Adamis Pharmaceuticals (NASDAQ:ADMP) shareholders received negative news yesterday when the FDA announced that it issued a CRL for Adamis' Epinephrine pre-filled syringe. This decision was unexpected, as I was projecting that Adamis would obtain an FDA approval, instead of being rejected. For Adamis shareholders, this decision by the FDA could have a large impact on Adamis' ability to compete against other epinephrine products, and the decision left only one clear winner, Mylan (NASDAQ:MYL).
The FDA was concerned about some of the improvements that Adamis made to the device, which was in response to some initial concerns from the FDA. Essentially, the FDA is saying that Adamis will need to expand its human factors study and reliability study, in order to examine if the changes had any effect on usability. On a positive note, the FDA indicated that Adamis did solve the volume delivery issue, which was the subject of an initial CRL from the FDA.
Adamis investors should be encouraged, as the company stated that it should be able to have its study expanded and results within a short amount of time, and at an immaterial cost. The real question though will be how long a short amount of time is. Every delay for Adamis is time for its competitor Antares (NASDAQ:ATRS), which is developing its own Epinephrine product with Teva (NYSE:TEVA) to catch up. As I mentioned in a previous article, the first Epinephrine product to the market will have a substantial advantage versus Mylan by being able to barely undercut them in price and gain significant marketshare. Having multiple competing products, however, will cause large pricing pressure and make the product less profitable. Even with a large partner that Adamis has in its partner Allergan (NYSE:AGN), the pricing pressure is still likely to be the case. It is also unclear as to the timeline for once Adamis submits a response, as to how the FDA will classify the response and whether there is any chance for the FDA to render an approval decision. It will be important for Adamis to have a response as quickly as possible, but to also get it right this time. Adamis has experienced too many delays with this product and investors are understandably frustrated about the fact that management has not been able to deliver. The longer that a generic epinephrine product is able to stay off the market, the more lucrative it is for Mylan (MYL), which currently has the EpiPen. Investors will need to see a quick response from Adamis and will need to rebuild confidence in management after an inability to execute up to this point.
Concerns Moving Forward
Without an approved product from the FDA, investors should have concerns about all of Adamis' pipeline. While Adamis does appear to have a solid pipeline of promising products (most of which are using the 505(b)(2) pathway), the ability of management to get caught up on relatively minor problems should be a concern. With Adamis trying to enter already heavily crowded marketplaces, it will need to continue to rely upon its ability to attract partners to market its products. With a management history of delays, partners could wait until much later in the approval process or until Adamis has approval in hand before partnering.
Another concern is that the value of the pipeline could be adversely affected by a history of management's inability to see a product through to the finish line. This is the second CRL for Adamis, and while management may have history from other companies about being able to execute, the market will have a short memory for management. It is important that management continues to try to restore investor confidence after this setback.
Moving forward, investors should make sure that there is a very clear timeline for an FDA response. Investors will also need to watch the progress by competitors in order to make sure that Adamis is the first company to the market with a generic Epinephrine product. Any further delays could give the competition time to surpass Adamis. It is also concerning that the management at Adamis has now had two delays in getting the product approved. It will be important for management to rebuild confidence.
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