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Adamis Pharmaceuticals Corp (NASDAQ:ADMP)
June 4, 2016
FDA decision on Epinephrine Pre-filled Syringe for the emergency treatment of anaphylaxis (NDA resubmission)
The Science
This one is an already established scientificly. It’s a reformulation of epinephrine (adrenaline), which is the hormone administered when individuals suffer from anaphylaxis, as an immediate response therapy. Anaphylaxis is an allergic reaction that comes about as the immediate response to a substance deemed by the body as foreign and harmful – peanuts, fish or whatever it may be. When the body responds to these substances, it releases inflammatory mediators (cytokines, etc.) to counter what it deems an invasion. This leads to inflammation in the skin, throat, etc., and in turn can lead to suffocation among a host of other things. Epinephrine counters the release of the inflammatory cytokines, and very quickly reduces the inflammation associated with the latter’s release. It is a quick and effective first line treatment for patients that suffer anaphylaxis.
Adamis has not really developed anything new here. It has simply taken the current formulation, and the technology behind its administration – essentially, a needle – and prepackaged the two as a low cost alternative to the current version.
The Data
The data on which the initial NDA was based suggested that Adamis’ epinephrine PFS (pre filled syringe) could deliver an effective and rapid onset dose of epinephrine in patients that go into anaphylactic shock. This was back in 2014, however, when the company first submitted its NDA. On March 27, 2015, the FDA issued a complete response letter (CRL) to Adamis, citing concerns over whether the drug could actually deliver the stated and required dose of epinephrine in its NDA backed form. Of course, this CRL hit Adamis hard, but the company has since recovered and had its resubmission accepted by the agency in January this year. The assumption here is that the agency’s concerns were valid (hence the extended period of time between CRL issue and NDA resubmission acceptance) but that Adamis has now addressed the concerns and fixed the issue.
The Market
The market potential for this one is very large. Mylan NV(NASDAQ:MYL) currently produces the Epipen, which is the product that Adamis is trying to undercut with its low cost alternative. Epipen generates a little over $300 million quarterly for Mylan, with the company selling its product for a little over $380 per pack of two. We don’t yet know the price Adamis intends to market its PFS at, but we know it’s a low cost alternative, so it’s reasonable to assume it will be looking at a price point somewhere in the region of 40-70% of the above mentioned $380. This, in turn, gives the market potential (assuming a 100% market penetration, which is very unlikely, but let’s use it for illustrative purposes) of between $120 million (40%) and $210 million (70%).
Reaction and Trading Strategy
With this one having been drawn out for so long, Adamis has been a volatile stock to hold over the last few years. The company is down more than 53% on highs registered just before it submitted its initial NDA, and the market currently values the company at a little over $132 million. This seems low, given its lead candidate’s market potential, and offers up the chance for plenty of potential upside if the agency gives the Epinephrine PFS a green light. It’s not often we say this, but a triple digit upside is possible. At the low end, look for a 70% gain on a positive outcome. Of course, the downside is equally severe. Adamis Pharmaceuticals Corp (NASDAQ:ADMP) is heavily reliant on the outcome, and as such, could quickly lose 50% of its market capitalization if the FDA says no. In many ways, a classic biotech development space play. The date to watch is June 4.