Avanir Pharmaceuticals (AVNR)
Reiterate BUY - Price Target: $14
May 31, 2013
We had the opportunity to catch up with AVNR management. Script trends continue to be strong and the company is on track to hit $100MMM gross Nuedexta sales this year and be cash flow positive. ANVR is still waiting for the official minutes of the meeting with the FDA for the pre-IND for AVP-786. The goal is to use a 5052b regulatory strategy. Given the excellent PK charts the company has made public, we think this is a solid strategy. Importantly the company has 3 Nuedexta Phase 2 trials ongoing that will have results in Q4:13 – H1:14 in MS neuropathic pain, Parkinson’s and Alzheimer’s agitation. Results of these trials may dictate the further development of AVP-786. On the legal front the 30 month stay ends in December 2013. The 2 week trial is scheduled to begin September 9th. ANVR expects a decision prior to the holiday season. Since they won all 5 items in the Markman hearing, management is confident the patents will hold up. The Nuedexta composition of matter patent expires in 2016. ANVR does have additional patents for Nuedexta that expire in 2023 and 2026. Also if AVP-786 is commercialized its patents extend to 2030+. Recently ANVR received a broad PBA label recommendation from the CHMP with formal approval expected in July. Sales in the EU are not in our model.
We reiterate our BUY rating. ANVR is in a strong position with no cash needs prior to becoming cash flow positive. In addition, with the broad EU PBA label on track to be approved in July, we are certain the company has partnering discussions ongoing. Our sales forecasts are $73MM, $126MM, $220MM, $329MM, and $445MM in FY13-FY17 respectively. Our FY13 price target of $14 is based on a 25x multiple of our FY17 EPS of $0.95/share, discounted at 20%.
Sentiment: Strong Buy