Will Avanir Continue to Trend Higher?

Nov. 2.10 | About: Avanir Pharmaceuticals, (AVNR)

By Patrick Crutcher

Avanir Pharmaceuticals (NASDAQ:AVNR) notified shareholders Friday that it had received FDA approval of AVP-923, now known as NUEDEXTA. Friday was a very hectic trading day for investors who saw shares plunge to a low of $1.31 following a bear raid on the stock.

Those lucky enough to double-down at these bargain prices under $2, stood to make a very good profit. The high short interest in AVNR(~10-12M) could potentially cause a nice short squeeze. Most brokers currently don’t have any available shares to short on AVNR. We wouldn't be surprised if this trends higher.

AVNR received FDA approval for NUEDEXTA (dextromethorphan hydrobromide and quinidine sulfate), which is indicated for the treatment of pseudobulbar affect (PBA). PBA is a neurologic condition characterized by involuntary, unpredictable and disruptive outbursts of laughing or crying in patients with certain underlying neurologic diseases or injuries. We should note that the FDA approved only the 20/10mg formulation, not the 30/10mg. Additionally, there were no patient population restrictions to MS or ALS patients only. Now that NUEDEXTA is approved, it also has the potential to be used off-label for diabetic peripheral neuropathy pain. This is a future indication AVNR will eventually be pursuing. Off-label use is likely to be negligible given that Medicare or insurance will not likely cover it. Ideally, AVNR will discuss the pricing for NUEDEXTA so that investors can begin modelling future revenue.

For sales of NUEDEXTA to reach some analysts' estimates, AVNR will certainly have to push sales/advertising and hope insurance will cover NUEDEXTA. More recently, AVNR has stated AVNR has already been looking to hire 60+ new employees in Sales & Marketing and the sales team is being led by Michael McFadden. He has an impressive career with over 20 years of pharmaceutical commercialization experience, most recently at Amylin Pharmaceuticals (AMLN). His sales team was consistently recognized as one of the leading managed markets teams in the industry.

One thing to keep in mind is that AVNR has a $75M shelf offering waiting to eventually be exercised; this shelf was made effective on October 28th.

Disclosure: Long AVNR

Sources:

Initial Coverage

Recent Q&A about safety data

AVNR Announces FDA Approval of NUEDEXTA

NUEDEXTA FDA Approval Conference Call Webcast