Innovus Pharmaceuticals Inc (OTCMKTS:INNV) just put out some news related to its lead development asset and the company has picked up a bit of strength on the back of the release. This is one we have covered on a number of occasions in the past, and the asset in question is one that we have – as part of said coverage – repeatedly highlighted as being a sort of moonshot, as compared to the bread-and-butter revenues that Innovus derives from its already commercially available product portfolio.
The news that we got today wasn’t quite what we were looking for as confirmation that the moonshot is in play, but it goes some way towards it.
Management is set to hold a conference call on Friday, early session, and we expect the lion’s share of this conference call to address the latest announcement. As it turns out, there seems to be some confusion as to exactly what the announcement means and how it plays into Innovus’ valuation. When the company clears this confusion (and we think it will do just that on the upcoming call), we expect its share price to pick up.
With this in mind, and ahead of the call, here’s our take on what the latest news means, and an attempt to offer readers a chance to get a jump on the added volume that comes on the back of the clarity-inducing call.
So, the asset is called Fluticare, and regular readers will know that this is one that we highlighted in the past as what we might call the ‘speculative highlight’ of this company. It’s already approved as a prescription pharmaceutical in the US and it’s the most widely prescribed asset in its indication: allergic rhinitis. Innovus, however, is looking to pick up FDA approval for over-the-counter marketing under the above mentioned Fluticare moniker.
There’s an existing ANDA with the FDA right now and it’s this application that we have referenced in our previous coverage of the stock. Nothing has happened with this application for (essentially) twelve months, however, and shareholders were getting a little impatient after repeated missed milestones by management associated with the drug.
The latest news, then, is that the company is going to fast-track the asset’s path to market through the hijacking of an already approved ANDA, owned by an entity called West-Ward Pharmaceuticals. West-Ward Pharmaceuticals already has an agreement in place with Perrigo Company plc (NYSE:PRGO) based on the same ANDA and for what is essentially the same asset in the same indication, and this is one of the things that is causing a little bit of confusion.
What’s important to recognize is that the Perrigo asset is a store branded deal. Basically, it allows for Perrigo to sell the product to stores such as Wal-Mart Stores Inc (NYSE:WMT), which can then resell it to customers under the Walmart moniker as an own branded product. The Innovus arrangement is different. The company is taking the West-Ward ANDA and using it to brand Fluticare as a nationally branded product.
This may still seem a little confusing to some, but it needn’t be. Think of it like this: West-Ward manufactures the product. Perrigo takes it and sells it to Walmart, which then sells it as “Walmart’s allergy spray” to customers. Instead, Innovus takes it and sells it to customers (direct and through drug stores) as Fluticare. Same product, different brand.
The problem, of course, is that this isn’t Innovus getting its drug to market under the previous ANDA, which basically means there’s a middle man. This middle man (West-Ward) is going to limit revenue potential, at least for now.
On the other side of the coin, the upside to this arrangement is that it allows the company to start marketing the product under the Fluticare brand name, meaning there’s opportunity to inject a certain degree of consumer awareness of the product into the market before the FDA approves the original application.
For that reason, it’s a positive development. Sure, it’s not the $250 million-plus development we were looking for, but it gets the company to market, and at a time when impatience was weighing heavily on sentiment, that’s incredibly important.
As mentioned, there’s a call tomorrow that will outline all this to shareholders and anyone that wants to listen, and we expect said listeners will come away from the call with a positive outlook. In turn, we expect the company to pick up a bit of strength heading into the session tomorrow, and that the strength to continue into early next week.
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Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.