On the radar for a move higher: Savient Pharmaceuticals Print E-mail
By Nick DeCesare   
Monday, 11 April 2011 07:53
In October of 2010, Savient Pharmaceuticals Inc (Nasdaq: SVNT) announced it had failed to find a buyer, at the right price, for their company. The stock price immediately plummeted around 40% and sank to around $12.50 a share. Since that time, the stock has retreated all the way into the low $9 range and currently sits in the mid $10 area. 

In the months that have followed the “no sale” announcement, Savient has hired John Johnson as CEO.  Johnson was the former head of Eli Lilly & Co.’s oncology division and brings an impressive resume to the table.  He was formerly the CEO of ImClone Systems Inc which was acquired by Eli Lilly for almost $6 billion in 2008.  

Mr. Johnson’s sole focus when he was hired was to bring Savient’s lead drug, Krystexxa, to market as quickly and efficiently as possible.  A specialty sales force was recently put together and trained to market and sell Krystexxa.  They are targeting doctors who treat the 125,000 to 150,000 of people in the United States population that suffer from severe gout, a condition which develops form am overload of ulric acid in the body.  This condition can lead to excessive pain in the joints, especially the feet, and is a very complex m of arthritis.  Doctors are already prescribing it and Savient recently signed a 5 year deal with the U.S. Department of Veterans Affairs to also supply Krystexxa, and their weight-gain drug, Oxandrin.  The deal will last five years and financial terms were not disclosed.
    
What else has me very excited about the potential of Savient’s stock price this year is the possibility that they will be acquired by bigger pharma.  Rarely do I suggest companies I write about will be acquired, but I truly believe Savient is one of them.  Several analysts agree that Savient is still a very attractive acquisition candidate and could see sales ramp up into the $500 million range by next year.  Morningstar analyst David Krempa recently stated that, “"We think a sale is still a possibility, but they need to prove the drug's potential.”  Morningstar has listed Savient as one of their top 15 biotechs to be purchased in 2011: http://reut.rs/hzXCez

Investors should also be aware that Krystexxa has an orphan drug status, which guarantees a 7-year marketing exclusivity. The drug is also guaranteed patent protection through 2026. I am expecting Savient to file for approval of Krystexxa in the EU in the coming days, which will move the stock higher.
    
With sales up and running for Krystexxa as well as well as reimbursement specialists in the field (no patient has been denied reimbursement for Krystexxa to date), an EU filing to take place any day, and the possibility of a buyout coming this year, it makes sense to be acquiring or adding shares of Savient Pharmaceuticals at their current depressed levels.  I doubt the opportunity to buy this stock at such prices will last very long.

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Disclosure:  Long SVNT



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