Monday, January 10, 2011

Avanir Pharmaceuticals Looks to Treat Uncontrollable Laughing and Crying

The FDA approved a new drug for the treatment of uncontrolled laughing and crying associated with some neurological conditions such as multiple sclerosis and Lou Gehrig's disease or amyotrophic lateral sclerosis.  The medication is called Nuedexta and is a product of Avanir Pharmaceuticals (Nasdaq: AVNR).  It is the first approved drugs for pseudobulbar affect, in which patient cannot control their emotion.  The drug has not been shown to be safe or effective in patients with other mental disorders, such as Alzheimer's and dementia. [WebMD]  

Typically a stock's price increases when the company gets FDA approval, but the value of the company should be based upon the impact and market share the drugs will obtain.  Neudexta should be on the market by March.  Currently, I do not see Neudexta being a big time drug for several reasons and do not think that it will lead to appreciation of of Avanir's stock price.  Neudexta is a good treatment for those who suffer from uncontrollable laughter or crying, but investors will not benefit from it's approval.

AVNR has no other drugs on the market.  Abreva (10% docosanol cream) was granted to GSK to market in North America.  AVNR has a drug candidate AVP-923 in Phase III clinical trials for the treatment of diabetic peripheral neuropathy.  Two other candidates, a MIF inhibitor and Xenerex, were sold to other companies.
Neudexta is a combination of two drugs that are already on the market, quinidine and dextromethorphan (DXM).  Quinidine is an anti-arrhythmic and is associated with a variety of side effects such ringing in the ear, thrombocytopenia (low platelets), granulomatous hepatitis, myasthenia gravis (an autoimmune disorder resulting in muscle fatigue and weakness), and torsades de pointes (type of arrhythmia).  Because of these side effects, quinidine is rarely used.  The drug was not approved in 2006 due to safety concerns of quinidine.  Given the high prevalence of malpractice lawsuits, physicians will be reluctant to prescribe Neudexta for their patients.  The approved formulation consists of a lower dose of quinidine to address the concern.  DXM is a relatively safe drug and is found in OTC cough syrups.  There are no studies about the effects of using DXM for prolonged time.  Typically, patients take DXM for about a week to suppress their cough.  Long term abuse of DXM has been associated with cognitive deterioration. [Journal of Psychiatry & Neuroscience

Since these drugs are already on the market and inexpensive compared to newer chemical agents, don't expect AVNR to be able to set a high price for Neudexta.  A blog on "Seeking Alpha" reports a co-pay ranging from $60-$340 for a 90 day supply. 

The market for Neudexta is not huge.  Don't expect AVNR to be raking in cash. It is estimated that 20,000-30,000 people in the United States have ALS. [NIH]  Of those diagnosed with ALS, approximately 50% experience pseudobulbar affect.  A smaller percentage of MS patients experience pseudobulbar affect (10%). [Neurology Today

I just can't get excited about AVNR.  Neudexta is not a blockbuster or even a drug that will generate considerable revenue.  There's the risk of arrhythmia, which is very concerning.  Besides AVP-923, AVNR has no other drug candidates in its pipeline.  AVNR has a beta of 2.48, P/E of N/A, and a market cap of 517.46M.  Investors should be cautious and think twice or maybe thrice before investing in AVNR.

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