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FDA Approval To Power The Next Leg Of Rally For Neos?

We recently launched a separate SA feed called the Busted IPO Forum.  This Forum is focused exclusively on stocks that have been public for 18 months to five years that are significantly under their offering price.  Many times after the initial analyst hyperbole has died and lockups have expired, these same companies can be had for 30 to 50 cents on the dollar to where the shares went public.  I have found many multi-baggers like ZELTIQ Aesthetics and AskJeeves over the years trolling this neglected space and I have talked about these opportunities consistently in my seven years writing here on SeekingAlpha.  If you would like to get these free articles as soon as they are published, just become a real-time follower to Busted IPO Forum by clicking HERE and hitting the big orange 'follow' button, selecting the 'real-time' option.

Behind every exquisite thing that existed, there was something tragic.” - Oscar Wilde

The FDA has been kind to the small cap holdings in the Biotech Forum portfolio over the past month.  Near the end of July, a hugely positive Ad Comm Panel recommendation for Dynavax Technologies' (DVAX) hepatitis B vaccine 'Heplisav-B' triggered a huge rally in its stock.

Late this week, the FDA approved ADS-5102 from Adamas Pharmaceuticals (ADMS) set off a 40% rise in that Biotech Forum & Insiders Forum holding on Friday.  So where could our next FDA win be seen in the portfolio?  NT-201 from Neos Therapeutics (NEOS) has a PDUFA date of September 15th.  Let's take a look at that small cap concern in front of its pending decision date.

Company Overview:

Neos Therapeutics is a Texas based pharmaceutical company focused on developing, manufacturing and commercializing innovative extended-release {XR} products using its proprietary modified-release drug delivery and orally disintegrating tablet technologies.  Its products are aimed at the ADHD market in the United States.  This is an approximate $10 billion annual market that is showing consistent growth.

Analyst Commentary:

Analysts certainly have been positive on NEOS over the past month.  BMO Capital reiterated a Buy rating and $14 price target on the name late in July.  On August 9th, RBC capital then reissued their Buy rating and $12 price target on NEOS.  This was seconded the next day by Cantor Fitzgerald with a $20 price target. It analyst cited the June approval of the company's second approved drug Cotempla XR-ODT as one of his reasons for optimism on the stock.

Product Portfolio:

Adzenys XR-ODT®

This product was launched in May of 2016 and is showing impressive early growth.  Adzenys scripts were 41,954 for the three months ended June 30, 2017, an increase of 29.9% over the 32,296 for the three months ended March 31, 2017.  Adzenys XR-ODT has become the preferred alternative dosage treatment for ADHD, as more patients (35%) started on Adzenys XR-ODT than any other alternative dosage form product. To date, Adzenys has seen just under 115,000 scripts filled.  almost 75% of the scripts written for Adzenys in the second quarter came from individual transferring over from other ADHD medicines.  This provided the vast bulk of the $4.9 million in revenues the company booked in the second quarter.

Cotempla XR-ODT:

This is the first and only methylphenidate extended-release orally disintegrating tablet for the treatment of attention-deficit/hyperactivity disorder {ADHD} in patients 6 to 17 years old.  This drug was approved on June 19th and will hit the market in the fall.

NT-201:

This is the Company’s amphetamine XR liquid suspension product candidate.  It should be approved on September 15th and hit the market in January of 2018.

Outlook:

The company ended the first half of the year with just under $80 million in cash on hand after a $30 million secondary offering hit the market late in June.  This represents nearly half of company's current market capitalization and takes any near and medium term funding needs off the table.

The company already is seeing substantial growth from its core product "Adzenys" on the market.  This should be joined by Cotempla XR-ODT this fall and NT-201 in January.  Given all products will be serviced by the same sales force, margins should improved nicely on faster sales growth.  The current consensus has the company delivering over $75 million in annual sales in FY2018 after just under $30 million this fiscal year.

Given that growth, funding that is in place and strong analyst support; This 'Busted IPO' should be a solid growth story in the years to come and I expect the stock to trade up into the low or mid teens over the next 12-18 months.

To get the full value of joy you must have someone to divide it with.” - Mark Twain

The 40% rise in Adamas Pharmaceuticals (ADMS) Friday was a big part of the five percent rise in the model-20 stock Insiders Forum portfolio this week.  This portfolio consists of attractive small and midcap stocks insiders are currently purchasing.  Since its launch on 06/30/2016, the portfolio has returned 36.64% as of the market close on Friday.  This compares with a return of just 13.55% for the Russell 2000 which serves as the portfolio's benchmark.  To celebrate this week's 'win', we are enabling free two-week trials into the Insiders Forum through the market open on Monday.  To enable your risk-free 14 day trial, just click HERE.

If we had no winter, the spring would not be so pleasant: if we did not sometimes taste of adversity, prosperity would not be so welcome." - Anne Bradstreet

Thank You and Happy Hunting

Bret Jensen

Founder, Biotech Forum & Insiders Forum

Disclosure: I am/we are long ADMS, NEOS, DVAX.