Two more bottoms for the GBMB
January 22, 2011
– Comments (19) |
RELATED TICKERS: ALIM
, SVNT
Alimera (ALIM) – market cap 281M, share price 9. Cash 55M, debt 0, burn 6-8M/quarter. The stock wasn’t hit too badly on news of a CRL for Iluvien in diabetic macular edema last December 27, but the selling seems to have ramped up this past week. Given that the CRL seemed fairly benign, citing only some manufacturing deficiencies and the absence of three year data from the phase III FAME study, continued downward movement seems unjustified. Final three year data was collected last October, too late for the NDA submission, but perfectly timed for a quick resubmission. Once this data is fully analyzed and the manufacturing issues have been addressed, there’s an upside of 15 or higher should the drug be approved in late 2011 or early 2012. While the FDA always has the prerogative to raise new safety or efficacy concerns on a resubmission, the lack of a request for new clinical trials bodes very well for the next PDUFA. The all-time low for the stock of 6.6 came during this past summer of European discontent, and will almost certainly not be revisited prior to PDUFA #2. A couple of notes of concern: Iluvien licensee pSivida has seen a similar share price drop over the last week, indicating that the decline may be due to more than just short-term chaos. Short interest remains high at 16%, although I am unsure if this accounts for those who covered after the CRL. I bought 2000 shares for the GBMB account at 9, but I still advise caution until downward momentum has clearly ceased.
Savient (SVNT) – market cap 717M, share price 10.2. Cash 78M, debt 0, burn 5-10M/quarter. The direction of this stock has surprised me numerous times, so it might not be best to follow me on this one. The most recent surprise was the huge run-up in September after the very predictable approval of Krystexxa, followed by the crash when the company was unable to sell itself in October. I had flirted with the idea of buying deep puts when the share price was at 24, but never went through with it. The company is progressing with their plans to market Krystexxa on their own. 8mg vials are being priced at $2300 wholesale for biweekly administration, for an indefinite duration. Since gout is a chronic disease and Krystexxa is a prophylactic treatment for those who have failed all other therapies, it would appear that Savient will be making about $60000/yr off each of these patients for the rest of their lives. Disagreement over the actual numbers of eligible patients leads to wildly disparate revenue estimates of $200M-$900M, the higher of which helped foment the excessive ballooning of the share price last fall. I have to say that in the ER I see horrible cases of gout that have been refractory to all approved treatments quite frequently. Alexion’s Soliris and Viropharma’s Cinryze have proven to be extremely effective money-makers for much smaller populations with chronic ailments, but the larger patient pool for Krystexxa may actually induce more pushback from American health insurance companies and eventually from European spending regulators. One must hope that Savient priced Krystexxa wisely to maximize profits and minimize the chances of denial. Even at the low end of revenue estimates the company seems underpriced at a cap of 717M. Sales began in December and there is a high likelihood that once large pharmas see insurance reimbursements beginning (and Savient lowers their price for a buyout) we will see this company belatedly acquired. In CAPS world, BravoBevo and translator999 came on board after the October crash (and are down substantially), and portefeuille is a long-time supporter through various profiles. The GBMB account will be buying below 10.
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