NEW YORK -Savient Pharmaceuticals Inc. (SVNT) is expecting an approval decision from the Food and Drug Administration for its gout treatment Krystexxa, either Friday or Monday, but the real excitement lies in a potential partnership or acquisition.
The drug received a strong 14-to-1 positive recommendation from an FDA panel in June and the stock has almost tripled since then, recently trading at $15.65.
Gout is a form of arthritis and affects about 2.1 million people in the U.S., according to the Arthritis Foundation. Krystexxa would be used in patients that don't respond or are unresponsive to standard therapies such as anti-inflammatory drugs or allopurinol, an enzyme inhibitor.
The East Brunswick, N.J., drug developer has long stated that it will need to form a partnership to successfully market Krystexxa in the U.S. and overseas, and many believe that its market value of just $950 million makes a buyout more likely.
"Although investors have learned to exercise caution ahead of most regulatory milestones, we see little downside in SVNT shares," writes Cowen & Co. analyst Eric Schmidt.
Of the possible outcome, Schmidt believes it is most likely that Krystexxa will either receive straight approval or get a request for more information that could delay approval for up to 90 days.
In a worst-case scenario, which Schmidt believes is unlikely, the agency could request more data that could lead to another clinical trial and create a more significant delay.
Overall, analysts are generally bullish. Of the nine analysts that have a rating on Savient, six have the equivalent of a strong buy or buy and three have a hold, according to Thomson Reuters.
Regardless, there is a large contingent of shares - short interest is 18% of the float - that are betting that the FDA will deliver disappointing news, causing the stock to fall from its recent gains.
But success could squeeze those investors and lead to stock price volatility in the wake of the news.
Wedbush Morgan analyst Kimberly Lee notes that the FDA has missed more than 60% of its targeted decision dates, so any minor delay isn't cause for alarm. Conversely, she recommends investors take advantage of any related decline in the stock price.
Lee, projecting $400 million in peak annual Krystexxa sales, expects a large pharmaceutical company to quickly acquire Savient if that approval arrives, because of the lack of gout treatments on the market, a dearth of competition and the simple, one-drug structure of the company.
Others on Wall Street have echoed that sentiment, noting that the company hasn't been aggressively building a sales force and has slowed down its manufacturing prior to the approval.
"We believe an acquirer could pay at least $20 a share," Lee said.
No comments:
Post a Comment