House/Senate Inquiry Into Pricing of NUEDEXTA Cancelled as Anticipated
Avanir Pharmaceuticals (AVNR - OUTPERFORM): House/Senate Inquiry Into Pricing of
NUEDEXTA Cancelled as Anticipated; Next Up Earnings
Price: $3.69 12-Month Price Target: $13
• As we anticipated the House/Senate inquiry into NUEDEXTA pricing has been canceled. Today, the Senate
committee on aging posted a summary of their conclusions on their site
http://aging.senate.gov/events/hr236rpt.pdfThe committee concluded that “From the recent investigation into URL Pharma and Avanir, we have learned that drug
companies charge prices based mostly on what the market will bear without strong pushback from purchasers, and less on
what the drug costs to develop, market or manufacture.” Recall in May the House/Senate Committee on Aging initiated an
Inquiry into NUEDEXTA pricing in May.
• In responding to the committee AVNR provided additional information regarding possible compounding of the two
components that make NEUDEXTA as well as the co-pay assistance that have befitted several patients.
Specifically regarding compounding the company noted “. . .that compounders started making the medication, which is
comprised of two common and inexpensive ingredients, for former participants of Avanir’s clinical trials after the trials
ended”. Additionally “the company stated to staff in briefings that FDA treated the drug as a new entity”. In terms of co-pay
assistance the document noted that “. . .as of the end of June 2011, 343 patients have used this program”.
• The key metric for the stock is weekly script data, and we continue to believe that based upon trends noted since
launch that Monday’s script numbers will be strong.
• 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.