For investors interested in pharmaceutical stocks, few catalysts are able to rival an FDA decision. Fortunately, we know approximately when the FDA is slated to make their decision thanks to the PDUFA date of various drugs. The PDUFA date is a date imposed by the FDA for the FDA to decide whether or not to approve a drug for marketing in the United States. There are three possible outcomes: FDA acceptance, a Complete Response Letter (rejection with a list of reasons stating why the drug was rejected), or the FDA can delay the decision in certain circumstances. While PDUFA decisions can be very important to investors, we must remember that they are inherently risky. That is why I prefer to buy a stock a few months before the PDUFA date and then sell the stock before the expected PDUFA date.
Through selling a stock before the expected PDUFA date, investors are limiting their risk that the FDA decision will be negative. The benefit to this strategy is that usually a company's stock price increases as it gets closer to a PDUFA decision. This leaves investors with the opportunity to make significant gains if they follow the method.
In my previous article, I pointed out several upcoming FDA decisions. I later went back through and calculated the runup that investors would have experienced had they followed the methods that I proposed, that article can be found here. The table summarizing the results is reproduced below:
Initial Price per share
Sell Price per share
Gain/Loss per share
Raptor Pharmaceuticals (RPTP)
Delcath (DCTH) (panel)
AVEO Pharmaceuticals (AVEO)
DepoMed Inc. (DEPO)
Flamel Technologies (FLML)
The average gain was 5.79%. While that is not bad at all, I did find some very interesting conclusions that I would like to share with you. It appears as though FDA panel decisions do not move a stock very much at all, it seems to be much more important to have the PDUFA decision on your radar. Also, as a side note do not hold through a panel decision as they can adversely affect the stock price if the panel decision is negative. It also appears as though smaller companies seeking approval for their first or second drug fared much better overall in terms of runup potential. Essentially, the more important the drug was to the company, the larger the share price increase. This article will add a few more FDA decisions for catalyst oriented investors.
QRxPharma (OTCQX:QRXPY) will face an FDA panel on July 17, 2013. Remember that FDA advisory panel decisions are non-binding and that the FDA will ultimately make a decision on the PDUFA date. With that being said, the FDA usually follows the advice of its advisory panels. QRxPharma will hope to gain a positive panel recommendation for its drug MOXDUO. MOXDUO is composed of already approved drugs, and as such it should not have as tough of a time in front of the FDA. The main benefit of MOXDUO is purportedly a reduction in respiratory risk and a reduction in vomiting and other side effects, when compared to the same doses of Oxycodone or Morphine.
This drug is very important to QRxPharma, as it signed a commercialization agreement for MOXDUO commercialization in the United States with Actavis (ACT). This agreement has the potential to be very lucrative for QRxPharma, as the company will receive between a 10%-30% royalty on net sales of the drug. Another important aspect of the agreement for QRxPharma is the fact that for the first six months of the agreement, QRxPharma has the ability to receive a 50% royalty on $150 million in cumulative U.S. sales. Finally, this agreement becomes even more potentially lucrative for the company due to the fact that QRxPharma is able to retain a co-promotion/profit sharing right if it so chooses. This right would require for QRxPharma to build a sales force and to provide up to 25% of the effective selling effort to U.S. prescribers any time within the first 12 months of launch. This drug has the potential to lift QRxPharma into profitability, and with a huge marketing partner like Actavis the drug is very important for the future of QRxPharma.
The PDUFA date for the drug is August 26, 2013. This date will likely be the more important of the two, as it will be the final approval decision. The one problem with betting on a substantial price increase for QRxPharma is the fact that it is thinly traded, so there may be liquidity concerns. Also with the advisory committee approaching and given my update when I suggested possible times to get out from advisory panel runups, the runup may have already for the most part occurred. A better strategy may be to wait for the panel decision and then to buy after the FDA panel decision, if you are going to buy QRxPharma at all.
Auxilium Pharmaceuticals (AUXL) has a PDUFA date of September 6th, 2013. The FDA decision will be over Auxilium's drug Xiaflex. Xiaflex is already approved in the United States for the treatment of adult Duputren's contracture patients with a palpable cord. What Auxilium is attempting to do is to have the drug's market expanded by allowing for the drug to be used in of patients with Peyronie's Disease (PD). The expansion into this market should provide for many more opportunities for Xiaflex, especially given the fact that it has orphan drug designation for Peyronie's Disease. Orphan designation is significant for a number of reasons, as it allows for special tax credits for the drug developer, as well as it allows for the company to market the drug in the orphan designation for seven years without competition.
Not every drug is able to obtain orphan drug designation; orphan designation is reserved for drugs that are intended to treat a condition for which it is estimated that there are less than 200,000 people afflicted. Orphan designation will typically allow for a company to substantially increase revenue, as they will not have any competition for the desired indication. Increasing the amount of revenue that the drug brings to Auxilium makes this decision very important to the company.
Xiaflex is important to Auxilium's future, as it produces significant revenue for the company. In the first quarter of 2013, the drug brought in $12 million in revenue in the United States .The worldwide revenue number was $20.7 million. Expanding into an orphan designation would allow for a much larger market potential for the drug. As an investors focusing on the potential for price increases in the face of a runup, the fact that the drug is so important to Auxilium, helps to suggest that there should be the potential for a large amount of price appreciation.
Seattle Genetics (SGEN) is a company with a rather large market cap of $4.26 billion. However, that does not necessarily mean that the company will not experience some sort of price increase heading into an important FDA decision. I would just say that there will probably not be a very large price increase. Seattle Genetics has a PDUFA date of September 14, 2013, in regards to its drug Adcetris. Much like Auxilium, Seattle is attempting to expand the market potential for the drug. Seattle is asking for the FDA to approve the drug to include the retreatment and extended duration beyond 16 cycles of therapy in relapsed Hodgkin's lymphoma and Systematic anaplastic large cell lymphoma.
This drug is currently very important to Seattle, and will be an important part of Seattle's future. In the first quarter of 2013, Adcetris was responsible for $33.9 million of Seattle's $57.3 million in total revenue. This means that with the drug bringing in well over half of the company's revenue, that any sort of potential to increase the market for the drug should have a substantial impact on the revenue at Seattle Genetics. This drug is not, however, by any means the only drug in Seattle's pipeline; Seattle has a pipeline full of promising drugs. As such, I would still be hesitant to say that there is going to be a very large price increase heading into the PDUFA date as Seattle is already a large company and would have many drugs to fall back on if the FDA for some reason decides to issue a CRL. With that being said I do still expect for the FDA to approve the expanded label for the drug.
Ligand Pharmaceuticals (LGND) will have a PDUFA date of October 3, 2013. This PDUFA date is in response to Ligand's NDA, where the company is seeking approval for bazedoxifene/conjugated estrogens. Ligand and its partner Pfizer (PFE), are seeking approval for the drug in the use of non-hysterectomized women for the treatment of moderate-to-severe vasomotor symptoms (VMS) and vulvar and vaginal atrophy (VVA) associated with menopause, as well as the prevention of postmenopausal osteoporosis.
This drug is important to Ligand as it would provide a substantial new market opportunity for Ligand. Even better is the fact that through the royalty agreement, Ligand has the potential to receive significant revenue at little to no cost to the company. By having a marketing agreement with Pfizer, Ligand is leveraging Pfizer's sales force and still receiving a portion of the sales as a royalty. This agreement should work out well for both companies if the drug is ultimately approved for the indications.
Bazedoxifene is by no means Ligand's first drug. Ligand already has many drugs on the market, available through its pharmaceutical partners. Ligand had $11.7 million in revenue last quarter, and $1.5 million in net income. If approved, bazedoxifene should be able to help increase Ligand's revenue base even more in the upcoming years and should provide a solid growth opportunity for investors. Due to the size of Ligand, I would not expect all that large of a price increase going into the PDUFA decision. This is also partially due to the fact that Ligand already has a very large pipeline, and the rejection of one drug is not really going to have that much of an impact on the long term potential for Ligand. It will be interesting to see whether or not there is a significant increase in price heading into the PDUFA date for Ligand.
Antares Pharmaceuticals (ATRS) has a PDUFA date of October 14, 2013. The PDUFA decision will be for Antares' drug Otrexup. Otrexup is indicated for the treatment of Rheumatoid Arthritis (RA), poly-articular-course juvenile RA and Psoriasis. Otrexup is a device that is designed by Antares that allows for the subcutaneous administration of MTX. MTX has been around for years for the treatment of the aforementioned indications, so all that Antares needs to do is convince the FDA that their device should be approved. Significantly, the device is able to be self-injected by patients, and Antares believes that the drug represents a significant improvement over currently available treatment options.
Antares claims that the benefit of its system is the fact that it will allow for patients to remain on MTX for longer, thus reducing the costs associated with the treatment of RA. It would reduce costs due to the fact that MTX is cheap when compared to expensive biologics. Antares also believes that Otrexup will increase patient compliance, as currently available injection options must be performed in a doctor's office which increases healthcare costs and also the hassle associated with treatment. Having a self-injection of MTX should provide another treatment option for patients. For a more in depth look at Antares, click here.
Antares currently has a few drugs on the market, all through partnerships. This PDUFA decision is very important for the company due to the fact that it could help Antares to generate significant revenue. The FDA decision will be important to Antares as it will be the first product that Antares will launch by itself. Otrexup is expected to help Antares become profitable, and should help to drive the long term growth of Antares. Otrexup is very important to the future of Antares, and shareholders will be watching the FDA decision closely. The importance of the drug to Antares would suggest that there may be a large increase in stock price heading into the PDUFA date.
Amarin Pharmaceuticals (AMRN) will have an advisory panel meeting on October 16, 2013. The PDUFA date for Amarin is December 20, 2013. It is important for investors to note that the advisory panel notes will likely be released on October 11th, or October 14th. Remember that for runup investors, you always want to be out of the stock before the advisory panel notes come out. Advisory panel notes can adversely affect the company's share price, as shareholders often try to get a sense as to which way the FDA is leaning going into the advisory panel from the notes provided. The advisory panel will consider Amarin's drug Vascepa.
Vascepa is currently FDA approved for the treatment of adult patients with very high triglycerides (greater than 500mg/dL). Amarin is attempting to have Vascepa approved for the use in patients with high triglycerides (TG ≥200 mg/dL and < 500 mg/dL) with mixed dyslipidemia.
The approval for this indication would substantially improve the market potential for Vascepa and help to separate it from its main competitor Loveza produced by GlaxoSmithKline (GSK). Loveza currently is approved for patients with very high triglycerides, but not for patients with high triglycerides. In the event that Amarin successfully expands its label, Vascepa would have an advantage compared to Loveza. The advantage would be in having a much larger target market when compared to Loveza.
Vascepa is Amarin's only drug and as such is extremely important for the long term potential of Amarin as a company. Vascepa was responsible for all of Amarin's $2.34 million in revenue last quarter. Glaxo has had much more success with its drug Loveza (having brought in $3.8 billion last year). It is important to note when comparing these numbers that Vasepa has not been on the market for any significant amount of time when compared to Loveza. The sales numbers of Loveza are meant to show the market potential for Amarin, and why I believe that there could be a substantial runup heading into the panel decision. If Amarin's Vascepa is able to obtain an advantage over a drug that brought in $3.8 billion, then it could be very significant for shareholders.
In terms of runup potential there are many things that we need to consider. I would personally take a position before this FDA panel decision and then sell right before the panel notes come out, as I believe that the price will go up as investors get a sense of how important the panel decision is for Amarin. While the FDA is not required to follow the advice of its panel, the FDA usually does follow the advice of the panel. If the panel approves of the drug, there could still be a large potential for a price increase heading into the PDUFA date. Amarin I believe has a large potential for a price increase, and I will be watching Amarin closely.
Alimera Sciences and pSivida Corporation
Alimera Sciences (ALIM) has a PDUFA date of October 17, 2013 for its drug Iluvien. The drug is indicated for the treatment of chronic diabetic macular edema (DME). Unfortunately, the drug is already the recipient of two CRLs (which means that Alimera sought approval of the drug before and the FDA refused to approve the drug). However, this time Alimera believes that it has all of the data that it will need in order to be able to pass FDA scrutiny.
This FDA decision is very important to the future of Alimera and its development partner. Its partner on the drug, pSivida, is entitled to receive a 20% royalty on net profits from Iluvien. With the possible royalty, this drug will be very important if pSivida wants to have any hope in the future of being profitable. pSividia (PSDV) investors will be closely watching the FDA decision regarding the drug, as pSividia is eligible to receive a $25 million milestone payment upon FDA acceptance of the drug. The payment along with the royalties would help to fund pSivida's ongoing activities, which are currently running at a net loss of $2.8 million per quarter.
This drug is also important to Alimera, as it could help Alimera to become profitable. Alimara could definitely use the revenue, due to the fact that Alimera lost $14.0 million last quarter. The opportunity for Alimera to commercialize the drug and retain most of the profits will help to substantially drive long term growth in the company, provided of course that Alimera is successful in obtaining FDA approval. Alimera will need the revenue that the drug should provide, and as such investors will be watching very closely to see if Alimera is successful in gaining FDA approval. This FDA decision is very important for both companies, and as such I would expect a significant price increase heading into the FDA decision.
AMAG Pharmaceuticals (AMAG) has a PDUFA date of October 21, 2013.This application is for AMAG's drug Feraheme, which is already approved by the FDA. The sNDA, if approved, would expand Feraheme's label from the treatment of iron deficiency anemia (IDA) in adults with chronic kidney disease to adults with IDA who have failed or could not take oral iron treatment. This label expansion could be quite significant for AMAG, as it would expand the market opportunity for Feraheme well beyond its current label.
Feraheme is important to AMAG's future, as AMAG reported $15.6 million in U.S. Feraheme sales last quarter. AMAG recently announced that its margins on Feraheme are a whopping 82%. The rather impressive margins should set AMAG in a position where the FDA approval has the potential to provide significant revenue. Even more importantly for AMAG shareholders is the fact that the company already has a rather large sales force in place to sell Feraheme and may be able to leverage the label expansion without having to hire a significant number of sales representatives.
Due to the fact that this drug is so important to the future of AMAG, AMAG may be well positioned for a runup into its PDUFA date.
Pozen Inc. (POZN) will have a PDUFA date of January 24, 2014. This PDUFA date is in regards to an Pozen's PA tablets. Pozen is seeking the approval of PA tablets for the secondary prevention of cardiovascular disease. This indication has the potential to be a very substantial market opportunity for Pozen and as such investors will be watching the FDA decision on the drug closely. The market for the secondary prevention of cardiovascular disease is a large market, which also means that Pozen could have the potential for significant revenues if the drug is ultimately approved by the FDA.
Pozen is currently seeking a marketing partner for PA tablets, and investors who invest in the runup could be pleasantly surprised should a partnership agreement be announced before the FDA approval decision. PA tablets are very important to Pozen's future; as its current product, Vimovo is only generating $1.4 million in revenue. It appears as though the PA tablets will be the drug that investors expect will make Pozen a profitable company. As we get closer to the PDUFA date I would expect for a large increase in share price simply based on the fact that this is such a lucrative indication and such an important drug for the future of Pozen.
Durect Corporation (DRRX) has a PDUFA date of February 12, 2014. This FDA decision is in regards to Durect's drug Posidur, which is designed to deliver an already approved drug Bupivacaine. The drug is designed to provide up to three days of pain relief following surgery. The results on the drug have been interesting so far, and it will be interesting to see the FDA decision on Posidur. Durect currently holds worldwide marketing rights to the drug, and this drug is very important to the future of Durect.
Durect does not currently have any drugs on the market, and needs the revenue that would be provided by the drug. It is important to note that should Pfizer make a determination to halt the development of Remoxy, investors could be looking at a large amount of downside. Remoxy is the most advanced drug in Durect's pipeline, and the drug is the subject of multiple Complete Response Letters. However, it could also provide unexpected upside should Pfizer ultimately decide to resume development activities for the drug.
If Posidur is approved by the FDA, it would serve as a validation of Durect's drug delivery technology. The fact that Durect does not currently have any FDA approved drugs on the market, along with the market cap of Durect would suggest that Durect is poised for a significant price increase heading into the PDUFA decision.
There are an abundance of FDA decisions coming up in the next few months for investors. There are some companies which could be poised for significant price increases ahead of the FDA decisions on their respective drugs. My hope is that this article will serve as a starting point for investors to consider investing in a potential price increase for any of the companies mentioned above. Obviously, I did not include all of the FDA decisions in my article, and if I forgot any decisions that you feel are significant please include the stock's name and ticker in the comments section of this article. The next few months should be a very interesting time for investors.