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I can't say I have heard that the word on the street is that there is going to be an equity raise, I just am surmising that based on the shorting interest, the lack of cash the company currently has, the idea that Odidi will get his convertible paid off and reports that suggest the company is hustling to produce drugs for their partners.
I am hoping your analysis is correct. And it may be and those trying to short are mis-reading Odidi's intentions. Any normal company would do an equity raise, but this is not an ordinary company. Which is one of the reasons I like it.
The reason for the shorters perhaps showing a degree of anxiousness to get ahold of shares to sell could be because there is word on the street that the company is going to do an equity raise. In this case, it may be coming from a position of strength, however, as the company might detail its 2017 and 2018 revenue outlook for the market as part of any deal. And that might look better than any of us think, particularly if new partnerships are about to be signed. I also have a feeling the company is seeing some pretty good demand for its already partnered drugs and is having trouble finding enough cash to produce the needed quantities. These are good problems.
It would be easy to see where they announce a new partnership deal and shortly follow with an offering.
You will all be interested to know that our broker contacted us today (we are a large holder) offering us a 40% daily return if we would allow them to lend out our shares to short sellers. We refused the opportunity. But clearly, the shorts are in search of shares and are willing to pay handsomely to get them.
In today's computerized trading world where trading algo's dominate the buying and selling, you can be pretty certain that computers were doing most of the buying and selling on Friday. And those computers are programmed to make pennies of a narrow spread and do it many, many times. So, much of the volume was likely from algo's that were attracted to the volume (this stuff feeds on itself).
This is the same site where the previous bogus rumor last Fall came from. Unfortunately, there is zero credibility with this source. Anyone can post anything they want there.
Are you aware of Ibalizumab? How do you think it will impact the prospects for PRO 140? It is going to be filed with the FDA soon (its phase III was completed in October of last year) and should be on the market later this year. Like PRO 140, it is a MAB and has no side-effects. It also treats all varieties of HIV (unlike PRO 140) and is given every two weeks via IV. Test results show it to be more effective that PRO 140 as well, although both drugs are pretty effective. PRO 140 is a good drug but it looks like a better drug will be on the market soon. Also, the financial situation of CYDY remains very precarious. How does PRO 140 survive the financial and competitive pressures?
From listening to the presentation, I came away thinking they may have a partner for Regbatin sooner than Rexista. Unfortunately, no one in the audience was knowledgeable enough to ask about the potential for a Purdue lawsuit and if that would delay partnering the drug.
Here is the Mackie analyst's latest take:
IPCI is Difficult to Model – Too Many Moving Parts: IPCI is a very difficult company to model due to the inability to accurately predict when product launches occur. We lowered our generic Focalin XR sales forecasts from 2017 to 2020. Generic Seroquel XR should launch
around May, but the exact timing is uncertain. We lowered our 2017 R&D estimates as we are not sure when the trials for pregabalin will begin – management is trying to out-license it. To be even more conservative, we lowered our 2018 Rexista royalties as we are unsure how long a Purdue lawsuit could tie up IPCI – a 30 month stay could result in Rexista being launched in 2019 (possible but unlikely). We also have amortized our IPCI licensing revenue ($3M upfront from Mallinckrodt and assumed $7.5M upfront in Q4 pertaining to a Rexista out-licensing deal) over 10 years – this impacted our 2017 revenue estimates.
Roadmap for 2017:
FDA recently accepted the review of the Rexista oxycodone NDA. Under
the Hatch-Waxman Act, we expect IPCI soon to notify Purdue of its Rexista NDA via a Paragraph IV certification. We expect Purdue to sue IPCI within 45 days once it gets the notification. We expect this litigation to occur in late March or April. That lawsuit would
then trigger a 30 month clock before IPCI could launch its Rexista (assuming it receives FDA tentative approval). However, we have assumed IPCI would settle with Purdue in 2018 and then launch. We expect FDA to grant tentative approval of Rexista on September 27, 2017.
IPCI needs to find a strong marketing partner to showcase Rexista oxycodone.
This may be of interest: http://www.businessinsider.com/obamacare-medicaid-expansion-states-in-danger-opioid-epidemic-2017-2
My focus was on the stats in the article more than the premise of the article. The stats in it are horrible regarding the opioid epidemic. IPCI could be in a very good spot as something has to be done. Not that we didn't already know it but it is good to get a reminder about just how bad this has been and how it keeps getting worse.
This may be of interest: http://www.businessinsider.com/obamacare-medicaid-expansion-states-in-danger-opioid-epidemic-2017-2
My focus was on the stats in the article more than the premise of the article. The stats in it are horrible regarding the opioid epidemic. IPCI could be in a very good spot as something has to be done. Not that we didn't already know it but it is good to get a reminder about just how bad this has been and how it keeps getting worse.
The potential lawsuit is definitely the reason for lack of a partnership deal. Also, in theory, since Purdue has the most to lose from Rexista, it should be willing to offer the best terms in a partnership deal. So, I imagine IPCI wants to do the deal with Purdue to maximize value for shareholders.
From reading the MD&A, it appears to me that IPCI feel they have a good case against Purdue. If true, Purdue will sue, use the courts to extend the situation as long as they can and then settle with IPCI on the courthouse steps. I have no long Purdue can keep things hung up in court, but I am guessing it might be until mid-2018. If anyone else has more knowledge about such things, we would all appreciate hearing more.
So, we can expect a lawsuit shortly from Purdue, we can expect a September tentative approval for Rexista, we can expect revenues from currently approved and newly approved generics to give the stock upside between now and when IPCI settles with Purdue and we might also get the sale of rights to one of the generics or partnership agreements on Regbatin to bring in capital sooner to enable the company to get spending on Regbatin and Podras sooner.
I am pretty sure this story has a happy ending and probably a not so bad middle as well.
The cash position was a positive surprise to me - I thought it would be lower. And if they have to do anything more than a little ATM before the cash starts flowing towards the end of Q2, I would be surprised. If there was a bigger share offering it would be to fund something big with a lot of growth potential, and that would be a positive, not a negative.
So, we now wait to see if Purdue sues IPCI and also to see if the FDA approves any of the other generics. I suspect we will see both over the next few months. But the revenues from the generics should be sufficient to get the stock price higher as we await the ultimate settlement with Purdue and partnership of Rexista.
Part of the Mackie report.
From a Mackie report this morning (They left their price target at $6 and said they expected the stock to trade higher today):
We Believe Rexista Should Be Best-In-Class: If approved, Rexista may be the only abuse deterrent oxycodone product with properties that may provide early warning of drug abuse if the product is manipulated or abused. IPCI previously announced the results of a food
effect study which showed that Rexista can be administered with or without a meal (i.e., no food effect), providing another point of differentiation from currently marketed oral oxycodone extended release products. The submission includes abuse-deterrent studies
conducted to support label claims related to abuse via oral, intra-nasal and IV use.
Can IPCI Hurdle Better than Ezekiel Elliott?: Under the Hatch-Waxman Act, we expect IPCI soon to notify Purdue of its Rexista NDA via a Paragraph IV certification. We expect Purdue to sue IPCI within 45 days once it gets the notification. We expect this litigation to
occur in late March or April. That lawsuit would then trigger a 30 month clock before IPCI could launch its Rexista (assuming it receives FDA tentative approval). However, we have assumed IPCI would settle with Purdue in 2018. We expect FDA to grant tentative approval
of Rexista in H2 2017 and we forecast final approval in 2018 once the patent dispute is resolved. We have modeled IPCI to market Rexista in the U.S. in 2018. IPCI needs to find a strong marketing partner to showcase Rexista oxycodone.
Bloomberg says there are 1.6 million shares, or 6.9% of the float, that are short IPCI. They can't be very happy right now. It will be interesting to see if they try to take the stock down tomorrow before starting to cover. It would be nice if they were met by a wave of long-only buyers and were unable to pull off such a stunt but IPCI is still a very small company with a very small following and lousy broker coverage. So, a concerted efforts by the shorts to temporarily keep a lid on the stock might be successful.
My best guess is that we will have to wait longer than we like for the partnership, but I hope you are right.
The stock market is weird. It was lock that this news was coming so you would have thought the stock would have ripped even more in the last week or so. But better late than never. It is very good news and a 9/25 PDUFA date is pretty good as well (I would like to have seen it be a bit earlier). Now, we are on watch for a partnership deal and/or a lawsuit from Purdue. In the end, the lawsuit will be dealt with and a partnership will be signed. We just cannot know now in what order these things will happen and how long it will take. A lawsuit from Purdue should show up pretty quickly (a month or two at the most) if it is going to happen.
Though you all might find this broker comment on COLL's Xtampza's sales of interest:
"Xtampza ER prescriptions show strong ramp in latest week (COLL). TRx's for
Xtampza ER, COLL's abuse-deterrent form of oxycodone ER, totaled 1,056, up from 896 in the prior week. Recall that COLL signed a number of contracts with key payers in 2H16. Based on the most recent week of Rx data, we estimate that sales are now annualizing to $12M-$13M, assuming a gross-to-net spread of 40%-45%."
That is a rather unimpressive sales performance for a stock with a $361 million market cap. IPCI might get more sales from its ANDA's in 2018, let alone Rexista sales, and it has a market cap of $82 million. IT does not make any sense.
Selling now would be crazy as it would allow others to reap the substantial value creation that has yet to occur but seems apparent to most on this board and who follow the company closely.
ANDA's will make the company nicely profitable, maybe even this year if we catch a break with early enough approvals. Rexista, will make some serious money, Regbatin will make even more but PODRAS is the "killer app" in IPCI's product portfolio as it could produce huge royalty streams for years to come. It is unlikely that the company gets all of the above to work as we would hope, but it is not out of the realm of possibility. And, yes, the stock would be a moonshot if even most of the above came to fruition. But it will take time. Shareholders should be thinking in a 5 year time frame, at least. Now that PODRAS's patent is public, you can expect other drugmakers to try to come up with knock-offs of it and patent that themselves. IF they are successful, that might cut out some of the years of royalties for PODRA, but they have a decent head start.
Rexista is the biggest threat to Purdue. Therefore, it seems reasonable to assume that Purdue will do all that it can to thwart Rexista, including suing it on baseless grounds. This is particularly sensible for Purdue to do because IPCI is so cash poor and can't really afford the lawsuits. Indeed, it could end up being a negotiating tactic of Purdue to get a better price from IPCI as the long term Purdue goal may be to partner with IPCI. Meanwhile, the longer they are able to delay Rexista's launch, the more money goes into their pocket. Also, why would Purdue ultimately let IPCI partner with someone else and hurt them when they could get only benefit from a partnership rather than pain from fighting off IPCI's non-Purdue partner? From IPCI's perspective, Purdue should be willing to pay them the most since they have the most to lose. So there is a deal waiting to happen between the two companies, but don't be surprised if it gets a little dramatic first. What would be good for IPCI to do is to line up several other partners and tell Purdue we are going to go with one of these if you don't call off the lawyers and do a deal with us now. That might force Purdue's hand.
So, I hope I am wrong and Purdue and IPCI come to a nice partnership agreement well ahead of a stupid, fake patent fight. But be prepared for the stupid, fake patent fight as it might happen. Just one of many possible theories as to what could happen and I highly doubt it plays out exactly like I have drawn it up above. But you would be wise not to ignore the possibility.
I believe you underestimate the advantage the no food effect gives Rexista. When you are in pain, you rarely feel like eating. So, doctors are more likely to prescribe Rexista as it will more likely be taken by their patients because of the no food effect. It is a differentiator in my view.
They could have a manufacturing agreement in place without a marketing agreement. The two could be separated.
I suspect that PODRAS is the most valuable thing IPCI has and yet it gets no value at all from the market as best I can tell. So, if Rexista is strung out by the FDA, I believe there is still huge value in the share price. But I also know the market is not too smart and will knock the stock back on any delay of Rexista. But i am still a long term believer, even if that were to happen. Hopefully, tomorrow passes uneventfully.
Given IPCI does not have to do any phase III tests, that is even better than Priority Review. It saves us shareholders another dilutive offering as the company would need the money to fund those tests had they been required and it gets the drug to the market far faster than having to do Phase III tests and getting Priority Review status.
Great post - thanks for your efforts.
Perdue sued Collegium and held up their marketing. It is not 100% clear they will sue IPCI as well, but you should assume they are going too until a few months have passed after getting FDA acceptance. It simply is in Perdue's self interest to do so, unless they are going to partner with IPCI. And they are the most logical partner as they will suffer from Rexista's presence on the market if the company partners with another firm.
Now, the lack of a partner being lined up so far is intriguing. Does it reflect smart negotiation skills by IPCI, waiting until the last moment when their position is the strongest so they can get the optimal deal? Or does it reflect a lack of interest because Rexista is an opioid and no company wants to be associated with opioids right now. Or something else? There are no end to the possibilities on this front and the company sure is not providing much guidance as to the status here. Then again, doing so would likely undermine their negotiating leverage. But it is worth thinking about the fact that a company that is pretty confident in the outcome tends to be much more open about where the process is heading. So, I am concerned about the partnership situation.
We know the company intends to partner Rexista, so it does not intend to go it alone. On the manufacturing issue, they should have no trouble at getting someone to do that for them. The key is finding a marketing partner for Rexista. If they are able to do that soon, my worries will reduce greatly.
I don't think the ATM goes away until a partnership is signed or we get to the middle of 2017 and cash is flowing in as good or better than we expect from the ANDA's. There will be a cash squeeze in the Spring. This cash squeeze is another thing that may be causing a delay in a partnership as potential partners know the company is desperate for cash and are hoping they will take less just so they can get some cash in their pockets. If there are not a bunch of motivated competing partners, this could be a reason behind the delays. Also, the low cash position is another reason Perdue might sue as they see that as a weakness they can exploit since lawyers are expensive.
Like you, I see risks, but i also see a pretty good potential for very high returns as the company does seem to have differentiated technology. I am pretty sure it will all work out well but the path from here to there might not be as straight as I would like it to be. What would really help the stock is for it to be able to get coverage from decent analysts. But since they are protecting us as shareholders (and Odidi himself since he is a large shareholder) by not doing huge, dilutive share offerings that attract the better brokerage firms, we have to be content to wait for the numbers to speak for themselves and drive the stock higher. Shoot, Podras alone should have a higher valuation than the current stock price given its promise. But only us on this board are aware of it and we do not have enough clout to push the share price to where it deserves to be.
Once the FDA accepts Rexista's application, it becomes a threat to Ocycodone and therefore they will use whatever they can to delay or destroy that threat. They likely will not be successful with any lawsuit, but the fact is that IPCI is cash poor and they know they can mess them up by taking them to court. Now, on the other hand, they might just do a deal with Perdue first to partner with them on Rexista. But, whatever happens, there could easily be a bit of hardball negotiating that goes on first which could involve the threat of a lawsuit or an actual lawsuit.
So, if it comes off patent in 2018, then does that mean generic competition for Oxycodone/ Rexista? Would that mean all our assumptions as to revenues are too high? I don't think so as I believe the Oxycodone patent situation is more complicated than just the 2018 expiry. But I would be interested in your thoughts on this.
I think this stock is going to soar at some point but it might not be in the next few months. I am not as certain that FDA acceptance will immediately be followed by Rexista partnership deal. As I have said before, Purdue is likely to sue IPCI sometime after the FDA acceptance (but that might well be part of their negotiating strategy to partner with IPCI or acquire them). The bottom line is that partnership is something that may not be on the immediate horizon. Good things will eventually happen but perhaps not in the time frame you imagine.
If IHub crashes and burns, I would recommend Stockhouse.com since IPCI is a Canadian company.
I believe the food effect is the biggest advantage over the others.
In addition to IPCI, you should really take a close look at Theratechnologies (TH). Very successful phase III testing of their new drug for HIV, Breakthrough Therapy and Priority Review status from the FDA on the drug (ibalizumab which will formerly complete their BLA in Q1) and insider buying from all the management team and board in the last week. Could easily be a 10 bagger as it is completely undiscovered. Trades at THERF in the US.
I am pretty sure the MAckie analyst is getting the info about the likelihood of Purdue suing IPCI directly from the company. So, that means you think the company does not know what it is talking about. Seems unlikely.
Unfortunately, there is no link that is accessible to the public. But here is the relevant paragraph:
The New Roadmap: Once Rexista oxycodone is filed at the FDA, within sixty days we would anticipate the FDA to let IPCI know that they have accepted their NDA for review. After that occurs, we would expect the IPCI to certify its Rexista oxycodone product with Purdue (a paragraph IV certification under the Hatch-Waxman Act). Once IPCI notifies Purdue with
the certification, we would expect Purdue to file a lawsuit against IPCI within 45 days. That lawsuit would then trigger a 30 month clock before IPCI could launch its Rexista-oxycodone (assuming it receives FDA tentative approval). We expect IPCI to settle its likely patent dispute with Purdue in 2018, which would pave the way for a launch (see page 2). We have
removed our 2017 Rexista oxycodone from our revenue estimates due to the likelihood Purdue could hold it up in litigation, we have now assumed a 2018 launch.
Also, Mackie is out with a new report today re the Par/Focalin situation confirming what has been discovered already by the good due diligence of some on this board. He indicated plans to increase his 2017 Focalin estimates but has not done so yet. He had $4 million for 2016 and now has greater confidence in that number.
According to Mackie, IPCI already knows that Purdue will sue them in order to delay the intro of Rexista. It makes sense for them to do so as any delay in the intro of Rexista helps Purdue and more than offsets the likely costs in both economic and reputational terms. While one never knows for sure the outcome, it is probably best to assume they get sued and that Rexista does not start generating revenues until 2018 and hope for better results.
Also, the prospect of a lawsuit might mean any partnership will be delayed. Why put upfront money on the table now if the revenues are not going to be flowing for a while? Of course, you could get a deal that gives a little money now (all the company needs to get past the cash squeeze in the Spring) and more later when the lawsuit is finally behind them.
It means the NDA just filed did not include PODRAS but the FDA has granted Fast Track status to a second NDA they will file in the future with PODRAS.
All this attention on Focalin seems a bit over the top given the company makes little right now from Focalin and will never likely make much. Whatever the outcome for Focalin, it will be swamped by the good news of an eventual partnership deal on Rexista. For someone trying to determine the long term value of IPCI (nearly all of us I suspect), Focalin is just not all that relevant.