This Company Could Be An Opportunity To Buy Into A Dramatic Oversell


Most of the time, when we look at the development end of the biotech space, we focus on small cap stocks with a valuation of between $250 million and $1 billion. Six weeks ago, Repros Therapeutics Inc. (NASDAQ:RPRX) fit nicely into this bracket. As things stand today, however, the market values Repros at just $42.5 million – a close to 80% decline on its October 19 close. The driver behind this decline was the cancellation of an early November advisory committee meeting that would have seen a review team report its opinion on Repros’s lead candidate, enclomiphene, in a secondary hypogonadism indication.

The FDA is set to report its final decision today, however the likelihood of a decline is high. The regulatory agency cited questions concerning the bioanalytical method validation used in the trial as the reasoning behind the cancellation. Apparently, the method used could affect the interpretability of pivotal data on which the drug’s NDA was based. Any doubt over the credibility of pivotal data almost always translates into a non-approval. With this in mind, today could mark another steep decline in Repros’s market capitalization. Of course, some level of sentiment towards the PDUFA will already be priced into Repros stock, but not all.

With this said, the cancellation of an advisory meeting might just be a forerunner to an extension on the clinical phase of enclomiphene. The FDA defines bioanalytical method validation using six broad categories – accuracy, precision, selectivity, sensitivity, reproducibility and stability. The thing is, as bioanalytical processes advance, the way in which these categories are applied changes. If the FDA concerns relate to an element of the process that can be modified easily (which we will gain insight into today), and the data can be alternatively presented in a way that supports the initial hypothesis, approval might not be that far away.

Additionally, while enclomiphene is the company’s lead candidate, it also has another drug in mid to late stage trials that has the potential to generate revenues to the level of, or even higher than, its lead counterpart. Markets seem to have overlooked this candidate in favor of a dominant sell bias. The drug is a uterine fibroid therapy called Proellex. Uterine fibroids are non-cancerous growths that form in the uterus, which have a range of symptoms including heavy menstrual bleeding, pelvic pressure and constipation. As much as 75% of women will develop uterine fibroids during their lifetime, and while a portion of these will go undetected through a lack of any real symptoms, many have symptoms so severe that they necessitate a hysterectomy. Repros is targeting the symptomatic patients, with the goal of reducing the need to undergo this serious operation. Top line is expected from a phase IIb during the first half of next year, and positive results could be a turning point for the company – that is, assuming positive developments surrounding enclomiphene haven’t already initiated an upside reversal.

So what are trying to say here? Well, that Repros has taken a hammering over the last couple of months based purely on expectations of an FDA decline. However, these expectations don’t necessarily mean the end for enclomiphene, as the FDA may report today that it only requires additional data, or even better, an alternate relevance analysis of the current data. With topline from a late stage phase II also coming early next year, we could see both a revised FDA decision and some encouraging trial data contribute to a reversal market sentiment surrounding Repros within a relatively tight timeframe – specifically April-June 2016.

In the development stage biotech space, speculator sentiment is king. When a company has little or no revenues to speak of, its valuation generally relies on trial data and FDA updates. Both the interpretation of trial data and the implications of updates are qualitative, not quantitative, and as such, have the potential to induce over (or under) reaction. In this reaction lies opportunity, and in this instance there may be an opportunity in an oversell of Repros. One to watch going forward, with a strong focus on today’s FDA announcement.

An ad to help with our costs