On the pipeline issue, which I agree with Shub is fundamental to determining value (and the wisdom of how the company is spending it's cash,) I note that a poster on SAlpha takes the view the pipeline is promising.
I've asked some questions there and let's there if they are answered. Later, I'll read more and possibly contact the company to learn more.
Usually, this issue would be consuming me, but it wasn't a core facet of my initial investment decision, which was made 2 or so weeks ago. In my personal prioritization of time, I'm ranking this as a less urgent thing I need to learn more about.
With CDTX, which I own had a full trial failure a few weeks ago (vs TRVN where the data was, at worst, a bit less great than expected.) Shares fell 30%+ and I increased my position in CDTX by 60% on the dip.
The reason is that the trial that failed was the "let's hope, but not core" trial, (I've covered this before.) The market was confused -- even analysts were confused -- that the failure of the one trial meant the chances of the other trial was decimated. The fact that the name of the compound used for the failed trial (CD101) was the same as the name of the compound of the trial that is still ongoing (CD101,) made it all the more reasonable to assume that the failed trial and the ongoing trial were tightly linked.
However, this isn't the case at all. The trial that failed involved the clinic applying CD101 in a lotion onto the skin, and the trial which is ongoing is an IV that treats an entirely different disease and situation. The company's core mission is the trial that is ongoing and they decided, "let's just try this other thing for $10M investment and see what works."
I'm going through this detail in order to write out for my own clarity, what we need to learn about TRVN's pipeline.
The drug that TRVN has and is heading for approval is for IV in the clinic. All it needs to do is compete with morphine and other generics (and drugs not yet approved and likely will, such as CARA's.)
The trials that are ongoing is for a pill -- a pill for pain that the patient can take at home on a sustained basis, and another compound for a pill that can treat migranes.
I think it doesn't much matter that the IV drug, TRV130/Olinvo is addictive. It's given in the hospital in high-pain scenarios, and where the clinic's objective is to treat the intense pain under the continuous supervision of medical staff. While it would be terrific if there's a non addictive IV pain killer, Olinvo still has expected market share (pending possible new competitors.)
In the pipeline trials, addictiveness seems fundamental (to me.) The physician seems much less likely to favor TRV734 (general pain) and TRV250 (migrane) if they are addictive. My assumption, for now, is that the three TRV's -130, 734, and 250 are derived nearly identically.
Maybe this is wrong. Most readers will conclude that I'm pretty uninformed -- and that's right, I am. I'm just forming the framework for the information that I need to aggregate. At the same time, the market took the view that the three TRV compounds are nearly identical.
CARA, for example, is using the same drug approach and chemistry for it's various target categories in the sense that they are treating pain while circumventing the brain, which is where the addictiveness is triggered.
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I'm looking at this as what's in my personal interest financially. There is a social benefit to exploring migrane solutions, and perhaps management wants to use their R&D team to develop as many ideas as they can afford and for which they have expertise.
To my view, there is the so-called agency issue, where managers and investors are not on the same side. Managers get salaries; stock options and their jobs are interesting. Why not develop new ideas, when they can just raise money endlessly to do so? For this reason, I innately mistrust the pipeline. Pending new information, I'm just assuming the company would do best for shareholders if it shut down the trials, fired a lot of people, and focused on how to develop data to sell as much of the IV drug that is heading for approval. Of course, this isn't going to happen, but this indicates just how much that, as an uninformed investor, I don't like the pipeline
More than likely, I'm wrong, and if so, my view of the company value will increase. In general, the market appears to be taking the dire view that is my base (current) expectation. The market sees present cash depleted by garbage trials, and management less motivated to sell itself and/or the approvable drug because they like the expected cash flow to subsidize the R&D stuff they want to do.
With CDTX, the market was just flat uninformed. I knew this right away, as I followed carefully the pipeline. Shares fell their 35% and then solidified and are moving back up slowly.
With TRVN, I am assuming for now the market is accurately informed about the pipeline, but I'm disagreeing with the market as to the market value of the approvable drug. If shares had fallen just 20% on the trial data, I would have stayed away. But, shares fell a lot more, and this gave me a likely profit cushion to take a position and have time to figure out what I didn't know about the pipeline.
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What I believe the poster at SA is saying, and which I'm trying to clarify, is that TRVN took a safe/certain approach with the compound for IV acute pain...whereas with the two pipeline compounds (pills -- for out of hospital use,) the company has some chemistry tricks up it's sleeve that they kept away for the acute/IV.
...This doesn't quite make sense to me -- not to the degree that the IV would be addictive and the pills are not...but I'm trying to clarify the SA author's informed view on the topic.
