hogfan's picks

[hogfan2]

$RMTI...Rockwell Medical (RMTI) Speculative Buy as January PDUFA Date Nears
Posted on December 12, 2014 by Gary Anderson | Leave a reply
Rockwell Medical (RMTI) Speculative Buy as January PDUFA Date Nears



January 24 PDUFA date set for patented, drug with large market potential = near term catalyst
Shares may be coming off double bottom formation
Completed capital raise in November by BofA Merrill Lynch at 9:00/share for net proceeds of $54.7 million
$53 million in ttm revenue from existing operations




Overview/Share Structure

Rockwell Medical logoRockwell Medical, Inc. (RMTI) is a biopharmaceutical company targeting end-stage renal disease (ESRD) and chronic kidney disease (CKD) with products and services for the treatment of iron deficiency anemia, secondary hyperparathyroidism and hemodialysis.

Founded in 1995 and headquartered in Wixom, MI, Rockwell Medical has 286 full time employees.

Shares outstanding: 46.6 million (following November capital raise)

Insider ownership: 18.6% with 420,000 shares purchased in last 4 months and zero insider sells

Institutional ownership: 22-28% (depending on source)



January 24 PDUFA Date for New Drug, “Triferic”

For those new to pharma/biotech stocks, a critically important day is the PDUFA date (pronounced puh-doo-fuh). It stands for “Prescription Drug User Fee Act” and the trading leading up to the PDUFA date is typically volatile.

What’s at stake is huge, as the PDUFA date is the day the FDA votes to approve or reject a new drug. Sometimes, the FDA will rule before the announced PDUFA date, but it’s the day by which a decision is expected.

Triferic is Rockwell’s late-stage investigational iron maintenance therapy for the treatment of iron deficiency in chronic kidney disease patients receiving hemodialysis, and the PDUFA date set for approval or rejection by the FDA is January 24.

While this may not be as exciting as a cure for cancer, the market/revenue implications for Rockwell are big. End Stage Renal Disease (ESRD) is the condition where a patient’s kidneys have completely failed. As a result, patients with ESRD require dialysis treatments several times/week (or a kidney transplant) to survive. There is no cure. Unfortunately, ESRD affects 2.52 million patients globally and is growing 6-8% annually, exceeding population growth rates in much of the world.

The key to understanding Triferic’s potential is that these 2.5 million dialysis patients also suffer from chronic anemia (low hemoglobin levels) and serious (sometimes life-threatening) liver failure. Liver failure in this patient population is most often caused by iron toxicity resulting from the iron replacement therapies currently used to treat the underlying anemia. It’s a real (and expensive) problem for hospitals and renal physicians to manage hemoglobin and iron levels in these patients, and Triferic addresses the problem.

Triferic is administered during the patient’s dialysis treatment and in positive clinical trials has shown to be efficacious in preventing anemia and high iron levels that can lead to liver failure. There were no adverse effects from the drug reported in the studies. Should the FDA approve Trifecta for use in ESRD patients, then I can see widespread use of by physicians to more easily manage their patients.

Moreover, hospitals nationwide have an increasing role in patient treatment modalities. Hospitals nationwide must be accredited by and follow “best practice standards” set by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). The JCAHO has enormous power in healthcare administration nationwide. If a hospital loses accreditation from JCAHO, they lose their Medicare funding…a devastating blow. While JCAHO may not literally “prescribe” a drug, they can strongly influence its use by making hospitals prove they are using “disease-specific best practices” to lower cost and reduce the average patient length of stay. So a drug like Triferic can become a best practice protocol used by hospitals to demonstrate to JCAHO what they are proactive in reducing patient length of stay limiting expensive complications of anemia and liver toxicity in ESRD patients. These protocols become part of a standard set of orders that physicians who are authorized to practice at a particular hospital must follow.



Existing Operations

Risk in RMTI is somewhat mitigated in the fact the company has a 20 year operating history and ttm revenues of $53 million from sales of various solutions and products for dialysis. In October 2014, the company entered into an exclusive licensing agreement with Baxter Healthcare, a $40 billion industry giant, to market their dialysis solutions (listen to conference call). So, unlike a pharma microcap with one product that’s make or break leading up to the PDUFA date, RMIT has several irons in the fire for future revenue expansion.



Possible Double Bottom

RMTI shares are volatile and might be making a double bottom formation. With end of year tax-loss sales, support could be broken with new lows made between now and eoy, so caution is advised. In fact it’s possible that RMTI may have broken to new lows by the time this is published.

Rockwell Medical chart

Analyst Estimates

For those who follow analyst estimates, there are 5 currently covering Rockwell Medical. Their average estimate for 2014 is for a loss of .46/share, improving (dramatically) to positive earnings of .24/share for 2015.



Suggested Trade

I believe shares have a reasonably strong chance of coming off the bottom here and are likely to move up rapidly by January as the 1/24/2015 PDUFA date nears.

Buy RMTI shares above recent $8.10 low and below $9 with a tight stop loss. Should shares be under $8.10 by the time you read this- you might consider holding off for even lower prices as the year winds down and tax loss sellers complete their exit.

Disclosure: I am long RMTI @ $8.14

Rockwell Medical





Follow me on Twitter:


Subscribe to MicrocapResearch.com
Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Email Address



Share this:
Twitter13LinkedIn1FacebookGoogleRedditPinterestTumblrStumbleUponPocketEmail
Posted in Biotech, Pharmaceutical.


http://microcapresearch.com/rockwell-medical-rmti/