The FDA just confirmed what most people already know. We have a drug problem in the US and painkillers containing opioid analgesics have been a major component of this abuse. Earlier this week, the FDA made a huge statement against oxycodone hydrochloride abuse and helped pave the way for Acura Pharmaceutical's (NASDAQ:ACUR) Aversion lineup of tamper-resistant products to start cashing in on its potential.
"The development of abuse-deterrent opioid analgesics is a public health priority of the FDA," said Douglas Throckmorton M.D., deputy director for regulatory programs in the FDA's Center for Drug Evaluation and Research. Talk about music to Acura's ears. The FDA approved labeling for a new formulation of OxyContin by Purdue Pharmaceuticals L.P. and this only enhances Acura's proprietary Aversion technology. Furthermore, the agency stated that it would not approve a generic formulation to the original OxyContin, breathing even more life into Acura's cause. These actions by the FDA might not stop with OxyContin and that is where Acura might continue to reap rewards. Acura additionally has more opioid analgesics under consideration and Nexafed with its Impede platform for combating pseudoephedrine hydrochloride abuse. Does methamphetamine abuse ring a bell?
First, let's consider what the FDA news means for Acura's Aversion technology and what it means to the marketplace. OxyContin, developed by Purdue Pharma L.P., was first approved for use as an opioid painkiller with its original formulation in 1995. Problems stemming from abuse really started to appear in 2000 and led to a huge $600 million lawsuit in 2007 against Purdue Pharma for claims of misleading the public about this potential for abuse. In April of 2010, the FDA approved a reformulated version of OxyContin and Purdue Pharma stopped shipping the original formulation to pharmacies in August of 2010. OxyContin sales were stated to be $2.8 billion in 2011 alone. Acura's Aversion technology is used in Pfizer's (NYSE:PFE) immediate-release oxycodone painkiller Oxecta which earned FDA marketing approval in June of 2011. The FDA news on generics only works in Oxecta's favor. With this huge marketplace, there is plenty of room for Acura and Pfizer to realize some potential.
Acura's Aversion technology is meant to discourage oxycodone abuse in two ways. When dissolved in water or alcohol, Acura's Aversion formulation forms a viscous gelatinous mixture that is close to impossible to draw through a needle into a syringe for I.V. injection. Aversion technology also makes pills difficult to crush and snort by introducing inactive ingredients that produce irritation and discomfort to the nasal passage when snorted. Acura's technology can extend beyond oxycodone and has the potential to work with other opioid analgesics. Acura has developed formulations to work with morphine tablets, hydrocodone bitartrate/acetaminophine tablets, oxycodone HCL/acetaminophine tablets, hydromorphone tablets, oxymorphone tablets, tramadol tablets and methadone tablets. The potential marketplace of all these addictive drugs is huge and Acura is ahead of the game. Now let's consider Acura's Impede platform.
Pseudoephedrine hydrochloride, commonly called Sudafed (produced by Johnson and Johnson (NYSE:JNJ)), is abused in two manners. It can be used as a stimulant to produce a rapid heart rate and excitable hyperactive condition, or worse it a can be converted to methamphetamine or "meth." Methamphetamine is a potent drug that has really come to the forefront since the early 1990s with meth arrests up 300% since 1993 and meth now considered one of the most dangerous drugs by many experts. Since 2005 and the Combat Methamphetamine Epidemic Act, Sudafed and pseudophedrine hydrochloride sales have been tightly restricted and over the counter sales have been regulated. To combat the conversion of Sudafed into methamphetamine, Acura has developed Nexafed which disrupts the conversion process in the three manners that are commonly used to produce the drug. According to a study of 215 pharmacists surveyed, 70% of the 164 pharmacists that are involved in stocking decisions would recommend or decide to stock Nexafed in their pharmacies. Of the 215 pharmacists, over 50% would recommend Nexafed to their customers when asked for advice on which nasal decongestant to use. This indicates a huge potential marketplace for Nexafed which has just recently become commercially available in December of last year.
Acura's Impede technology works to combat the three most common manners of converting pseudophedrine hydrochloride into methamphetamine. The one-pot method of direct conversion of Nexafed to pure methamphetamine hydrochloride produced only 38% of pure product recovered (on average) compared to twice as much for Sudafed. The other two methods of extracting pseudophedrine hydrochloride from Nexafed tablets prior to converting it to methamphetamine have already been proven to be successfully blocked by Acura's Impede technology. One method is to dissolve it in a solvent to isolate pure pseudophedrine hydrochloride and the other is by chemical reduction followed by drying what remains into a crystallized form. Acura's Impede technology can only boost Acura's prospects with more time and exposure of Nexafed to the public.
The FDA appears to be on Acura's side and the two platforms developed by Acura appear to have plenty of potential and value. Sudafed has been one of the most common names associated with nasal decongestants throughout the years and pain relief with opioid analgesics has always been a valuable tool in the care of patients with critical injuries or illness. Making these drugs safer for the public that continues to experience abuse from out of control addictive disorders is now a priority of the FDA. Even insurance companies know the value of drugs that reduce methamphetamine and opioid analgesic abuse as billions of dollars are wasted annually on treating complications from such abuse. Acura's surge on Wednesday to over $3.62 a share still seems minor when compared to the potential market of its products.
Acura has no debt, over $27 million in cash on hand and burned through only $5.1 million the last two quarters. On top of that, the stock still has a 52-week change of just under -19% and has over 51% ownership by institutions and insiders. Despite the FDA news, the stock has settled at $2.64 (April 18th) a share and continues to fall. The current dip in the market might be the perfect opportunity to add Acura to your portfolio.
Disclosure: I am long ACUR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.