38 page comprehensive report out today.
Using two vaualtiion measures Cowen has a current valuation range of $6.15-$6.27.
Initiating With Outperform (1)
October 1, 2012
A Story Like NUEDEXTA Can Turn That Frown Upside Down
Conclusion: Avanir Pharmaceuticals is developing therapeutics for central
nervous system disorders. The company's lead drug, NUEDEXTA, is the first FDA
approved medication for the treatment of pseudobulbar affect, which is
characterized by involuntary and inappropriate crying, laughing or other
outbursts of emotions. With worldwide rights, Avanir is currently marketing
NUEDEXTA in the U.S. targeting both the retail and long-term care (LTC) markets
and is further expanding their LTC focused sales force, which we believe will
have a significant impact in growing market share. Additionally, the company is
in Phase II clinical trials with AVP-923 for the treatment of agitation in
Alzheimer's patients, which is estimated to affect approximately 50% of those
with the disease. We believe this indication could be much more significant to
Avanir's bottom line if clinically successful.
Recent Price Increase For NUEDEXTA & Continued Strong Growth
In The LTC Market Are Strong Positives. On August 27, NUEDEXTA
took a 9% price increase, its second ever, for a monthly cost of $574 or
$6,888 AWP per patient. We believe from our discussions with management
that the pushback on pricing from physicians and insurers would not occur
until the $600 per month price point. New script growth remains strong
with 1003 new scripts being recorded for the last week of August.
Sales Force Continues To Grow And Long-Term Care Sales Team
Is Becoming A Bigger Piece Of The NUEDEXTA Sales Story. Avanir
currently has 42 sales reps covering the long-term care facility market. The
company expects to be up to 55 by November 2012. There are currently 71
reps covering the retail market.
Education Is Everything. As is always the case, education is the key to
NUEDEXTA being successful. As care givers and physicians learn to identify
the symptoms of PBA, this is the primary way the market will grow.
We are initiating coverage of Avanir Pharmaceuticals with an Outperform rating. We
believe Avanir is a unique company in the emerging biotechnology space in that it is
a CNS focused company that has a product that has been successfully developed
and commercialized for a CNS indication for which no therapeutic has previously
received FDA approval. The CNS space is one that has historically been riddled with
failure in biotechnology, but Avanir has bucked this trend with NUEDEXTA for
pseudobulbar affect (PBA). In addition, the company markets the drug in the U.S.
with a proprietary sales force focused on both the retail and long-term care markets.
The script growth for NUEDEXTA week-over-week has been strong and we believe
this is mainly attributed to the company’s aggressive focus on the LTC market. This
is a captured patient market where medical directors often oversee multiple
institutions thereby adding several LTC facilities through one detailing contact.
In addition to a successful NUEDEXTA launch, Avanir is developing AVP-923 for the
indication of agitation in Alzheimer’s patients. This again, similar to PBA, is a
condition that is found in patients suffering from an underlying CNS disorder. We
break out the agitation market in our revenue buildup model at the end of this
report and it is a sizeable market, even by conservative standards. Namenda, from
Forest Labs, is a $1.2B drug for Alzheimer’s disease with a slight effect on cognition.
We believe a benefit to these patients on the agitation front is just as significant for
quality of life for the patient as well as for the care giver. The company just enrolled
the first patient in a Phase II trial in September 2012. The trial is expected to enroll a
total of 200 patients with patients being dosed for 10 weeks.
We believe Avanir offers investors the unique investment opportunity of having an
emerging biotech with an approved proprietary product that is generating revenue
and pipeline programs, also focused in the same therapeutic field of CNS, which
allows for the rich biotech multiple to be applied to the valuation of the company’s
Sentiment: Strong Buy