Neos Therapeutics, Inc. (NEOS)

[chmcnfunds]

Bullish SA article from several weeks ago:

Neos Therapeutics: All Angles Covered For PDUFA

Jul. 14, 2017 9:57 AM ET|7 comments| About: Neos Therapeutics (NEOS), Includes: SHPG
Avisol Capital Partners


(331 followers)
Summary

Neos is a small company developing generic drugs.

Its past experience with the FDA gave it hindsight to approach the next PDUFA properly.

We believe there is now considerable upside from current levels.

By S. Mitra, MBA (ISB)

Neos Therapeutics (NEOS) looks more and more like a very good mid-term investment before the September PDUFA. It is a small company with just a $176mn market cap and yet has an existing revenue stream in the form of two revenue-generating products in the market. A third product, Cotempla XR-ODT, just got approved by the FDA in June, and should be in the market later this year. All these recent products target the large ADHD or Attention Deficit Hyperactivity Disorder market, and uptake and even treatment switching has been good so far. The products have a long patent runway extending to 2032. Recently revised guidance from the FDA regarding more stringent generic bioequivalence standards have also considerably limited competition. Finally, NT-0201, the company’s amphetamine XR liquid suspension, will have a PDUFA in September, providing an important catalyst for the company.

Considering all the above positives, we took a position in the stock yesterday at around $6.50. This is the third time in the last 12 months we have played this stock on a catalyst. The other two times worked out pretty well so we expect nothing less from the next PDUFA catalyst.

There are a number of reasons NT-0201 should succeed with the PDUFA. Principally, this is because the company now has a lot more hindsight from its previous interactions with the FDA. Recall how the company received a CRL in November 2015 because the FDA required a bridging study for the company’s Cotempla XR-ODT product? The bridging study involved showing bioequivalence between the clinical and the commercial versions of the product, including food effect assessment and validation and three month’s stability data. This time round, with NT-0201, the company has already completed the bridging study and a bioequivalence study with the listed drug. As it says in its latest 10-K:

In addition to the clinical trial program outlined below, we conducted two additional bioequivalence studies for NT-0201, in support of the NDA: a bridging study of our clinical trial material and our to-be-marketed drug material, which examined the effect of a high-fat meal on the commercial formulation, and a bioequivalence study of the commercial formulation versus Adderall XR 30 mg.
The bioequivalence study clearly showed that the commercial scale formulation of NT-0201 is bioequivalent to the listed drug, Adderall XR, 30 mg, under fasted condition. As you can see below, the mean-concentration graphs are almost overlapping at every time point.



Source - 10-K

The study also showed that there is no significant food effect, that there was a similar exposure rate in children with a higher mean which decreased with age, just as with Adderall, and also that the safety and tolerability profiles of the two drugs were equivalent.

Armed with this data, the company submitted the NDA on November 15, 2016, so the expected PDUFA date is September 15, 2017.

Another important angle with NT-0201 is that Neos has managed to come to an arrangement with the maker of the listed drug, Shire Pharmaceuticals (SHPG), which lets Neos pay a one time lump sum license fee of less than $1mn and single digit royalties against Shire’s agreement not to file any patent infringement suit against Neos. As we know quite well, launch of a generic product is fraught with the hurdles of patent infringement lawsuits; this agreement effectively nips that problem at the bud.

Overall, we have a good feeling about this upcoming PDUFA and think that NEOS has covered its back very well, taking stock of all possible debacles that could happen, and pre-emptively addressing them all. So, we are betting big on the PDUFA. We do, however, expect another dilution right after, despite its recent $32mn June secondary. The company had about $50 million in cash as of March, and despite the addition of the $32mn, it will still need more cash for the two product launches this year. So, we expect a dilution on good news, and our strategy will be to “rinse and repeat” the stock around the PDUFA and perhaps again enter a small position post a dilution, if any, which we will hold longer term in expectation of positive market uptake sometime by the middle of 2018.

Disclosure: I am/we are long NEOS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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https://seekingalpha.com/article/4087726-neos-therapeutics-angles-covered-pdufa

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