Neuren Pharmaceuticals Ltd (ASX: NEU) shares were out of form on Tuesday after getting caught up in the market selloff.
The ASX 200 stock ended the day 6% lower at $11.40.
This leaves the pharmaceutical company's shares trading within sight of their 52-week low of $10.90.
One leading broker thinks that investors should be seizing this opportunity to buy a quality company at deep discount to its true value.
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What is the broker saying about this ASX 200 stock?
According to a note out of Bell Potter, its analysts have been pleased with the performance of the company's Daybue product, which it receives royalties from. It said:
Daybue CY24 US sales of US$348m was within guidance and slightly above consensus. Acadia's CY25 guidance for US sales is US$380-405m (9-16% growth). Our US$385m forecast is comfortably within this range and remains unchanged following the update. The US-only guidance implies CY25 royalties to NEU of US$41-44m, so not a major difference to NEU at either end of this range.
Most pleasingly, even the low end of CY25 guidance reflects HSD growth yoy, providing confidence in Daybue's continued growth outlook in the US excluding any Canadian or EU contributions. Note management expects Daybue 1Q25 US sales to have a similar QoQ seasonality decline as seen in 1Q24 before rebounding later in the year.
In light of this, the broker has reaffirmed its buy rating with a trimmed price target of $20.00.
Based on where the ASX 200 stock is currently trading, this implies potential upside of 75% for investors over the next 12 months.
Second asset for free
Bell Potter highlights at the current share price, the market is ascribing no value to Neuren's second asset. It explains:
Regarding catalyst timing, it will be ~2 years until the next major clinical catalyst, being the first Ph3 readout for NNZ-2591, which offers clear re-rating potential but remains some time away.
NEU has unrivalled balance sheet strength to prosecute future NNZ-2591 development yet effectively zero value is currently attributed to this asset, likely due to the Ph3 readout timing. We maintain our BUY recommendation which continues to be driven by a positive outlook on NNZ-2591. Licensing income from Daybue alone supports the current share price.
All in all, this could be an ASX 200 stock to buy. Especially if you're looking for exposure to this side of the market (and big potential returns!).
