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After reporting Q3 earnings, Savient Pharma (SVNT) plummeted back to $1 from the meteoric rise to nearly $3 during September. The stock has been stuck around that $1 level for the last two months. Will the new EU approval for KRYSTEXXA finally unleash the stock?

The company is a specialty biopharmaceutical company focused on developing and commercializing KRYSTEXXA (pegloticase) for the treatment of chronic gout in adult patients refractory to conventional therapy.

As written in previous articles (see here), the company was able to complete a restructuring that provided time to build the revenue base in the US. While all of those moves left the company better equipped to survive long enough for the promising new drug to thrive, Savient has yet to prove to the market that the drug will ever meet the original estimates. Will the lowered cost structure even be sufficient enough to survive?

EU approval

On January 8th, the company reported obtaining European Commission Marketing Authorization approval for marketing the drug in the European Union. It provides the first approved drug in the EU for patients to address a significant unmet medical need for patients with chronic tophaceous gout.

The stock didn't move much considering The Medicines Agency's Committee for Medicinal Products for Human Use (OTCQB:CHMP) provided a positive opinion on October 19th. The real news will be whether the company can snag a significant partner not that it has EU approval.

With all the cash on the balance sheet needed to finish commercializing the US market, the company plans to sign up a EU partner to rollout the drug and hopefully provide an up front payment. A strong partner could help justify the long-standing claims that the drug has a lucrative future. Not to mention, a significant partner could help bring much needed attention to the drug in the US where the initial rollout has been a commercial failure.

Either way, the product launch is expected to occur by mid-2013 with a focus on France, Germany, and the U.K. for now. Until the product becomes commercially available in the EU, the company will continue to provide the drug to patients through the established Named Patient Programme.

New Board Member

Along with the EMA approval last week, the company announced the election of the Genzyme CEO to the Board of Directors. This news might turn out to be just as important as the expected approval in Europe.

David Meeker has been the CEO since October 2011, but the key portion of the news is that Genzyme is now a Sanofi (SNY) subsidiary. The company just happens to be headquartered in France where the drug will begin the EU rollout.

It would appear inappropriate to have a member join the board prior to forming a major partnership, but the company surely can use those connections to derive a top-notch deal.

Stock

The stock continues to struggle around $1.15. Will a EU partner help the stock back to the significantly higher prices where it traded at the end of 2010? See the chart below:

(click to enlarge)

Conclusion

At this point, investors should consider an investment in Savient as a call option on the EU partner. At just over $1, the stock has huge upside if the drug can ever garner a larger penetration in the domestic market or a big licensing deal in Europe.

Like an option, the stock could be headed much lower without the financial support and backing of a major partner. The ability to successful commercialize the drug in the US appears less likely as every quarter passes.

Source: Savient Pharma: The Ultimate Biotech Option

Additional disclosure: Please consult your financial advisor before making any investment decisions.