Last Updated on January 17, 2019 by Sultan Beardsley
ACRX traded last around $2.90 and has entered oversold territory. It has a FDA advisory committee meeting (ADCOM) scheduled for 10/12/2018 and a PDUFA date on 11/03/2018. The stock is near its 52 week low of $1.55 and is down over 36% this month from a high of $4.55 without any negative material events or announcements. Actually, it appears that the approaching ADCOM and PDUFA catalysts triggered selling by fearful bag holders.
ACRX has two products, both approved in the European Union (EU). DSUVIA, an orally administered medication for acute pain management in medically supervised settings, is under evaluation in the U.S this month. DSUVIA is an alternative to opioids and has shown comparable efficacy in clinical studies. If you were to arrive at the emergency room after sustaining a laceration DSUVIA could be administered to subdue the pain instead of morphine. With the U.S. in the midst of an opioid epidemic doctors should be frothing for a non-addictive, non-invasive alternative for acute pain management. The reason the ADCOM and PDUFA dates likely triggered a sell off is because ACRX previously received two CRL’s from the FDA, one for DSUVIA and another for Zalviso. Therefore, ACRX veterans and or new investors may have thought “why expose myself to an unnecessary risk when I could sell for a healthy profit at $4.55”. As they sold, the stock price receded, others followed suit, shorts smelled blood like a shark in water, and wala, you have a stock that tanks 36% in a month. But there is another factor at play too. Trevena Inc. (NASDAQ: TRVN)
The Trevena Problem
TRVN was featured as our case example of how to swing trade a biotech stock earlier this week. In the past month TRVN is up over 110% in anticipation of a positive ADCOM vote on 10/11/2018 and FDA approval on 11/02/2018.
TRVN’s Oliceridine and ACRX’s DSUVIA are similar in that they are both designed to treat acute pain. But that’s about about all they have in common. Oliceridine is administered intravenously (IV) and targets opioid receptors in a very specific manner. DSUVIA on the other hand is non-invasive and taken orally, greatly increasing the flexibility and utility of its application. Both have high commercial potential, but that’s not really the point here. The point is the run up.
TRVN is on their first NDA filing for Oliceridine while ACRX is on their third for DSUVIA having received a CRL’s in October of 2017. So, with nearly identical ADCOM and PDUFA dates, and deceivingly similar product profiles, investors placed their bets first with TRVN as evident by recent price actions. However, approval and a favorable vote from ADCOM is now factored into TRVN’s share price. Those who did not believe ACRX will satisfy the FDA’s previous issues already jumped ship. In fact, I believe this scenario is resemblant of ADMP’s approval of SYMJEPI Jr. They too suffered two CRL’s for SYMJEPI Sr. and sank near their 52 week low before garnering FDA approval for SYMJEPI Jr. on 09/27/2018. We believe that will be the case here, especially given that DSUVIA has been approved in the EU since June of 2018. The EU has notoriously harsher standards for the commercialization of pharmaceuticals.
ACRX should increase in value over the next weeks and month as the ADCOM and PDUFA dates approach. Sellers are gone and only buyers who believe in the company remain. TRVN has syphoned all that it could from ACRX shareholders and other biotech investors looking to capitalize on its ADCOM momentum. This leaves ACRX oversold and undervalued. We anticipate strong buying action from retail investors who recognize ACRX as a discounted biotech stock with intercontinental reach and a high potential near-term return on investment. Institutional ownership is 9.10%. I’d expect them to increase their positions following a favorable ADCOM vote. Final bullish indicators are that insiders bought 119,198 shares at an average cost basis of $2.30 since 08/06/2018 and underwriters of the last public offering exercised their option rights buying an additional 1,090,909 shares raising around $23 million for ACRX.
I do not have have a position in ACRX, but may initiate one in the next 72 hours. I have no position in TRVN either.
This article expresses my own opinions and I wrote it myself. I was not compensated to write it and have no business relationships with ACRX or TRVN.