The last year has been very volatile for the diversified drug developer, Ampio Pharmaceuticals (NASDAQ: AMPE). AMPE was trading as low as $2.54 in May 2012 due to extreme weakness in the broader market brought about by macroeconomic concerns. Soon after (specifically in early July 2012), the stock was trading as high as $6.25 after an overly optimistic article about the company was published on the financial site Seeking Alpha.
While that rally was brought down by a public stock offering, what one can infer from that price action is that the market doesn't really have a well-defined opinion on Ampio's prospects. At least for now, AMPE has found a comfortable medium just above $4.00 per share as investors await further developments.
Currently, Ampio has four pharmaceutical products in development for various indications and three diagnostic products on the side. Their furthest developed product is Zertane, which is an oral tablet that is designed to prevent premature ejaculation (PE). Surveys indicated that this is the most common sexual dysfunction in men, occurring in about 1/3 of the global male population. While there is no question that the PE market is enormous and lucrative, Zertane has some major hurdles.
One of the biggest issues for Zertane is its path to US approval. The phase III studies done in Europe will not be valid for an NDA, so two additional phase III trials will have to be performed (as described in the June 20, 2012 meeting with the FDA). After all that work, Ampio will also have to compete with the current leading drug in PE in the United States - Priligy (dapoxetine), which is commercialized by Johnson & Johnson (NYSE: JNJ). On the bright side, Zertane is a 505(b)(2) submission which allows the drug to use clinical data from other formulations of tramadol (its active ingredient) for its approval process. This would make Zertane's approval very rapid given the right conditions.
Investors should also note that Zertane will have better luck with approval abroad. The company is hoping to have the drug approved in Australia this year, based on trials conducted there. It should also be a smoother process to reach the European market, as well as other nations. Sexual health drugs have generally been disastrous investments in the past. Biosante Pharmaceuticals (NASDAQ: BPAX) comes to mind, as does the infamous "female Viagra" developed by Boehringer Ingelheim. Still, Ampio does have two other products also being submitted under 505(b)(2) which could result in surprisingly rapid approval.
Optina is an interesting drug being developed for diabetic retinopathy and diabetic macular edema, which targets a common side effect of diabetes. Diabetes, as you may know, has enormous prevalence in the United States (recent estimates come in at 25.8 million Americans). The size of the market for diabetes treatment is estimated to be close to $92 billion, so Optina's potential is certainly there since there are no good daily medications for diabetic retinopathy at this point. Vasaloc is another 505(b)(2) drug that will target diabetic nephropathy, another problem induced by diabetes.
The one treatment that is being developed as a new molecule rather than a reformulation of sorts is Ampion - a non-steroidal treatment for diseases that induce inflammation. Arthritis is one example that would be could be highly profitable for the company.
Note that while Ampion is produced by humans naturally the company was able to obtain commercial rights due to the molecule's discovery and patent protection by Ampio's Chief Scientific Officer Dr. David Bar-Or.
Since Ampio's pipeline contains compounds that have already been extensively tested for safety in the past (barring Ampion, which is produced in the body naturally anyway), the focus should be on the efficacy demonstrated in future clinical trials as measured by endpoints. Expectations regarding future clinical trials and a degree of optimism over Zertane's eventual launch should keep the stock stable for the time being. I'd imagine that those who are long the stock are in it (or should be in it) for the long run.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.