Cowen & Co. - Nuedexta Gets a New Friend in the LTC Market Price
Yesterday after close, AVNR disclosed a Januvia (sitagliptin)
co-promotion agreement with Merck. Januvia is a $2.5BN+ a
year diabetes drug, and co-promotion with Merck gives big
pharma validation to AVNR's prowess in the LTC segment. We
remain bullish on AVNR's ability to execute.
Januvia, Janumet (sitagliptin/metformin), and Janumet XR for the captured LTC
With an increased risk of hyperglycemia among the elderly and the attractive safety profile
of Januvia, we believe that LTC represents a captured market for Januvia as it has been for
Nuedexta. We believe meaningful gains could be achieved through this agreement.
Up to $60MM possible over three years and it's mostly performance based.
AVNR's LTC sales force will promote Merck's sitabliptin franchise starting October 2013 in
the LTC segment, and AVNR will be paid a fixed fee plus performance-based payments.
According to the 8-K, a majority of payments will be performance based and AVNR could
receive up to a maximum of $60M during the three-year agreement. Merck will continue to
promote Januvia in all other settings. In the absence of further guidance regarding the details
of the agreement, we apply a conservative estimated payment of $30M spread out over the
next three years. However, we view AVNR's LTC sales force to be experienced, based on
Nuedexta performance in the same setting. Also, we view Januvia as the market leader,
which will be met with little resistance from the LTC segment. Overall, we view this agreement
to be a low-hanging fruit for AVNR.
AVNR's chance to shine as a dominant player in the institutional setting.
A more significant outcome of this agreement, in our opinion, is the demonstration of AVNR's
prowess in the LTC segment and the potential for further co-promotion deals down the road.
We remain bullish on AVNR's ability to execute in this institutional segment, where AVNR can
grow to be a dominant player.
Rated Outperform - Price Target $12