Towards the end of last month, we published this piece on Egalet Corp (NASDAQ:EGLT). The driver behind our coverage was that the company had seen its share price decline during the months running up to the end of November and we felt that a couple of near term catalysts could be what was required to get things turned around.
At the time of our highlighting this one as a stock to watch, November 22, Egalet was trading for around $1.00 flat. By midday on Friday (as one of the catalysts we outlined as potentially turning the stock around hit press), Egalet was up at $1.35 – a 35% or so appreciation.
Right now, the company goes for around $1.20 and the correction could be an opportunity to pick up some cheap shares ahead of a longer-term return to the overarching upside momentum.
Here’s what we are thinking.
Anyone that’s been with us a while will already be familiar with Egalet but by way of a quick introduction to the company for the uninitiated, it’s a biotech stock that’s working to bring abuse deterrent (for the most part) opioid products to market in the US. There’s a huge problem with abuse deterrence right now in the US, perpetuated by the flood of prescription opioids that have hit the market over the last decade or so.
Many companies are working on solutions to the epidemic and Egalet’s offering to this aim is a drug called ARYMO ER (morphine sulfate), which is an extended-release morphine asset that initially picked up approval back at the start of this year as a treatment for the relief of chronic pain.
The latest news (the catalyst that’s pushing up the stock) relates to a supplement to the initially approved application that Egalet submitted shortly after the initial approval.
So what happened?
In short, the initial approval didn’t include abuse-deterrent labeling. This is a problem because there is a huge number of generic opioid options available in the US right now and without a differentiator (like abuse deterrence), even with approval, the market potential for ARYMO is extremely limited.
If the company could get abuse-deterrent properties listed on the drug’s label, however, it would serve to set the asset apart from the already available options and – in turn – should lead to a substantial market share acquisition.
And that’s exactly what the company just reported.
The agency has issued tentative approval for the company to update the drug’s prescribing information with data from a category 2/3 intranasal human abuse potential (HAP) study and an intranasal abuse-deterrent claim.
That’s a big deal and it’s one that offers a nice USP for the drug from a prescriber perspective.
So where do things go from here?
It’s important to note that this is a tentative approval, meaning that the company won’t be able to alter its labeling just yet. There’s a patent with another company that needs to expire before Egalet can make the alteration and until tis expiry takes place, the FDA isn’t able to grant full approval to the supplement.
With that said, however, it’s more of a formality than anything else. There’s nothing to suggest that there will be any issues between now and patent expiry, which is slated to happen at the start of October next year, meaning it’s just a waiting game.
Once the full approval is granted, this company can start generating some real sales on its commercial portfolio.
As mentioned last time, there’s also an ongoing phase III trial investigating Egalet-002 that should read out during the coming months and – again – this is very much a catalyst to watch for Egalet and its shareholders.
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Image courtesy of Erich Ferdinand via Flickr
Disclosure: We have no position in EGLT and have not been compensated for this article.