AVANIR PHARMACEUTICALS (AVNR)

[FDA_Player]

AVNR:
Life Sciences -- Biotechnology
BUY ON WEAKNESS; REITERATE
THESIS ON APPROVAL AND STRONG
LAUNCH AND MARKET POTENTIAL
Investment recommendation
Reiterate BUY, $9 target on conviction of near-term FDA approval,
successful commercial Q1/11 launch. We estimate approval chances for
AVNR’s AVP-923 for PBA at 75% based on extensive talks with experts
and careful analysis of safety data. We think AVNR will drive strong PBA
awareness and conduct a strong launch in Q1/11. We think 923 will see
good uptake starting H2/11. Our $9 target is based on a pNPV analysis.
Investment highlights
• We think 923 will get a broad label, be well received by MDs,
patients on Q1/11 launch. We think many ALS, MS, stroke, brain
injury, Alzheimer’s and Parkinson’s MDs/patients are eagerly
anticipating approval of a PBA drug. Experts we have spoken to see
923 as effective and safe. We estimate $350M peak US sales and
$300M peak EU sales (Fig 1).
• We do not see sales potential reduced by label warnings or a likely
arrhythmia black box warning. Based on conversations with
clinicians, we do not think 923 will be limited by QTc warnings, or
cardiac (EKG) monitoring requirements. Black box warnings are
based on serious clinical safety events, which have been absent thus
far in 923 clinical experience.
• We see meaningful 923 sales ramp in H2/11 after initial PBA
disease awareness campaigns. We think AVNR will conduct effective
PBA awareness in Q1/11, which will be followed by strong 923 sales
growth starting in Q2/11.

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