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Opiant Pharmaceuticals Inc (NASDAQ:OPNT): Buy The Dip

Opiant Pharmaceuticals Inc (NASDAQ:OPNT): Buy The Dip
Written by
Chris Sandburg
Published on
September 19, 2017
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This time last week, we published this piece on Opiant Pharmaceuticals Inc (NASDAQ:OPNT).During the few months previous to our coverage, the company had proven a real winner for our readers.When we first covered it back in July, it was trading for in and around $8 a share. By mid-September, this had risen to highs in excess of $50 a share.Since our last coverage, however, the stock has taken a real hit. On September 18, Opiant will open the session at $27.56 – down more than 45% on the just mentioned highs. OPNT Daily ChartAs regular readers will know, one thing that we like to do here at Insider Financial is to keep an eye out for opportunities to pick up stocks at a discount, generally on the back of a correction that we see as temporary. When we see this happening the company we have highlighted as a potential winner as recently as we have done with Opiant, even better.The deeper this one goes the larger the discount available to anybody looking to pick up an exposure on the back of our thesis.So why are we so sure that Opiant will recover?In a word, Narcan.Chances are that a good portion of those reading will have come across Narcan one way or another already. If you caught our previous coverage of this company, you'll be in this group. For those unfamiliar with it, however, it's a nasal spray administration drug that is designed to reverse the effects of opioids in – primarily – the event of an opioid overdose. It's not unique to Opiant, at least not in terms of mechanism of action and active compound, but the nasal spray form is what differentiates this company from the number of other companies making generic and alternative administration forms of Naloxone, the active compound that is actually blocking the opioids.So, we just got an update on how Narcan is doing for Opiant and the update very much supports our long-term thesis on the stock.As per the latest release, net sales of the nasal spray came in in excess of $25 million during the first six months of 2017, which triggered a $3.75 million payment from an entity called WK Funding LLC to Opiant.We also learned that the company that markets and sells the spray in the US (Adapt Pharma Operations Limited, one of Opiant's partners) has been able to maintain a discounted public interest price of $75 per two-dose pack ($37.50 per dose). This is one of the real highlights of the sort of administration – price. As a comparison, the autoinjector costs $4500 for two units as of 2016, up from $690 just a couple of years earlier.What compounds all of this is the August announcing by Donald Trump that the opioid epidemic in the US is a national crisis. Once this is formalized and, in turn, once the US government signed off on some funds to deal with the problem, Narcan is going to see a large spike in demand. The availability of the product is a topic of considerable debate, with said debate primarily rooted in price, meaning that Opiant and Adapt's nasal formulation has a distinct advantage when this shift takes place. While Opiant isn't marketing the drug itself and is earning based on revenue share agreements, the company's top line is very much linked to the success or failure Narcan. As such, as fundamental changes in the US lead to an increase in demand for Narcan, we should see a parallel appreciation in demand for shares of Opiant.As we always say, especially at this end of the space, these are not risk-free plays as far as Opiant is concerned, cash burn remains the primary risk associated with an exposure at this time. With that said, so long as the company can take advantage of the above discussed fundamentally driven boost in revenues and use it to foot the bill for its research and development efforts, near-term dilution should be minimal.Check out our previous coverage of OPNT here. We will be updating our subscribers as soon as we know more. For the latest updates on OPNT, sign up below!Image courtesy of Rae Allen via FlickrDisclosure: We have no position in OPNT and have not been compensated for this article.

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