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Repros Therapeutics (NASDAQ:RPRX) rallied on March 28, when its share price jumped by 76.34%. The sudden rise was triggered by the company's announcement on the results of its first pivotal study of Androxal.

The report showed that both primary endpoints were successfully met. The encouraging results boosted the stock. On the next trading day, RPRX opened at $14.82, up by 62.32% from its previous closing price of $9.13. The emotions were high during the day. The stock continued to rally, and eventually closed at $16.10.

While a defining victory was achieved on that day, many investors are still skeptic to jump in. Some believe that a sudden jump has high probability to fall quickly, as well. If you take a peek at the historical prices, RPRX also plummeted in a single day back in January. While it grew by 280% in the last 12 months, the year to date return is still negative.

I think the results of the Androxal studies were an excuse for the bulls to lift the stock up again. After this push, the stock is now trading at a level where it used to be. Can RPRX can sustain this rally or at least hold on to its current price level?

Company Profile

Repros Therapeutics is a small-cap biopharmaceutical company with primary focus on the development stage of oral molecule drugs for male and female health. It was founded on August 1987. Its current market cap is slightly below $300 million. The company has two products in its pipeline. They are Androxal for male health and Proellex for female health.

For now, Repros relies heavily on Androxal, since Proellex is still on partial hold by the FDA. It was put on full clinical hold by the FDA on August 6, 2009. Almost a year later, the full clinical hold was lifted on June 11, 2010 and alleviated to partial hold.

Financial Position

Repros Therapeutics' market cap is way below compared to the market cap of its competitors. Eli Lilly (NYSE:LLY), supplier of Axiron, has a market cap of $64.42 billion. Auxilium Pharmaceuticals (NASDAQ:AUXL), producer of Testim, has a market cap of $850 million. Abbvie (NYSE:ABBV), which markets Androgel, has a market cap of $64.5 billlion.

Androxal is positioned to compete in the testosterone market, which is a $2 billion market today. Therefore, there is high potential for RPRX to grow exponentially towards a billion dollar company. However, this can only be achieved if it can secure FDA-approval for Androxal.

While there is high hope for RPRX in the future, for now it is incurring losses on the basis of earnings per share. It consistently fell short of consensus EPS forecast for the last three quarters. In 2012, the total EPS was -$2.5. The first quarter ended with EPS of -$0.17. This further worsened on the second quarter and on the third quarter at -$0.21 and -$0.30, respectively. The fourth quarter EPS further deteriorated when it ended at -$0.47.

In spite of the losses quarter over quarter, the company remains financially stable. It ended the year 2012 with an unaudited cash and cash equivalents amounting to $24.2 million. During the same year, RPRX cash burn was pegged at approximately $14 million. Cash runway is estimated by mid 2014. At present, it has about 18.2 million shares. The company can also issue new shares to offset cash outflows and survive until its products start generating income.

Stock Performance

There are two major events to look back in order to better assess the market behavior of RPRX. One is the major dip, while the other is the major leap.

On January 28, the share price took a deep dive from $18.61 on January 25 to a disappointing $11.11. The plunge was a dismal -40.30% in a single day. This came after the company released a slide presentation of ZA-301 site 9 evaluation blinded assessment.

The presentation showed that the population of one site is quite different from the 16 other sites. This is according to baseline sperm count. As a result, the company planned to remove the site from the efficacy studies. This probably caused some investors to flee as the planned NDA submission targeted for mid-2014 will be further delayed. Aside from that, the clinical results of the first pivotal study will be moved from Q2 to Q3 of 2013.

Since then the share price level traded within the $9 to $13 range. It entered March at $11.90 and the prices were declining towards $8 until March 26 when it closed at $8.95. The price recovered slightly to end the last low point at $9.13 on the following day.

The second event happened on March 28, exactly two months after. The share price leaped back and partially recovered. However, the jump was not high enough to recover the price to the same level before it took a plunge. Nevertheless, at least the theoretical loss of those who bought RPRX shares on January 25 is minimized.

Analyst Recommendations and Ratings

RPRX share prices rallied when the news was out regarding positive results of its pivotal study on Andoxal. When the drug candidate enters the final stage and reports the same encouraging results, the stock prices will surge further. Its current price level is nearing towards the 52-week high at $19.12. However, it is still in the mid-range of the one-year target estimate pegged by some experts at $22.25.

Analysts have mixed estimates of RPRX. The analysts of Yahoo Finance have equal votes for buy and strong buy. On the other hand, Nasdaq's analysts have the same consensus for strong buy. Analysts of MSN Money have the same recommendation with Nasdaq. Even if a majority of the analyst firms recommended buy, some investors are still hesitant. This is due to the high risk of buying in the midst of a rally.

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It is possible for the price to plummet again just like it did last January. However, this will only occur if the results of the studies are poor. So far, the reports are favorable. The company even estimated an approval from the FDA any time soon. This makes me believe that the rally of RPRX may continue. While it looks like a risky investment after making such gains, the stock is trading way below its peak valuation of $60. Surely, the stock is not suitable for the faint-hearted, but it can be added to the speculative portion of the portfolio.

Source: Can Repros Therapeutics Maintain Its Momentum?