals (NASDAQ: ACAD), received US Food and Drug Administration (FDA) approval of DAYBUETM (trofinetide) for the treatment of Rett syndrome in adult and pediatric patients two years of age and older. On 17 April 2023, Acadia Pharmaceuticals launched DAYBUE™ (trofinetide) in the United States as the first approved treatment for Rett syndrome. Adoption of DAYBUE in the diagnosed Rett syndrome population has been faster than expected, with approximately 860 patients on DAYBUE at the end of February 2024. Caregivers and physicians have continued to report meaningful improvements in patients and the high demand has been well supported by access from Medicaid and private health insurance payors. In the United States there are approximately 5,000 diagnosed Rett syndrome patients and prevalence studies suggest the total number of patients may be 6,000 to 9,000. Acadia reported net sales of US$177 million for 2023 and has provided guidance for net sales in 2024 of between US$370 million and US$420 million. Further information about DAYBUE, including prescribing information can be accessed at www.DAYBUE.com Neuren Pharmaceuticals Limited Annual Report 2023 5
OPERATING REVIEW CONTINUED Growing sustainable income to Neuren In June 2023, Neuren received from Acadia a milestone payment of US$40 million earned following the first commercial sale of DAYBUE (trofinetide). Neuren is eligible to receive ongoing royalties on net sales of trofinetide in North America, plus milestone payments of up to US$350m on achievement of a series of four thresholds of total annual net sales, plus one third of the market value of the Rare Pediatric Disease Priority Review Voucher that was awarded to Acadia by the FDA upon approval of the New Drug Application (NDA)”, to be paid when Acadia sells or uses the voucher. Neuren estimates the value of its one third share as US$33 million. No royalties or similar costs are payable by Neuren to third parties, which means Neuren’s revenue from Acadia will flow through to pre-tax profit. The royalty rates and sales milestone payments are related to the total amount of annual net sales of trofinetide in all indications in North America, as set out in the following tables: 1 Royalty rates payable on the portion of annual net sales that fall within the applicable range. Each sales milestone payment is payable once only. Tiered royalty rates (% of net sales)1 Sales milestone payments1 Annual Net Sales Rates Net Sales in one calendar year US$m ≤US$250m 10% ≥US$250m 50 >US$250m, ≤US$500m 12% ≥US$500m 50 >US$500m, ≤US$750m 14% ≥US$750m 100 >US$750m 15% ≥US$1bn 150 Persistency rates improving in new patient cohorts 14 1 Acadia Fourth Quarter and Full Year 2023 Earnings Call presentation in Feb 2024 66% 64% 58% 51% 75% 68% 80% 76% 70% 63% Month 4 Month 5 Month 6 Month 7 Persistency Rates1 (Based on confirmed discontinuations and patients who were 60 days past their scheduled refill) Lilac-1 experience Previously presented real world Current real world n.a. n.a. 1 Acadia Fourth Quarter and Full Year 2023 Earnings Call presentation in Feb 2024 A characteristic of all long-term medicines is that not all patients who commence treatment will persist with treatment. Furthermore, for patients and caregivers, adjusting to a novel treatment regimen can take time, especially when it is the first treatment ever to become available. The number of patients commencing treatment and the proportion that persist with treatment long-term are key factors in the sales outcome. Acadia has provided detailed metrics for real world persistency since launch, which continues to outperform the clinical trial experience and has improved as new patient cohorts are added. The chart below shows the data reported in Acadia’s Q4 earnings call presentation in February 2024. The real world persistency has consistently tracked at more than 10 percentage points above clinical experience and monthly cohort persistency rates are trending up. Neuren Pharmaceuticals Limited Annual Report 2023 6
Net sales of US$177 million in 2023 delivered royalties of A$27 million to Neuren. Assuming Acadia’s guidance for 2024 is met and an exchange rate of 0.65, Neuren anticipates royalties of A$61-70 million (US$3945 million), plus A$77 million (US$50 million) from the first sales milestone payment due for the first calendar year in which net sales exceed US$250 million. The milestone payment would be earned as revenue in 2024 and received in Q1 2025. Acadia anticipates potential approval of a New Drug Submission (NDS) filing for trofinetide in Canada around year-end 2024. There are currently 600 to 900 Rett patients in Canada. Any net sales in Canada will be included in the North America net sales for the purpose of calculating royalties and sales milestone payments to Neuren. OPERATING REVIEW CONTINUED 1 2023E royalty of A$27m 2024E royalty of A$61 – 70m, plus A$77m sales milestone 2023 net sales of US$177m 2024E net sales of US$370 – 420m 61 138 4 10 13 27 70 147 Q2 2023 Q3 2023 Q4 2023 CY2023 Royalty only* Royalty + Sales Milestone^ Royalty and Sales Milestone to Neuren (A$m) CY2024 Historical Acadia guidance * Based on 10% of DAYBUE net sales up to US$250m and 12% of DAYBUE net sales between US$250m and US$500m, and AUDUSD of 0.65 ^ Neuren will be entitled to US$50m sales milestones (receivable in Q1 2025) if CY2024 DAYBUE net sales reaches US$250m; assumes AUDUSD of 0.65 370 3 67 87 177 420 2023 Q3 2023 Q4 2023 CY2023 CY2024 Acadia Guidance DAYBUE Net Sales (US$m) 45-55 80-87.5 * B ased on 10% of DAYBUE net sales up to US$250m and 12% of DAYBUE net sales between US$250m and US$500m, and AUDUSD of 0.65 ^ Neuren will be entitled to US$50m sales milestones (receivable in Q1 2025) if CY2024 DAYBUE net sales reaches US$250m; assumes AUDUSD of 0.65 Neuren Pharmaceuticals Limited Annual Report 2023 7
A redacted version of the expanded licence agreement between Neuren and Acadia was filed with the US Securities and Exchange Commission as a material contract exhibit to Acadia’s 2023 10-K Annual Report, which is available to view via the SEC Filings section of Acadia’s website. Following the expansion of the partnership with Acadia for trofinetide to worldwide, Acadia is now advancing in key markets outside North America. For Europe, Acadia is engaging with the European Medicines Agency (EMA) in Q1 2024, with a potential Marketing Authorisation Application filing in H1 2025. For Japan, Acadia is engaging with the regulator, Pharmaceuticals and Medical Devices Agency (PMDA) in 2024. There is urgent unmet need for a treatment for Rett syndrome around the world, evidenced by communications received from families, patient support groups and physicians. The estimated number of potential patients and currently identified patients is shown in the table below. Neuren expects rates of diagnosis to increase with greater awareness and accelerate with the availability of a treatment. Europe Japan Other Potential Rett patients 9,000 – 14,0001 1,000 – 2,0001 ~30,0002 Currently identified Rett patients ~4,0002 ~800 – 1,0002 ~2,0002 1 Acadia estimates 2 Neuren estimates based on prevalence studies and patient organisations About Rett syndrome Rett syndrome is a seriously debilitating and life-threatening neurological disorder. It is first recognized in infancy and seen predominantly in girls, but can occur very rarely in boys. At diagnosis, Rett syndrome has often been misdiagnosed as autism, cerebral palsy, or non-specific developmental delay. Most cases of Rett syndrome are caused by mutations on the X chromosome on a gene called MECP2. Rett syndrome strikes all racial and ethnic groups and has been estimated to occur worldwide in 1 of every 10,000 to 15,000 female births, causing problems in brain function that are responsible for cognitive, sensory, emotional, motor and autonomic function. These problems can include learning, speech, sensory sensations, mood, movement, breathing, cardiac function, and even chewing, swallowing, and digestion. Rett syndrome symptoms appear after an early period of apparently normal or near normal development until six to eighteen months of life, when there is a slowing down or stagnation of skills. A period of regression then follows, with loss of communication skills and purposeful hand use, loss or impairment of walking, and the onset of stereotypic hand movements. Other problems frequently include seizures and erratic breathing patterns, an abnormal side-to-side curvature of the spine (scoliosis), and sleep disturbances. OPERATING REVIEW CONTINUED i Development and commercialisation outside North America In July 2023 Neuren and Acadia expanded their partnership for trofinetide from North America to worldwide. Neuren received US$100 million up-front and is eligible to receive milestone payments and royalties related to development and commercialization of trofinetide outside North America as set out in the table below. Trofinetide Payment Upon 1st commercial sale for Rett in Europe US$35m Upon 1st commercial sale for Rett in Japan US$15m Upon 1st commercial sale for second indication in Europe US$10m Upon 1st commercial sale for second indication in Japan US$4m Total development milestones US$64m Europe Up to US$170m Japan Up to $110m Rest of World Up to US$83m Total sales milestones on achievement of escalating annual net sales thresholds Up to US$363m Tiered royalties on net sales Mid-teen to low twenties per cent Neuren Pharmaceuticals Limited Annual Report 2023 8
NNZ-2591 FOR MULTIPLE NEURODEVELOPMENTAL DISORDERS Neuren is developing NNZ-2591 for four other serious neurodevelopmental disorders that emerge in early childhood and have no or limited approved treatment options. The estimated number of potential patients being targeted across these four disorders is more than five times larger than Rett syndrome. Potential patients Disorder Gene mutation Published prevalence estimates US1 Europe1 RoW1, 2 Phelan-McDermid SHANK3 1/8,000 to 1/15,000 males and females 24,000 31,000 104,000 Pitt Hopkins TCF4 1/34,000 to 1/41,000 males and females 6,000 8,000 28,000 Angelman UBE3A 1/10,000 to 1/20,000 males and females 19,000 24,000 81,000 Prader-Willi 15q11-q13 1/10,000 to 1/30,000 males and females 17,000 21,000 72,000 66,000 84,000 285,000 1 Estimates derived by applying the mid-point of the prevalence estimate range to the populations under 60 years 2 RoW comprises Japan, China (urban population), Brazil, Israel, South Korea, Australia and New Zealand All four programs have been granted Orphan Drug designation by the US Food and Drug Administration (FDA) and are being developed under Investigational New Drug (IND) applications. In designing and executing the NNZ-2591 development program, Neuren has been able to leverage the extensive and highly relevant experience the management team has gained from the trofinetide Rett syndrome program across manufacturing, non-clinical, clinical and regulatory. Phase 2 clinical trials Phase 2 clinical trials are being conducted in all four indications. The open label trials are each enrolling up to 20 children to examine safety, tolerability, pharmacokinetics and efficacy over 13 weeks of treatment with NNZ-2591. All subjects receive NNZ-2591 as an oral liquid dose daily, with escalation in two stages up to the target dose during the first 6 weeks of treatment, subject to independent review of safety and tolerability data. The study begins with 4 weeks of observation to thoroughly examine baseline characteristics prior to treatment, against which safety and efficacy are assessed for each child. This is followed by the treatment period of 13 weeks. A follow-up assessment is made 2 weeks after the end of treatment. The overall aim of these first trials is to expedite the generation of data that will enable the subsequent trials to be designed as registration trials. In 2023 positive results were achieved in the Phelan-McDermid syndrome trial and enrolment was completed in both the Pitt Hopkins and Angelman syndrome trials. Top-line results are anticipated for Pitt Hopkins in Q2 2024 and for Angelman in Q3 2024. OPERATING REVIEW CONTINUED Phelan-McDermid Pitt Hopkins Angelman Prader-Willi n subjects Up to 20 Up to 20 Up to 20 Up to 20 Age range 3 to 12 3 to 17 3 to 17 4 to 12 Location US US Australia US Screening/Baseline Week 0 Week 4 Week 10 Week 17 Week 19 Up-titration to 12mg/kg BID NNZ-2591 treatment Follow-up Phase 3 preparation Non-clinical toxicity studies and optimisation of drug product and drug substance manufacturing Neuren Pharmaceuticals Limited Annual Report 2023 9
OPERATING REVIEW CONTINUED Positive results in Phelan-McDermid syndrome Phase 2 trial In December 2023, Neuren announced positive top-line results from the Phase 2 clinical trial of NNZ-2591 in children with Phelan-McDermid syndrome. NNZ-2591 was well tolerated and demonstrated a good safety profile. There was only one serious treatment emergent adverse event (TEAE) of gastroenteritis, which was not related to study drug and occurred during the safety follow-up period after end of treatment. Three subjects discontinued due to TEAEs, two testing positive for COVID-19 and one due to seizures that were not related to study drug. No clinically significant changes in laboratory values, electrocardiogram (ECG) or other safety parameters were observed during treatment. TEAEs occurring in two or more subjects are listed in the following table: Event N=18 n (%) Event N=18 n (%) Constipation 2 (11.1) Somnolence 3 (16.7) Diarrhea 2 (11.1) Pyrexia 3 (16.7) Nausea 2 (11.1) Fatigue 2 (11.1) Vomiting 2 (11.1) Aggression 2 (11.1) COVID-19 3 (16.7) Insomnia 2 (11.1) Nasopharyngitis 2 (11.1) Decreased Appetite 3 (16.7) Otitis Media 2 (11.1) Rhinorrhea 2 (11.1) Psychomotor Hyperactivity 4 (22.2) Significant improvement was observed by both clinicians and caregivers from treatment, across multiple efficacy measures. Improvements were consistently seen across many of the core PMS characteristics. The results for the global efficacy measures rated by both clinicians and caregivers showed a level of improvement typically considered clinically meaningful. 16 out of 18 children showed improvement measured by the Clinical Global Impression of Improvement (CGI-I), an assessment by the clinician of the child’s overall status compared with baseline. The mean CGI-I score was 2.4. 10 children received a score of either 1 (“very much improved”) or 2 (“much improved”). 15 out of 18 children showed improvement measured by the Caregiver Overall Impression of Change (CIC), an assessment by the caregiver of the child’s overall status compared with baseline. The mean CIC score was 2.7. Seven children received a score of either 1 (“very much improved”) or 2 (“much improved”). CGI-I and CIC are 7 point scales in which scores of 1, 2 or 3 indicate improvement. Efficacy endpoints summary 30 • Statistically significant improvement vs baseline in 10/14 efficacy endpoints • Mean CGI-I of 2.4 and Median of 2.0 with p-value <0.0001 • Mean CIC of 2.7 and Median of 3.0 with p-value =0.0003 Global Behaviour GI Health Quality of Life Symptom Specific Sleep CGI-I <0.0001 CIC 0.0003 CGI-S 0.0156 Aberrant Behavior Checklist-2 total 0.0013 Behavior Problems Inventory total frequency 0.0326 Vineland Adaptive Behavior Scales Composite 0.1710 GIHQ total frequency 0.0013 Efficacy measures and p-values1 (Total/Overall scores) PMS Clinician Domain Specific Rating Scale total 0.0156 Caregiver Top 3 Concerns total 0.0005 QL InventoryDisability total 0.0066 Impact of Childhood Neurologic Disability 0.1094 CSHQ total 0.0191 MB-CDI Total Vocabulary 0.0647 ORCA T-Score 0.0714 Communication 1 Wilcoxon signed rank test 1 Wilcoxon signed rank test Neuren Pharmaceuticals Limited Annual Report 2023 10
OPERATING REVIEW CONTINUED Preparation for Phase 3 In order to expedite the overall development plan, in parallel with conducting the Phase 2 trials Neuren has been executing the additional development work required to be ready for Phase 3 development. Non-clinical toxicity studies to support longer clinical trials and commercial use of the product have been completed. Optimisation and scale-up of the drug product and drug substance manufacturing arrangements are well advanced, with manufacturing of supplies for Phase 3 trials scheduled in 2024. Neuren plans to discuss proposals for Phase 3 development in Phelan-McDermid syndrome with the FDA during 2024. Mean CGI-I score of 2.4 with 16 out of 18 children showing improvement Mean CIC score of 2.7 with 15 out of 18 children showing improvement Significant improvement assessed by both clinicians a Clinician and caregiver global efficacy measures showed a level of imp considered clinically meaningful Mean CGI-I score of 2.4 with 16 out of 18 children showing improvement Mean CIC score of 2.7 with showing impro 1 - Very Much Improved 2- Much Improved 3 - Minimally Improved 4 - No Change 5 - Minimally Worse 6 - Much Worse 7 - Very Much Worse Score at Week 13 EOT (Visit 16) Waterfall Plot of CGI-I Overall Score ITT Population Individual Subjects All subjects (n=18) ssed by both clinicians and caregivers 31 measures showed a level of improvement typically ed clinically meaningful n Mean CIC score of 2.7 with 15 out of 18 children showing improvement Score at Week 13 EOT (Visit 16) Waterfall Plot of Caregiver Impressions of Change Score ITT Population Individual Subjects All subjects (n=18) 1 - Very Much Improved 2- Much Improved 3 - Improved 4 - Unchanged 5 - Worse 6 - Much Worse 7 - Very Much Worse Neuren Pharmaceuticals Limited Annual Report 2023 11
OPERATING REVIEW CONTINUED Phelan-McDermid syndrome has an overwhelming unmet medical need Phelan-McDermid syndrome (PMS) is caused by a deletion or other change in the 22q13 region of chromosome 22, which includes the SHANK3 gene, or a mutation of the gene. PMS is also known as 22q13 deletion syndrome. The SHANK3 gene codes for the shank3 protein, which supports the structure of synapses between nerve cells in the brain. PMS has severe quality of life impacts for those living with the syndrome, as well as parents and siblings. There are no approved treatments for PMS despite its severely debilitating impact. The estimated prevalence of PMS is 1% of people diagnosed with autism, or between 1 in 8,000 and 1 in 15,000 males and females. It has historically been underdiagnosed, but this is changing with rising awareness and enhancement of genetic testing technologies. In November 2022, an important Externally-Led Patient Focused Drug Development (EL-PFDD) Meeting was held, in order for the FDA and other key stakeholders to hear directly from patients, their families, caregivers, and patient advocates about the impact PMS has on patients’ daily lives. The meeting content was collated in a “Voice of the Patient” report. In 2023 for the first time an International Classification of Disease (ICD) code was assigned to PMS. From the Phelan-McDermid Syndrome Voice of the Patient Report: “ PMS has an overwhelming unmet medical need. There are no FDA approved treatments for PMS despite its severely debilitating manifestations. Parents and caregivers are open to trying almost anything to try to relieve their child’s suffering; most have tried an incredibly high number of treatments and approaches for symptom management, with very little success. Some received medications that caused more harm than good.” “ PMS has severe quality of life impacts on those living with the disease, as well as on parents and siblings. Most activities of daily life, including communicating needs or wants, self-care (bathing, dressing, toileting) and socializing with peers/siblings are affected. Most individuals living with PMS rely on their parents and caregivers for all their daily needs, and many require 24-hour care.” Strong foundations built for NNZ-2591 Neuren has meticulously built strong foundations to enable clinical development of NNZ-2591 in multiple indications. Clear and consistent efficacy in mouse models of all four disorders The studies in these models compared normal mice (“wild type”) and mice with a disrupted gene (“knockout”). The knockout mice exhibit behavioural and biochemical deficits that mimic each disorder in humans. The wild type mice and the knockout mice were each treated with placebo and NNZ-2591. In all four models, treatment with NNZ-2591 for 6 weeks eliminated all the deficits so that the knockout mice were indistinguishable from the wild type mice. In the Prader-Willi syndrome model, treatment with NNZ-2591 also normalized fat mass (obesity), insulin levels and IGF-1 levels. Treatment had no impact on the wild type mice which is important from a safety point of view. Following review of the data from the mouse models and the mechanistic rationale for treatment, FDA granted Orphan Drug designation for NNZ-2591 in each of the four disorders. Neuren Pharmaceuticals Limited Annual Report 2023 12
OPERATING REVIEW CONTINUED The charts below show the results in the Angelman syndrome, Pitt Hopkins and Prader-Willi syndrome models. In the Angelman model, treatment also eliminated seizures in the knockout mice. EFFICACY IN MOUSE MODEL OF ANGELMAN WT-vehicle Ube3am-/p+ + vehicle WT+ NNZ2591 Ube3am-/p+ + NNZ2591 0 20 40 60 80 Distance travelled (cm) WT-vehicle Ube3am-/p+ + vehicle WT+ NNZ2591 Ube3am-/p+ + NNZ2591 0 2 4 6 Nest Building quality (grade 1 to 5) WT-vehicle Ube3am-/p+ + vehicle WT+ NNZ2591 Ube3am-/p+ + NNZ2591 0 5 10 15 20 Marble burying (n) WT-vehicle Ube3am-/p+ + vehicle WT+ NNZ2591 Ube3am-/p+ + NNZ2591 0 50 100 150 200 Time spent with the novel mouse (s) WT-vehicle Ube3am-/p+ + vehicle WT+ NNZ2591 Ube3am-/p+ + NNZ2591 0 20 40 60 80 Floating time (%) WT-vehicle Ube3am-/p+ + vehicle WT+ NNZ2591 Ube3am-/p+ + NNZ2591 0 2 4 6 8 Number of Platform crosses Daily living Daily living Sociability Hypoactivity & anxiety Motor Cognition EFFICACY IN MOUSE MODEL OF PITT HOPKINS 8 WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0.0 0.2 0.4 0.6 0.8 1.0 Force (N) WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 50 100 150 Time spent grooming (s) N_WT + Vehicle N_Tcf4+/_ + Vehicle N_WT+ NNZ2591 N_Tcf4+/_ + NNZ2591 0 20 40 60 Time spent with the novel mouse (s) WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 20 40 60 Freezing in % of 5min WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 2 4 6 Nest Building quality (grade 1 to 5) WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 50 100 150 Distance travelled Hypoactivity Daily living Motor performance Sociability Repetitive behavior Learning & Memory EFFICACY IN MOUSE MODEL OF PITT HOPKINS 8 WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0.0 0.2 0.4 0.6 0.8 1.0 Force (N) WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 50 100 150 Time spent grooming (s) N_WT + Vehicle N_Tcf4+/_ + Vehicle N_WT+ NNZ2591 N_Tcf4+/_ + NNZ2591 0 20 40 60 Time spent with the novel mouse (s) WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 20 40 60 Freezing in % of 5min WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 2 4 6 Nest Building quality (grade 1 to 5) WT + Vehicle Tcf4+/_ + Vehicle WT+ NNZ2591 Tcf4+/_ + NNZ2591 0 50 100 150 Distance travelled Hypoactivity Daily living Motor performance Sociability Repetitive behavior Learning & Memory Efficacy in mouse model of Angelman (Ube3a) Efficacy in mouse model of Pitt Hopkins (Tcf4) (cm) Neuren Pharmaceuticals Limited Annual Report 2023 13
OPERATING REVIEW CONTINUED WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 10 20 30 Obesity Fat mass (g) WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 50 100 150 IGF-1 (ng/ml) Circulating IGF-1 levels WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 2 4 6 8 10 Cognition Time spent with the novel object (S) Obesity Circulating IGF-1 levels Cognition WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 50 100 150 Social preference Time spent with the mouse (S) WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 20 40 60 80 100 Social Interaction Sniffing events (n) WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 50 100 150 200 Anxiety Time (S) Social preference Social interaction Anxiety WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 2000 4000 6000 8000 10000 Hypoactivity (Open Field distance travelled) Distance travelled (cm) WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 200 400 600 800 Hypoactivity (Open Field time spent active) Time (S) WT + Vehicle Magel2-null + Vehicle WT+ NNZ2591 (low dose) Magel2-null + NNZ2591 (low dose) WT+ NNZ2591 (high dose) Magel2-null + NNZ2591 (high dose) 0 2 4 6 Daily living Nest Building quality (grade 1 to 5) Hypoactivity Hypoactivity Daily Living (Open Field distance travelled) (Open Field time spent active) Efficacy in mouse model of Prader-Willi (Magel2-null) Insulin levels (pM) WT plus vehicle Magel2-null plus vehicle WT plus NNZ-2591 low dose Magel2-null plus NNZ-2591 low dose WT plus NNZ-2591 high dose Magel2-null plus NNZ-2591 high dose 110 173 112 143 115 119 Neuren Pharmaceuticals Limited Annual Report 2023 14
OPERATING REVIEW CONTINUED Optimum dose identified In the Phelan-McDermid syndrome model, the effect of four escalating dose levels was investigated. The results of this dose ranging study are shown in the charts below. They were consistent across all 8 behavioral tests and the incidence of seizures, demonstrating that the second highest dose was the optimum dose level in the mouse model. Comparison with human pharmacokinetic data from the Phase 1 clinical trial has informed the equivalent human dose for the Phase 2 trials in patients. A further observation was that the optimum dose in this 6-week study showed better efficacy than the same dose in an earlier study for 3 weeks, indicating that efficacy increases with treatment duration. In the Phase 2 trials Neuren is testing treatment with NNZ-2591 for 13 weeks. OPTIMUM DOSE IN MOUSE MODEL OF PHELANMCDERMID 9 Memory Learning Sociability WT + vehicle KO + vehicle KO + x mg/kg KO + 2x mg/kg KO + 4x mg/kg KO + 8x mg/kg 0% 60% 50% 30% 10% 10% Incidence of seizures OPTIMUM DOSE IN MOUSE MODEL OF PHELANMCDERMID 10 Motor function Anxiety Repetitive behavior Daily living Daily living OPTIMUM DOSE IN MOUSE MODEL OF PHELANMCDERMID 10 Motor function Anxiety Repetitive behavior Daily living Daily living DOSE IN MOUSE MODEL OF PHELAN9 Learning Sociability e KO + vehicle KO + x mg/kg KO + 2x mg/kg KO + 4x mg/kg KO + 8x mg/kg 60% 50% 30% 10% 10% Incidence of seizures OPTIMUM DOSE IN MOUSE MODEL OF PHELANMCDERMID 10 Motor function Anxiety Repetitive behavior Daily living Daily living OPTIMUM DOSE IN MOUSE MODEL OF PHELANMCDERMID 10 Motor function Anxiety Repetitive behavior Daily living Daily living OPTIMUM DOSE IN MOUSE MODEL OF PH MCDERMID Memory Learning WT + vehicle KO + vehicle KO + x mg/kg KO + 2x mg/kg KO + 4x mg 0% 60% 50% 30% 10% Incidence of seizures WT + vehicle KO + vehicle KO + x mg/kg 0% 60% 50% KO + 2x mg/kg KO + 4x mg/kg KO + 8x mg/kg 30% 10% 10% Neuren Pharmaceuticals Limited Annual Report 2023 15
OPERATING REVIEW CONTINUED Effects on biochemistry and brain cell structure confirmed Biochemical testing in the Phelan-McDermid model showed that the abnormal length of dendritic spines between brain cells, the excess activated ERK protein (pERK) and the depressed level of IGF-1 in the knockout mice were all normalised after treatment with NNZ-2591, as shown in the charts below. CORRECTING IMPAIRED SIGNALING IN NEURONS Correction of abnormal dendritic spines in mouse models: Left - Phelan-McDermid syndrome (shank3) Right - Fragile X syndrome (fmr1) Abnormal dendrites in shank3 knockout mice Correction in fmr1 knockout mice after treatment with trofinetide (NNZ-2566) Normalisation after treatment with NNZ-2591 Blood-brain barrier penetration confirmed As well as very high oral bioavailability, good penetration of the blood-brain barrier by NNZ-2591 has been demonstrated in a rodent study. A single dose was administered at 2 dose levels, with the high dose twice the low dose. The concentration of NNZ-2591 in the blood and cerebrospinal fluid was determined after 1.5 hours and again after 4 hours. The amount in the brain tissue was also measured after 4 hours. In each case the concentration was approximately proportional to the dose and after 4 hours the concentration in blood and brain tissue was approximately equivalent. Large scale manufacturing process developed Neuren has successfully developed a proprietary process for manufacturing drug substance at large scale with exceptional purity and high yield. Positive Phase 1 clinical trial results Neuren completed a Phase 1 clinical, in which twice daily oral dosing of NNZ-2591 for seven days was safe and well tolerated in healthy volunteers at doses expected to be within the effective therapeutic range. This was an important milestone for NNZ2591 to be able to move forward to Phase 2 clinical trials in patients. The primary objective was to evaluate safety and tolerability, with a secondary objective to evaluate pharmacokinetic parameters. No Serious Adverse Events (SAEs) were reported. All reported Adverse Events (AEs) were mild or moderate and resolved during the trial. There were no clinically significant findings from safety laboratory tests, vital signs, or cardiac tests. In the cohorts dosed for seven days, the most common AE reported was drowsiness. Neuren Pharmaceuticals Limited Annual Report 2023 16
OPERATING REVIEW CONTINUED Other indications The mechanism of action of NNZ-2591 is relevant for many other neurodevelopmental synaptopathies and potential additional indications are currently being assessed. As part of the expanded global partnership with Acadia signed in July 2023, Neuren granted Acadia exclusive worldwide licence for NNZ-2591 solely in Rett syndrome and Fragile X syndrome, which enabled coordinated global development and removed restrictions on Neuren for NNZ-2591 in those two indications. Neuren retains worldwide rights to NNZ-2591 in all other indications. 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. Acadia is responsible for all costs of development and commercialization in those two indications. THE SCIENCE BEHIND NEUREN’S PRODUCTS Trofinetide (also known as NNZ-2566) and NNZ-2591 are synthetic analogues of glypromate (“GPE”) and cyclic glycine-proline (“cGP”) respectively, each of which occurs naturally in the brain and is involved in the biology of IGF-1, which is a growth factor stimulated by growth hormone. In the central nervous system, IGF-1 is produced by both of the major types of brain cells – neurons and glia. IGF-1 in the brain is critical both for normal development and to maintain or restore the biological balance required for normal functioning. During development, the brain and the cells that comprise it change rapidly and in complex ways. IGF-1 and its metabolites play a significant role in regulating these changes. In the mature brain, these molecules play an important role in responding to disease, stress and injury. Trofinetide and NNZ-2591 mimic the function of the natural molecules in the brain, however each drug is designed to have a longer half-life in circulation, be suitable for use as an oral medication, more readily cross the blood brain barrier and have better stability for longer and easier storage and shipping. Whereas many drugs typically exert a specific effect on a specific target related to one symptom, trofinetide and NNZ-2591 exert diverse effects which can help to control or normalise abnormal biological processes in the brain. Many neurological conditions share four common, underlying pathological features: 1. Inflammation Inflammation in the brain (neuroinflammation) is perhaps the most common pathological feature of neurological disorders. Much of it is the result of excess production of molecules called inflammatory cytokines. These are prominent in brain injuries, neurodevelopmental disorders such as Rett syndrome, neurodegenerative diseases like Alzheimer’s and even so-called “normal” aging. Neuroinflammation places significant stress on brain cells. Stress can disrupt normal cellular processes such as information signalling, increase energy requirements beyond the ability of the cells to meet their metabolic needs, and disturb electrical functions which can lead to seizures and other abnormalities and even result in premature cell death. To find out more about these syndromes: www.pmsf.org www.angelman.org www.pitthopkins.org www.fpwr.org Neuren Pharmaceuticals Limited Annual Report 2023 17
2. Over-activation of microglia Microglia are the resident immune cells in the brain. Once thought to serve primarily a sentinel function – responding to infection and damaged cells by surrounding and removing them – it is now known that they play a central role in maintaining synapses during development and in mature brains by pruning dendrites, the many small extensions of neurons that form synapses. Microglia are also a key source of IGF-1. Due to this wide-ranging maintenance function, they have appropriately been referred to as the “constant gardeners” of the brain. Microglia are not only activated in response to infection and injury, they also are activated by inflammation. In this activated state, they not only lose their ability to effectively perform their normal function in synaptic maintenance but also produce more inflammatory cytokines which can further compound the damage to neurons and other brain cells. 3. Dysfunction of synapses Neurons communicate with each other by chemical and electrical signals transmitted via synapses. Normal synaptic function is essential for healthy brain function and underlies memory, cognition, behaviour and other brain activities. Normal synaptic function requires that the dendrites (the branches on the neurons) which form synapses are appropriately formed as well as that excitatory and inhibitory signals are kept in balance. When dendritic structure and synaptic signalling are abnormal, virtually all brain activities can be negatively impacted. Synaptic dysfunction has been identified as a core feature of many conditions including acute brain injury, neurodevelopmental disorders and neurodegenerative diseases. 4. Reduced levels of IGF-1 IGF-1 levels in the brain have been reported to be depressed in a number of conditions, which means that the critical role of IGF-1 in maintaining and repairing brain cells and synapses is impaired. The aim of treatment with Neuren’s drugs is to restore the natural balance of brain function by: – reducing inflammation – restoring the normal functioning of microglia – improving the dendritic structure of synapses – normalising the levels of IGF-1 in the brain OPERATING REVIEW CONTINUED Resting Microglial Cells Activated Microglial Cells Neuren Pharmaceuticals Limited Annual Report 2023 18
OPERATING REVIEW CONTINUED FINANCE Summary Financials 2023 $’m 2022 $’m Revenue from contracts with customers 231.9 14.5 Interest income 5.7 0.4 Other income – 0.9 Foreign exchange gain 2.4 1.2 Total income 240.0 17.0 Research & Development (26.8) (12.7) Corporate & Administration (5.9) (3.4) Loss on financial derivatives measured at fair value (2.2) (0.7) Profit before tax 205.1 0.2 Income tax (48.0) – Profit after tax 157.1 0.2 Cash flow received from operations 184.9 3.6 Cash flow used in investing (211.5) – Cash flow received from financing 3.6 – Effect of exchange rates on cash balances (0.1) (0.2) Cash and short-term investments at 31 December 228.5 40.2 The consolidated financial statements are presented on pages 30 to 50. All amounts in the consolidated Financial Statements are shown in Australian dollars unless otherwise stated. 1 Cash and short-term investments Financial strength to maximise growth opportunities 7 40.2 26.8 59.4 145.7 5.7 2.5 -8.2 -26.8 -48.1 27.7 3.6 228.5 Dec 2022 Cash Royalty Milestone ex-NA upfront Interest Other income Other expenses R&D Tax Non cash adj Financing/ investing Dec 2023 Cash 2023 Profit After Tax A$157.1m A$m 1 Neuren Pharmaceuticals Limited Annual Report 2023 19
Financial commentary The consolidated profit after tax attributable to equity holders of the Company for the year ended 31 December 2023 was A$157.1 million compared with A$0.2 million in 2022. Revenue of A$231.9 million was received under the licence agreement with Acadia (2022: A$14.6 million). This includes A$59.4 million for the first commercial sale milestone, an upfront of A$145.7 million under the expanded global licence agreement with Acadia and A$26.8 million from quarterly royalty income. Other income includes interest income of A$5.7 million (2022: A$0.4 million) and foreign exchange gains of A$2.4 million (2022: A$1.2 million). There was an increase of A$14.1 million in research and development costs, due to higher expenditures in 2023 for the NNZ-2591 Phase 2 clinical trials and the foundational work to prepare for Phase 3 development of NNZ-2591 across multiple indications. There was also an increase in corporate and administrative costs of A$2.5 million, mainly due to higher employee benefits and share-based payments expense. In addition, a loss of A$2.2 million on the fair value of outstanding forward contracts to sell Australian dollars and buy US dollars was recognised at 31 December 2023 (2022: A$0.7 million). The net income tax expense recognised for the year ended 31 December 2023 was A$48.1 million (2022: nil). After utilising Australian carried forward tax losses and the expectation of offsetting the 5% withholding tax paid to the US Internal Revenue Service in relation to the milestone payments, Neuren has recognised a current tax liability of A$37.1 million. OPERATING REVIEW CONTINUED Total cash and short-term investments at 31 December 2023 were A$228.5 million (2022: A$40.2 million). Net cash received from operating activities was A$184.9 million (2022: A$3.6 million). The increase of A$181.3 million was primarily due to the receipt of A$221.0 million (2022: A$15.9 million) from Acadia for the first commercial sale milestone payment of US$40 million, the up-front payment of US$100 million under the expanded global licence agreement for trofinetide and receipt of quarterly royalty payments. This was offset by higher payments to other suppliers of A$24.6 million (2022: A$11.3 million) due to higher expenditures for the NNZ-2591 Phase 2 clinical trials and the foundational work to prepare for Phase 3 development of NNZ-2591 across multiple indications. Withholding tax of A$11.8 million was paid to the US Internal Revenue Service by Acadia on Neuren’s behalf. This will be offset against Neuren’s Australian tax liability. Net cash from financing activities for 31 December 2023 was A$3.6 million (2022: nil), comprising proceeds received on conversion of loan funded shares and exercise of share options. Following the receipt of the first commercial sale milestone, up-front payment under the expanded global licence agreement for trofinetide and quarterly royalty payments, Neuren is holding more funds than are required to meet currently forecast short-term cash commitments. As a result, Neuren has classified A$211.4 million of short-term deposits as Short-term Investments. Neuren Pharmaceuticals Limited Annual Report 2023 20
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