Give Avanir Some Time


Avanir Pharmaceuticals' (NAS: AVNR) first full quarter marketing Nuedexta was only marginally better than the quarter it launched in. Net sales of Neudexta were just $1.9 million, which is an improvement from $0.5 million last quarter, but it's still a far cry from a successful drug.

The problem is that Neudexta isn't like other orphan drugs such as BioMarin Pharmaceuticals' (NAS: BMRN) Naglazyme, Alexion Pharmaceutical's (NAS: ALXN) Soliris, and Regeneron Pharmaceuticals' (NAS: REGN) Arcalyst that treat diseases directly. Neudexta treats uncontrollable outbursts of crying or laughing that's a symptom of neurological diseases or injuries to the brain in some patients.

The disease technically has a name -- pseudobulbar affect -- but doctors treating the patients are more focused on the underlying cause: Lou Gehrig's disease, Parkinson's disease, multiple sclerosis, and others. Although I imagine pseudobulbar affect is rather embarrassing, it's not an immediate life-threatening aspect of the disease.

On the conference call, management spouted off some numbers suggesting that the more often its sales force visits a doctor, the more likely the doctor is to prescribe Neudexta. Educating doctors about pseudobulbar affect takes "time and effort."

Time is always a precious commodity for biotechs. The company burned through $14.5 million in the third quarter and had just over $90 million in the bank. That's only six quarters of cash, but hopefully Avanir can keep increasing sales, which will lower its burn rate.

The prescriptions for Neudexta grew 16% month over month from May to June, which is a solid 56% quarter-over-quarter growth rate. If Avanir could keep up that rate, it could be at a run rate of about $100 million annually in about six quarters, which isn't too shabby for a company with a sub-$400 million market cap.

I think investors should give Avanir a little more time. But keep a close eye on that prescription data, because it'll determine whether you'll be crying uncontrollably or be laughing all the way to the bank.

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At the time thisarticle was published Fool contributorBrian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Motley Fool newsletter services have recommended buying shares of BioMarin Pharmaceutical. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy

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