Omeros (OMER)

Omeros is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing products focused on inflammation, coagulopathies and disorders of the central nervous system. Below is a breakdown and timetable of potential catalyst for the stock.

OMS302 is at the top of the chart and has submitted a new dug application to the FDA in July.  The company should get notice by the end of September whether the FDA will accept the NDA.  If accepted it should be another eight months until the FDA either approves the drug or not.  Based on two strong phase III trials, the application should be accepted and the drug approved mid year 2014.  Even though the OMS302 program is the next potential catalyst on a timeline basis, the reason we have purchased OMER for investment is based on the PDE 10 inhibitor program for Schizophrenia, called OMS824.  We are mainly interested in the company for this central nervous system drug inhibitor PDE 10 or OMS824.  

  

OMS824 just began the enrollment stage for a phase II study evaluating patients with Schizophrenia announced on September 19th, with results to be released by years end.  There is currently no approved treatment, so this would be considered a drug for an unmet need.  The previous phase I studies showed that the drug, even delivered under high dosage, was well tolerated and safe for use, leading the company to start this very important phase II trial.  The potential pool of patients for this indication is around 2.2 million Schizophrenia patients in the U.S. with over $16 billion in sales of atypical Antipsychotics in 2009.
PDE10 Patent expiration:
2027 for composition of matter.

Risks:  The risks associated with OMER include financing, the phase II OMS824 upcoming trial, and the FDA approval processes.  The company will need financing shortly with only around $21 million in cash left and a burn rate of around $4.5 million per month.  The company also has increased it's debt level to $20 million and is paying 9.5% for it. So I expect some dilution within the next six months.  But that is typical for an early stage biotechnology company.  Below is a weekly chart of OMER.

Bottom Line:  The company is a high risk micro cap stock with just a $200 million market capitalization.  We are holding shares for their OMS824 Schizophrenia program that could have a huge payoff if they achieve significant results.  If the current phase II OMS824 program does show good results, then the market capitalization should double to $400 million or roughly $15.00 per share minimum.  The risk to reward at these price levels looks promising. Thank you for reading.

Contact: 586-431-8000

ACAD: ($22.63)

Acadia Pharmaceuticals (ACAD) presented at the Morgan Stanley Global Healthcare Conference on Monday at 9:25 a.m.  Here are a few takeaways from that conference.

A) CEO Uli Hacksell stated that they expect "very significant" pricing power of Pimavanserin once approved by the FDA, due to past new drug launch comparisons, safety, and the unmet need with victims with PDP.
B)  ACAD believes Pima can be used for all kinds of dementia outside of Parkinson's and Alzheimer's disease.
C)  The FDA and ACAD agree that there are no safety concerns with Pima regardless if the indication is for Parkinson's or Alzheimer's.
Overall, there were good questions asked from the Morgan Stanley analyst, and equally strong replies from ACAD management.
The priority list for ACAD was pointed out as being:
1.  To continue to gather all relevant information to submit an NDA (new drug application) to the FDA.
2.  To run a phase II trial for patients with Alzheimer's disease.
3.  Run a phase II Schizophrenia trial using Pima coupled with Risperdal.

The stock made a new all-time closing high on the day of the conference, which was Monday.  Below is a weekly chart.

Bottom Line:  ACAD is moving along nicely with their lead drug Pimavanserin and intends on submitting and NDA by the end of 2014.  They also plan on starting a phase II Alzheimer's disease trial by the end of 2013.

From my previous post Future Value of ACAD, I ran some revenue estimates and came to a near term price for ACAD of around $29.00.  Judging from Monday's stock making a new high, I think investors are starting to see the big picture of what Pimavanserin can potentially be......a new and safe blockbuster drug to treat Parkinson's, Alzheimer's and other dementia related disorders.  Thank you for reading.

Disclosure:  We hold ACAD equity and options, CBST, ONTX, and January puts on the SPY.

ACAD: Future Value of ACAD ($19.96)

The goal for this post is to compare any similar drugs on the market today, particularly a anti psychotic, and compare the prices with what Acadia's Pimavanserin might be able to sell for once the drug is approved for Parkinson's Disease Psychosis (PDP) and goes to market in 2015.  From there, we can come up with some revenue estimates and market capitalization and finally a fair stock price per share estimate based on peak revenues.

For comparison's, I have inquired about the price of Abilify, which is a anti psychotic drug used to treat various psychotic conditions and will remain a non generic drug until April 2015.  I choose Abilify because it is a non generic, and many anti psychotic drugs are the only treatments available at present to treat PDP off-label. Clozapine is another anti psychotic drug used, but, it is now generic, so an apples to apples comparison cannot be made.  I was quoted prices at CVS and Sam's Pharmacy for Abilify.

Cost of Abilify at CVS Pharmacy
$14,484.00 per year supply 30 mg daily tablet.
$1,207 for a 30 day supply of 30 mg tablet.
$40.23 per pill cost daily 30 mg tablet.

Cost of Abilify at Sam's Pharmacy
$11,587 per year supply 30 mg daily tablet.
$965.60 for a 30 day supply of 30 mg tablet.
$32.18 per pill cost daily 30 mg tablet.

We'll use the average of the CVS retail price and discounter Sam's to derive the annual cost of Abilify 30 mg tablets for comparisons purposes of what Acadia's Pimavanserin might be able to sell for once it reaches commercialization in 2015. Which is $40.23 + $32.18 = $72.41 / 2 = $36.20 per 30 mg Abilify daily tablet.
But to be conservative, I am going to discount the daily cost of the Abilify tablet down around -10% to $32.80 per daily use priced to the consumer.

Which equates to:
$11,808 per annual supply.
$984.00 monthly supply.
$32.80 per pill daily 30 mg tablet.

I am going to refer to different analyst revenue prediction reports and Acadia presentations to draw further conclusions on future revenue based on the overall US Parkinson's Disease Psychosis market.
1,000,000 With Parkinson's in US.
30% develop PDP or Parkinson's Disease Psychosis at some point.
300,000 total patients with PDP.
50% penetration rate of those with the psychosis.
150,000 the actual number treated for PDP with Pima out of 1 million Parkinson's total victims - conservatively.
$32.80 = retail price per tablet per day of treatment, based on the Abilify retail pharmacy prices.
$18.00 = Sales to Acadia per 40 mg tablet before all the wholesale roughly (35%) and retail (35%) markups prior to being sold to the consumer.
$6,480 = Per patient ACAD annual revenue, ($18.00 per day * 30 days * 12 months)
$972,000 million = Total peak revenue to ACAD, (150,000 patients * $6,480 annual revenue to ACAD) U.S. Parkinson's Psychosis indication only.

The average biotechnology acquisition is a market capitalization of 3-4 times peak sales.  So, at three times peak sales from Pimavanserin for U.S. PDP, we calculate a share price by taking peak annual revenue of $972,000 million * 3 =  $2.916B market capitalization / 100,000,000 (approx. shares outstanding) = $29.16 stock price. The stock is currently trading at $20.00 per share or just 2.0 times peak sales.

Assumptions to future stock value
A)  The price above of $32.80 per daily tablet, reflects the mark up by the wholesaler and the pharmacy company selling to the consumer, not the price Acadia sells from manufacturing.  I believe the figures above are close enough to work with and scale backwards.
B)  Pima can price at $32.80 per tablet to the public.
I view the $32.80 per tablet as fair given the fact that Pimavanserin has a clean safety profile compared to Abilify and there is not another drug to compete with Pimavanserin for PDP.
C)  ACAD can penetrate 50% of the US market (50% of  300,000) for the patients that develop PDP.
PDP has an unmet need, and Pimavanserin has a clean safety profile compared to other anti psychotics that are being used today that have black box warnings.

Further note, that these revenue figures only include PDP in the U.S. and not Alzheimer's Disease Psychosis or ADP which patient's have similar symptoms. The ADP market is roughly four times the size of the PDP market that I just ran revenue figures on above. The math get's a lot more fun if ACAD can prove through trials that Pimavanserin works as well with Alzheimer's patients as it does with Parkinson's Disease patients as they are planning a phase II Alzheimer's Disease Psychosis study by year end 2013.  Also, the company holds world wide rights to Pimavanserin and the above revenue potential does not include the rest of world outside of the US, nor does it include any potential off-label for other indications.  The U.S. patent for Pimavanserin runs until mid 2028, and European patent runs through 2024.  Thank you for reading.

Disclosure:  We currently hold shares of ACAD.