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WOW. We are absolutely elated with the performance of our last swing move on SCYX. In case you missed it on Wednesday Scynexis (Nasdaq: SCYX) announced positive phase 3 data just as we anticipated. The share price soared over 100% after hours and ranged between 38% and 70% up in price the next trading session. Investors who got in prior to the data made at least 30%-100% returns on their investments. Now we are on to the next one and identified Adma Biologics (Nasdaq: ADMA) as a relatively safe and rewarding swing move.
ADMA closed January 31st at $2.95 down roughly 30% from its $4.0-$5.0 range prior to receiving a complete response letter (CRL) for its prior approval supplement (PAS) submission for Bivigam. The share price plummeted after the negative development bottoming out around $2.20. In our opinion the sell off was an overreaction by the market, especially if you had listened to the conference call.
The CRL boils down to an information overload for the FDA. This is probably why the initial PDUFA date of October 25th of 2018 was pushed to December 18th. Key components of the CRL were that no additional testing or clinical trials were requested. And data requested by the FDA pertained to the manufacturing, chemistry, and controls regarding Bivigam including fill and finishing processes. Our concerns regarding these topics are abated considering that in September the regulatory status of ADMA’s manufacturing facility in Boca Raton, FL was upgraded from from Office Action Indicated (OAI) to Voluntary Action Indicated (VAI). The implication of which is that the facility is operating in alignment with Good Manufacturing Practices (GMP). Furthermore, all of ADMA’s third party facilities used for fill and finish processes are in good standing and compliant. Adam Grossman ADMA’s CEO stated in the latest conference call that information requested by the FDA was either already present in the 1000’s of pages provided, or readily on-hand. On January 7th, 2019 less than 3-weeks after getting the CRL ADMA submitted their responses to FDA. The timely nature of this corroborates the notion that the PAS contained too much to data to thoroughly review in the time allotted. ADMA expects formal notification within 30-days from January 5th that the FDA received their response.
The CRL is Likely Classified as Class-1
The significance of the CRL’s classification is the turnaround time which the FDA has to respond. If it classified as a class-1 than a new 2-month review cycle begins once the FDA receives the response. If its a class-2 than the review cycle is 6-months.
Class 1 Re-submission — A re-submission that includes one or more of the following items:
1. Final printed labeling
2. Draft labeling
3. Safety updates submitted in the same format, including tabulations, as the original safety submission with new data and changes highlighted (except when large amounts of new information, including important new adverse experiences, not previously reported with the product are presented in the resubmission)
4. Stability updates to support provisional or final dating periods
5. Discussions of post-marketing requirements/commitments, including proposals or protocols for such requirements/commitments
6. Assay validation data
7. Final release testing on the last 1 to 2 lots used to support approval
8. A minor re-analysis of data previously submitted to the application (determined by CDER as fitting the Class 1 category)
9. Other minor clarifying information (determined by CDER as fitting the Class 1 category)
Class 2 Re-submission — A re-submission that includes any item not specified as a Class 1 item, including any item that would require a presentation to an advisory committee. A resubmission that requires a reinspection also would be a Class 2 resubmission.From fda.gov
Based on the CRL classification criteria the most logical conclusion is that the CRL will be considered a class-1. I could easily see how numbers 1, 2, 4, 5, 7, or 9 above could fall into the categorization of chemical, manufacturing, and controls of Bivigam. I feel extremely confident that nothing in the CRL would involve a presentation to an advisory committee nor a re-inspection.
RI-002 PDUFA Date On April 2nd
The biologics licence application (BLA) action date for RI-002 is less than two months away and is another potential positive catalyst. Of course there is the risk of a CRL. However, the combination of two factors make me bullish on the outcome. First, many of the same third party manufactures used in Bivigam’s lot release tests (which are in good standing) are also used for RI-002 production processes. And second, the original CRL for RI-002 in 2016 only concerned inspection issues and deficiencies with ADMA’s third party manufacturers. The efficacy or safety of RI-002 was not questioned. Keep in mind that RI-002’s BLA and Bivigam’s PAS are independent submissions. I.e. approval of the PAS does not necessarily mean approval of the BLA.
In my opinion ADMA is great stock to buy now and sell for substantive gains in 2-3 months. Assuming the FDA formally acknowledges receipt of ADMA’s CRL response within 30-days, and the CRL is considered a class-1, then by February 2nd the clock starts ticking on a 60-day review cycle. That would put the decision date around same day as the PDUFA date for RI-002. It is possible news of approval of both submissions could come on the same, or preceding days making for a huge upward catalyst. Either way I am confident ADMA’s response to the CRL will result in the PAS approval and the subsequent commercial relaunch of Bivigam. The general market sentiment appears to be in agreement. In the interim the share price should find a new range around $3-$4 and pop 20%-50% upon PAS approval. Especially if the timing coincides with a favorable outcome for RI-002’s BLA. Also, while the review process is 60-days, this does not preclude the FDA from deciding sooner assuming the CRL is indeed a class-1.
I am opening a position in ADMA when the market opens on February first. Our entry target is $2.90-$2.95 and price target is $5-$6 within 6-months. Beware of an offering if ADMA moves substantially off approval of Bivigam’s PAS and RI-002’s BLA. Long-term investors might want to wait that point before initiating a position.
I am/we are long ADMA.
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