Down But Not Out - A Drug Stock Ready to Boom
15 May 2009
In 2007, the value of the global pharmaceutical pain relief market was approximately $31 billion. In the United States, two-thirds of the dollar volume of the prescription pain medication market is for drugs used to treat chronic pain, with the reminder going toward drugs used for acute pain.
Javelin Pharmacueticals Inc. (JAV: AMEX) designs products to fulfill unmet and underserved medical needs in the pain-management niche. The company is particularly focused on breakthrough cancer, post-operative, back, orthopedic injury and burn pains. Despite the advances in medicine, the company insists treatments for these types of pain continue to be an underserved medical need.
The company penned an agreement in January worth up to $71 million that includes double-digit royalties on future sales of its new pain drug, Dyloject. Javelin will receive roughly $12 million in upfront cash payments from European pharmaceutical developer Therabel for the commercialization rights for Dyloject, the flagship product in Javelin’s current pipeline. Dyloject is an injectable form of diclofenac, which is a prescription anti-inflammatory drug often prescribed to treat post-operative pain.
Dyloject is undergoing Phase 3 clinical development in the United States – the drug is already available in the United Kingdom. During its pivotal U.K. registration trial, Dyloject’s efficacy and safety were shown to be significantly superior to standard intravenous treatments currently marketed in the U.K.
Dyloject is already on the market in the United Kingdom, and sales have been growing at an impressive pace. The drug is now on the formularies of 73 hospitals in the U.K., 58 of which were considered gold accounts and 15 silver accounts. In the first nine months of its availability, Dyloject was accepted at 40% of their targeted accounts.
The drug has been accepted at 95% of the institutions to which it’s been presented. This, Driscoll believes, shows that Dyloject has values to clinicians. It will prove valuable to shareholders, too…
Since Dyloject was introduced to the market, sales of the drug have doubled each quarter. Although that may be a small sample size, it shows the growth potential of the product once it is introduced into a winder market.
Like most of the market, shares of Javelin were slammed over the past year. Even after the partnership with Therabel was announced, the stock didn’t bounce much. With drug applications expected in late 2009 and shares are low levels, investors have a great opportunity to get in at a bargain level.
CEO Driscoll has shown his confidence in Javelin with his money. In May and June of 2008, Driscoll purchased 50,746 shares of Javelin common stock at a value of $169,598.
He wasn’t the only one. In total, Javelin’s directors and officers purchased 667,776 shares in 2008. That’s more than $1.6 million in company stock. In 2008, Javelin’s leadership made their confidence known with large bets on the company’s stock. 2009 will be a huge year for Javelin.
Javelin possessed two key profit catapults: its $71 million agreement with Therabel and pending FDA approval here in the United States. In addition to its $12 million in upfront cash payments and $59.5 million in sales and regulatory milestones, Javelin will earn a double-digit royalty on future net sales of Dyloject in all countries covered by the agreement. Both of these key events will contribute significantly to the company’s top and bottom lines.
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