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By Bert Wilkison

Avanir Pharmaceuticals, Inc. (NASDAQ:AVNR) will report financial results for the quarter ended March 31, 2012 before market open on Tuesday May 8, 2012. The company will conduct a conference call and an audio webcast at 9:00 am Eastern Time (6:00 am Pacific Time) on the same day.

3 Month Chart

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Overview:

Avanir saw yet another increase in institutional presence in the months leading up to its 2012 fiscal second quarter while the overall short interest in the name has decreased (again). The consensus earnings per share estimates among the company's six analysts has increased by $0.01 over the last three months from ($0.13) to ($0.12) a share, which is exactly what the company reported in its 2012 FY Q1 earnings release three months ago.

The average analyst price target has held at $6.33 throughout this quarter. Five out of six sell-side analysts have the stock at a "buy" rating, with one calling it a "hold".

During the quarter, Avanir and Concert Pharmaceuticals announced that they had entered into an exclusive license agreement that provides Avanir worldwide rights to develop and commercialize Concert's deuterium-modified dextromethorphan [d-DM] for the potential treatment of neurological and psychiatric disorders. This may lead to the end of Avanir and Nuedexta's reliance on quinidine-sulphate, the only potentially dangerous element of the PBA drug.

What to Expect:

Analysts expect a 76% increase from the ($.50) a share it recorded during the same time period a year ago, and also expect the company to book $7.81M in revenues, or a year-over-year increase of 457.86%. The expected quarter-over-quarter increase in revenues is 9% from the $7.165M Avanir reported for the three months ending at 12/31/11.

In the months ending 12/31/11, Avanir surprised to the upside, beating EPS estimates by three cents, or 20%. Many believe that the company will surprise again this quarter on both the revenues and EPS.

It should be noted, however, that the estimates Avanir is largely expected to beat this quarter, as well as future quarters, have been slashed over the last several months, as analysts most prudently reconsidered and downwardly revised their older, loftier and in hind-site, unrealistic estimates.

The company will likely make use of anecdotal evidence during the conference call, as has been the norm for several quarters now, to help illustrate Nuedexta's tremendous and often superior efficacy and the strides that have been taken in terms of getting the drug into the hands of those in need.

It is extremely unlikely that company will provide anything in the way of direct earnings guidance this quarter and is expected to book revenues on IMS data collected on sales/prescriptions written and not actual sales yet.

Average pill count per prescription written should remain stagnant at 51, in part due to the increase in non-retail sales, which has been said to account for more than 60% of all scripts written at this time. The other 40% is comprised of retail sales. Institutional sales are to be considered of lower quality (fewer pills per script) than retail prescriptions. I was told by a company representative that it may be unrealistic to expect the average pill count per prescription to rise above 60, which is helpful information for those who enjoy projecting future Nuedexta revenues.

Here is a very helpful and, at times, encouraging graph provided by fellow Seeking Alpha Contributor, OFP, which details that scripts written are potentially beginning a new and better growth trajectory pattern:

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The graph plots the weekly prescription data from IMS (WTRx, y-axis) vs. the number of weeks since launch (x-axis). For a simple overview of the graph, see below:

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Requested Link for Explanation

Of note and items to look for:

  • There was notable insider, open-market buying of the stock during the quarter.
  • On 03/06/12 Avanir Pharmaceuticals Inc. sued Watson Pharmaceuticals Inc. in Delaware during its latest attempt to thwart others' plans to market a generic version Nuedexta, the company's flagship product and lone revenue driver.
  • It is generally a positive sign when companies choose to release their earnings during the pre-market session.
  • Avanir has a loose history of selling off a bit, post earnings release.
  • There has been a substantial decease in liquidity/volume over the last three months.

Here is an excerpt from a recent note MLV & Co. sent out recently:

We continue to observe a positive trend in monthly NUEDEXTA prescriptions, reflecting the success of its institutional sales team. According to IMS Health, NUEDEXTA reached a new record of 7,367 prescriptions in March, of which 4,035 (or 54.8% of total) originated from the institutional long-term care [LTC] setting. We foresee NUEDEXTA uptake in both LTC and retail segments to increase in 2012 as patient awareness increases. We reiterate our BUY rating and one-year price target of $6.00 for Avanir Pharmaceuticals, Inc.

  • The company may provide an update on its PRISM registry for PBA.
  • It may provide some positive updates on the PRIME study, which is currently underway.
  • Avanir is still prepping for enrollment in a costly clinical studies for AVP-923 for agitation in Alzheimer's patients and may provide an update during the conference call.
  • Company recently participated at this years AAN conference, spreading greater awareness among prescribing physicians.
  • Avanir may update on/make mention of partnership(s).
  • May provide update on EU filing and/or the EMA.

Summary:

We believe that Avanir will slightly beat consensus estimates for both revenues and EPS and that the upcoming conference call, though likely to be positive, upbeat and encouraging, will have little no effect on the near-term share price. The stock remains a long(er)-term hold.

Source: Avanir Pharmaceuticals FY Q2 Earnings Preview: Meet, Beat Or Miss?

Additional disclosure: Data sourced by Avanir, IMS, Yahoo! Finance, Google Finance, Market Watch and NASDAQ.com