Avanir Pharmaceuticals' Possible and Unofficial Sales Guidance Is Good for Long-Term Investors

May. 4.11 | About: Avanir Pharmaceuticals, (AVNR)

Today Avanir Pharmaceuticals (NASDAQ:AVNR) announced in an official press release that it is preparing to embark on a "landmark" endeavor in the interest of quantifying the prevalence of pseudobulbar affect [PBA] among Americans, as well as the condition's impact on its sufferers' quality of life.

There has been plenty of speculation among investors concerning the US PBA market size to go along with the ongoing debate among medical professionals about the need for a new PBA treatment since Avanir's flagship product, Nuedexta, was approved by the FDA last October. The company hopes that the PRISM project will put to rest much of the debate that has, thus far, prevented a "widespread collaboration among treating physicians".

Though Avanir has made abundantly clear that they do not intend to issue any sort of formal revenue or sales guidance until it has several quarters worth of reliable data to draw from, the company may have unofficially tipped its hand concerning its near-term uptake expectations.

From today's PR:

Avanir anticipates recruiting 10,000 patients into the registry across approximately 500 sites in the U.S. Avanir is working with Novella Clinical as the company's contract research organization and expects enrollment to initiate in May and continue for at least six months.

That looks like a bit of unexpected guidance to me. I'm sure that both bulls and bears alike are using Avanir's above stated anticipation to draw updated conclusions about the US PBA patient population as well as to refine Nuedexta's early sales projections.

An extremely rudimentary deduction to make, based on the information contained in the PR, would be that if Avanir hopes to have 10K patients enrolled in the PRISM registry by November of this year it must also see a minimum of 10K patients actively using Nuedexta by year's end. Most estimates I've seen reflect an annual take home for Avanir, per patient, to be around $4K. This would clearly put Avanir on pace to become profitable sometime in 2012.

Also from today's PR:

"The PRISM registry will assess the relationship between PBA and quality of life among affected patients," said Randall Kaye, M.D., chief medical officer of Avanir. "In addition, data collected across multiple sites in the U.S. will allow participating investigators to compare the incidence of PBA within their practice to regional and national numbers. At Avanir, we believe a better understanding of PBA prevalence is positive for physicians, patients, and caregivers alike, and are thrilled to initiate what will ultimately be the largest PBA clinical registry ever performed."

"As a physician working directly with patients impacted by various neurological conditions and PBA, the PRISM registry represents a tremendous step forward in helping to document the true impact of this misunderstood and under-diagnosed condition," said Jonathan Fellus, M.D., medical director of rehabilitation, Meadowlands Hospital Rehabilitation Institute in New Jersey. "For too long, patients and their families have battled involuntary, sudden, and frequent episodes of laughing and/or crying without the knowledge and comfort that this condition is a treatable condition that many other patients are living with and managing on a daily basis."

The initial reaction to the PRISM news does not appear to be favorable for long investors, as shares are down roughly 2.5% in early trading, however, I believe the project to be a brilliant piece of long-term PBA market-development strategy that will ultimately pay off for the patient long-term Avanir investor, like myself.

Disclosure: I am long AVNR.