MAP Pharmaceuticals (MAPP) saw an appreciation of 20% on Friday. We believe this is just the start of an epic run for MAPP shareholders. The company's application for LEVADEX was rejected by FDA back in March due to CMC issues and no objections were made on efficacy or safety. The company resubmitted the approval application for LEVADAX last week and my analysis shows that it will come through this time around. With a PT of $25, I am giving a buy rating for MAPP.
MAP Pharmaceuticals, Inc.
MAP Pharmaceuticals is a bio pharmaceutical company which focuses on the enhancement of the therapeutic benefits and commercial attractiveness of proven drugs in the field of neurology through its formulation and inhalation technologies. MAPP's leading candidate is LEVADEX, which is an orally inhaled variation of dihydroergotamine mesylate (DHE). The drug has successfully completed trails (Phase III) for the treatment of acute migraines in adults.
DHE is already an approved substance and has been used to treat migraines for more than sixty years. There are some limitations of DHE, which make LEVADAX a very attractive improvement. The drug can be administered only by an injection, which makes it difficult/impossible to self administer. On the other hand LEVADEX can be administered through an inhaler making it much more useful for a migraine patient. DHE side effects include severe nausea and vomiting, whereas only 5% patients experienced nausea and 2% vomiting in initial trails of LEVADAX.
The market was expecting LEVADAX approval to come through in March but FDA rejected the application. The stock depreciated approximately 40% after FDA's rejection for LEVADAX. In the Complete Response letter to its NDA (New Drug Application) FDA made clear that the rejection was due to issues with chemistry, manufacturing and controls (CMC) and recent facility inspection of a third party manufacturer. The Food and Drug Administration did not cite any clinical or safety or efficacy issues or ask MAPP to conduct additional clinical studies. After the decision came out, MAPP ensured that it plans to diligently pursue this approval and would resubmit the application. The company announced on Wednesday that it has resolved its CMC issues with FDA and has successfully resubmitted LEVADAX for approval. CEO and President Timothy S. Nelson of MAP Pharmaceuticals said:
"The acceptance of our LEVADEX resubmission is an important milestone for the company. We will continue to work closely with the FDA through the review process, with the goal of providing the underserved migraine patient population with a potential new treatment option in 2013."
Allergan Inc (AGN)
The partner of MAP for the commercialization of LEVADEX is none other than AGN. Allergan is one of the biggest pharmaceutical companies in the world with a market cap of $27 billion. The company signed a deal with MAP last year to equally divide all costs and profits on LEVADA commercialization. The following excerpt from an Allergan press release summarizes their involvement:
''Under the terms of the collaboration, following potential FDA approval of LEVADEX, Allergan and MAP Pharmaceuticals will co-promote LEVADEX to neurologists and pain specialists in the United States. Specifically, Allergan will leverage its existing U.S. sales force dedicated to headache specialists using BOTOX® for Chronic Migraine, which will be complemented by MAP Pharmaceuticals' field sales force targeting neurologists and pain specialists. MAP Pharmaceuticals will retain all rights to commercialize LEVADEX™ outside the United States, as well as to primary care physicians within the United States.''
Valuation
There is coverage from 8 sell side analyst on MAPP and all have a buy or strong buy recommendation. The mean price target on MAPP is $22 i.e. 45% upside to current price. The EPS estimates for 2013 vary between $0.05 and 3.05; with a mean EPS of $1.00. Using the industry average P/E of 25x, we can calculate a PT of $25 for 2013. If we use high EPS estimate of $3.05, a PT of $76 can be calculated.
Conclusion
There is a very high probability of LEVADAX's approval this time around, especially since FDA did not raise any objections on clinical efficacy or ask for more clinical studies, when it rejected the drug in March. The primary issues with LEVADAX last time around were CMC related. As the drug has been resubmitted for approval, shows that these issues have been resolved. The mean EPS for 2013 is $1.00, which gives a mean PT of $25. I believe MAPP has an upside of 70% and therefore I am giving a buy recommendation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
