Savient Pharmaceuticals: Is Anything Left?

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Savient Pharmaceuticals (NASDAQ:SVNT) has been on a roller-coater ride since the approval of its drug Krystexxa for refractory chronic gout. Initially there was a large amount of buyout speculation, however, nothing materialized. SVNT began to realize that it was going to have to commercialize this product on its own if it had any hope on cashing in on Krystexxa. Fast forward to today, where Krystexxa sales are still very small, and that leaves the question of is there anything at SVNT really worth any value?

First, let's break down Krystexxa sales numbers, and then we will dive into numbers for some of SVNT's other products. In the fourth quarter of 2012 Krystexxa net sales were $4.7 million dollars. This is hardly enough to sustain the company, and it took a loss of $28.0 million for that quarter. With SVNT's current cash cushion of $96.3 million, it is clear that Savient will have to turn something around, and fast. Its prescription rates for Krystexxa have been slowing down, as Savient even acknowledged, the revenue was a mere 3% increase over the third quarter of 2012. Do note that as of January 16, it is expected that SVNT raised the price of Krystexxa another 30% to $3,850 per vial. Savient is trying its hardest to increase sales and revenue from Krystexxa, and while it is trying it does not seem to be succeeding all that well. The recent price raise, however, does not concern me in the slightest due to the fact that SVNT has orphan drug designation on Krystexxa, so there is no other competitor. The problem with Krystexxa is the rather restrictive labeling associated with the drug, and the company is having a hard time convincing doctors and patients that what they are seeing is "chronic refractory gout" and that it cannot be treated using other medications on the market. The problem for Savient would be to get doctors to try the medicine on a patient, which is no easy task given the $3,850 cost per vial. Savient is also still trying to straighten out reimbursement issues with insurance companies, which want the patients treated using currently available gout treatments (which are much less expensive). Convincing insurance companies to allow for reimbursement and getting doctors to prescribe the drug will, as it has always been, be very important if Savient wants to be able to find any sort of success. Also, it needs to continue trying to work on how to best commercialize the drug in the European Union, from which Savient received a marketing authorization in January 2013. I would expect Savient to try to find a marketing partner for the EU shortly, as the quicker it signs a deal, the quicker even more revenue can start rolling into Savient's quickly draining coffers.

However, Savient also has another hope. It recently signed a co-promotion agreement with Swedish Orphan Biovitrum AB also called Sobi. This agreement is for the drug Kineret. Kineret is FDA approved for the reduction in signs and symptoms and slowing the progression of structural damage in moderate to severely active RA in patients who are 18 years of age or older. It is also indicated for the use in patients who suffer from neonatal onset multisystem inflammatory disease, which is a hereditary autoimmune disease. If you take a look at the Phase III studies for Kineret, the results were outstanding and showed an improvement in patients. This drug is also very important to Savient, as it represents another stream of revenue, however, the terms of the agreement are not very clear to shareholders at this time. A positive is the fact that for at least RA Kineret fits very well, as Savient already has to target Rheumatologists in the United States, and Kineret would be prescribed mainly by Rheumatologists. This also means that Savient has less ground-work that it would need to worry about, and that it should fit in very well with Savient's current marketing efforts. Another important benefit is the fact that Savient is only responsible for marketing, Sobi is responsible for manufacturing, regulatory and safety measures. This means that it is also much less of a commercial headache for Savient than other medicines might have been. While this agreement might not seem to be incredibly important at the time of its release, with the April 1, launch date rapidly approaching, this agreement represents another potential steam of revenue for Savient.

Its Oxandrin drug is definitely way past its heyday. The drug will contribute minimal, if any revenues at all toward Savient's future, and one can only hope that Savient does not spend any more time or resources on trying to increase the sales of this drug.

Savient has had a bumpy road, and still does have many road blocks ahead for it. However, Savient is definitely attempting to cling to hopes of one day being profitable. With the expected jump in revenue due to the recent Kineret agreement, and with the expectation to increase sales of Krystexxa, Savient is coming closer and closer to ultimately becoming a self-sufficient company. Remember, however, that Savient will have to work quickly as its cash pile has been decreasing at an alarming rate. However, Savient's market cap does seem to be deceivingly low, it is currently listed at $59.12 million. This is a very low price for a company that has 96 million dollars in cash right now. When the market is valuing the company at less than its current cash, it seems as though the market is completely down on Savient. Well, now Savient through its new commercialization agreement has a chance to prove the market wrong, and to increase its revenues substantially compared with where they were last year. Savient is working against the clock for its cash pile (or it will have to do more dilution, a possibility that would anger many different shareholders), and the question is becoming increasingly: will Savient win, or will the clock?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.