Just a month ago, I suggested that our readers buy Nile Therapeutics when it was around $.60 a share. Just this past week, those that bought raked in a 50% profit as Nile has moved higher with recent news. It's time for another pick.
As you know, I am always looking for winners in the biotech sector that have room to run and great products. As such, my second pick of the year is Avanir Pharmaceuticals, Inc (Nasdaq: AVNR ). If you remember, last October, I wrote to you about Avanir when it was in the low $3’s and before their approval of Neudexta for Pseudobulbar affect or, PBA. I suggested buying into the FDA decision and that Avanir was undervalued. The FDA approved Neudexta days later, and the stock ran into the $5’s. It currently sits right around $4 a share and just broke out of a wedge technical trading pattern ready to move higher. It helps that the company's future looks bright with some positive things ahead, including Avanir’s launch of Neudexta. My hope is that investors see, with more calrity, some of these positive catalysts and the opportunity for future profits at these levels.
I was very impressed after I listened to the March 14th Roth OC Growth Conference presentation by Mr. Keith Katkin, CEO and President of Avanir Pharmaceuticals. (I recommend investors listen to this presentation and view the accompanying slideshow: http://www.wsw.com/webcast/roth24/avnr/ )
During his presentation, Mr. Katkin reiterated that the Neudexta launch is moving ahead as planned and scripts have been growing week over week. Since the launch just started in early February (not in January as some have suggested) it is too early for Avanir to comment on precisely how well the launch is going yet. Mr. Katkin will not comment on the exact numbers until his conference call in May. This is obviously the correct thing to do, he certainly does not want to throw out some inaccurate script numbers for Neudexta that are just not true. He did make several positive comments about the launch in general. Mr. Katkin stated that many doctors have been sharing success stories with Avanir about how well the drug works and doctors are contacting colleagues and letting them know how much they like Neudexta as well.
Another positive development for Avanir in the launch of Neudexta has been their sales force. Equipped with the latest technology (an IPAD enabled sales force), the team has been able to quickly and effectively meet with neurologists, psychiatrists, doctors of internal medicine, and other specialists to educate them on Neudexta and provide samples. A huge advantage that this sales force has is that 75% of them have had a previous sales relationship with a doctor they are currently targeting in the field with Neudexta. Finally, over 40 of these sales representatives have been members of the President’s Club, a club reserved for a small percentage of sales reps who meet high end sales targets and goals for their previous or current companies.
Avanir has done extensive marketing and research before the launch of Neudexta. During the conference, Mr. Katkin reminded everyone that according to Avanir’s research, 85% of targeted physicians are likely to prescribe Neudexta for PBA and 80% use it as a first line therapy for PBA caused by such things as stroke, dementia, and traumatic brain injury. Avanir also believes PBA is highly prevalent in the United States with 5.1 million people with mild PBA and 1.8 million with mild to moderate PBA. This is why Avanir has made such a push in their marketing plan for this drug, not only does the drug work, but more and more doctors seem to be recognizing its ability to keep involuntary laughing and crying episodes under control.
Avanir is also looking to extend Neudexta to other indications than PBA. In fact, within the next 6-8 weeks, Avanir will be filing an Investigational New Drug Application for multiple sclerosis pain. Also, Avanir is looking to bring Neudexta to Europe and will meet with the European Medicines Agency in the coming weeks. Management plans on filing Neudexta with the EMA by the end of this year.
Finally, with $119 million on the books at the end of 2010, no debt, and sales expected to ramp up this year for Neudexta, Avanir will most likely not be raising money any time soon. In fact, institutions and mutual funds would most likely agree, having shown their support for Avanir’s stock by spending approximately $53 million this past quarter snatching up shares in the current price range. Avanir is a stock with a very high short interest, not uncommon for a company that needs to prove the launch of their first drug is going well. But with scripts improving week over week, an experienced sales team, enthusiastic feedback from doctors, new indications on deck, and the May conference call right around the corner which will shed light on the Neudexta sales numbers, I certainly would not want to be short the stock.
I'm looking for Avanir’s stock price to continue moving higher in the weeks and months ahead, I believe Neudexta sales will continue to grow over time and patients and investors alike will reap the rewards.
Disclosure: Long AVNR
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