May 31, 2011
NUEDEXTA Scripts Growth Strong —
Weekly Pill Counts Up Sharply
• As we previewed, weekly NUEDEXTA scripts were strong for the week of May 20th with an increase of ~4000 new
pills prescribed, this week alone. This represents the largest week-over-week increase in pill count since launch. The
Wolters Kluwer end-user demand estimate for the week of May 20th is $184 thousand and it appears that the launch curve is
steepening, given a near doubling in the run-rate since the beginning of the quarter.
• We believe, NUEDEXTA sales are on track to meet or exceed our end-user estimate of $1.6 million for the quarter,
given weekly sales to date. Given that PBA is a condition for which no prior therapies existed and that physicians may
have rarely, if ever, screened for the condition, the pace of the launch may not be indicative of the overall success of
NUEDEXTA.
• The lower repeat Rx’s noted in this week’s data are not a concern to us, given that declines in repeat Rxs had also
occurred in prior weeks and were followed by strong upticks. Repeat Rx numbers should be interpreted with caution.
in our opinion. given that many may represent multi-month mail orders and that pill counts may better reflect sales.
Lumpiness in the launch metrics at this stage in the launch is typical.
• The company has noted that MS and ALS physicians have been recommending NUEDEXTA to their colleagues
treating stroke and traumatic brain injury patients. It appears that, given new evidence that MS and ALS physicians
may be more conservative in their prescribing practices than originally thought, the company is beginning to tweak their
launch plans. Part of this unanticipated prescribing behavior may have resulted in the initially slow launch.
• We currently model the markets for NUEDEXTA in the stroke and traumatic brain injury indications at twice the size
of the market for ALS and MS. Recall, as a base-case scenario, we had projected that peak sales in MS and ALS alone
would reach $500 million in 2017; accelerated adoption in these other settings could represent upside to our sales
estimates. Considering stroke, AD, traumatic brain injury and PD, we estimate peak sales could be in excess of $1 billion in
the US and EU.
• AVNR’s development pipeline remains robust and its “pipeline in a pill” provides an efficient reduced-risk path to
additional sales of NUEDEXTA for other indications. As part of its strategy, the company is looking to expand
NUEDEXTA into MS-related pain, diabetic peripheral neuropathic pain and behavioral disorders associated with dementia;
and may initiate trials in 2011.
• The MS-related pain program is particularly promising, in our opinion, given that NUEDEXTA is a non-opioid and
may find a significant market with off-label use. While we don’t model these opportunities yet, over 50% of the 200-
400K MS patients suffer from chronic pain and no therapies are currently approved for this indication.
• AVNR holds patents for NUEDEXTA in the US and EU, expiring in 2026 and 2023, respectively. Although, prior art has
existed in some capacity given that NUEDEXTA is a combination therapy, we are confident the USPTO was fully apprised of
existing prior art. Below we summarize the key NUEDEXTA patents:
1) In Jun. 2008, the European Patent Office (“EPO”) granted a new patent (1.539.166) which potentially extends the
period of commercial exclusivity for NUEDEXTA into 2023. This European patent expands the available NUEDEXTA
dose ranges under prior patent protection and encompasses a range of indications, including PBA, DPN pain, and other
neurologic conditions.
2) In Feb. 2010, the United States Patent and Trademark Office (“USPTO”) granted a new patent (7,659,282) which
extends the period of commercial exclusivity for NUEDEXTA into 2025 and subsequent to Feb 2010, the period of
commercial exclusively for NUEDEXTA was extended an additional year to 2026. The U.S. patent expands the
available NUEDEXTA dose ranges under prior patent protection and encompasses AVNR’s current clinical
development programs in PBA and other neurologic conditions.
• We maintain our OUTPERFORM rating and our $13 price target. We derive our $13 price target by applying a 6x multiple to
2015 revenues of ~$670 million, discounted by 25% annually.
Risks to our price target include the depth of penetration and timing of market adoption of NUEDEXTA for the treatment of PBA
in the various setting in which it is indicated.
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