By:
Erik Olson, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary:
• Eagle Pharmaceuticals (NASDAQ: EGRX) specializes in the development
and of injectable treatments concentrating on products related to critical care,
oncology, and orphan diseases.
• Eagle Pharmaceuticals ceased
the development of their fulvestrant formulation and will focus on other pipeline
drugs.
• The outlook for their
exertional heat stroke drug RYANODEX® looks promising although there have been
some speed bumps related to testing. A new government partnership should help
the drug stay on track and remain relevant.
• A new patent in the BENDEKA®
family of drugs brings the total patent count for BENDEKA® up to 16.
• Stock buybacks prove
managements optimism about the future.
Key
points:
Eagle Pharmaceuticals
recently announced that their fulvestrant formulation
did not meet the bioequivalence endpoints necessary when compared to FASLODEX®
in a study conducted. The original goal was to have one injection as compared to
two injections with FASLODEX® and in much less time. The new injection also
contained no castor oil and was administered through a needle that was 25% thinner
than the needle required to administer FASLODEX®. It was at this time that the
company announced that they planned to no longer proceed with testing and that
they are going to focus on other drugs in their pipeline.
The company has been
making advancements with its drug RYANODEX® which recently completed it second clinical
study. This study was to evaluate the safety and efficiency of RYANODEX® when
treating exertional heat strokes. Eagle Pharmaceuticals also entered into an
agreement with the United States Army Medical Research Institute of Chemical
Defense. The goal is to evaluate the neuroprotective effects of the drug. It is
believed that the official launch will be in 2020 and not 2019 as previously assumed.
Progress has been made on
the drug BENDEKA® which is for treating chronic lymphocytic leukemia (CLL) and
non-Hodgkin's lymphoma (NHL). The USPTO issued a new patent for BENDEKA® which
brings the count up to 16 patents that have been issued or allowed in the BENDEKA®
family expiring between 2026 and 2033. Additionally, third quarter revenue
included a $12.5 million milestone payment for BENDEKA®.
Eagle has $45 million in
debt, $91.2 million in cash and cash equivalents, and accounts receivable of
$78.5 million. They have also expanded their share repurchase program to $150
million. Recently, Eagle repurchased $50 million of common stock which goes to
show management’s confidence in future prosperous performance. As of November
1, 2018, Eagle has repurchased $154 million of common stock without taking on
debt to do so.
What
has the stock done lately?
On August 30, 2018, Eagle
reported on a study conducted in Saudi Arabia for the exertional heat stroke
drug. The goal was to enroll 70 severely ill EHS patients but only had 7 enrolled
for the study. The stock tumbled over 15% on August 30th and has
since continued to slide as much as 41% since the high of $80 on that date.
Good news is surely needed to help recover some of the losses Eagle has accumulated
since late August.
Past
Year Performance:
Eagle has decreased 14.35% in value over
the past year. This leaves more room for improvement as they continue to
develop new drugs and cease efforts on inefficient projects. While efforts may
not have panned out as expected this year, management’s confidence in future
performance is seen as they continue to buyback shares. Additionally, with low
debt and a lot of cash, they are positioned well to invest in projects they believe
will be profitable without having to worry about financing them with debt.
Source: FactSet
My
Takeaway:
While Eagle Pharmaceuticals’
1-year performance may not be that stellar, the company does have room to grow
in the future. Removing their fulvestrant formulation from the pipeline certainly
will hurt their valuation. However, Eagle has numerous other drugs in their pipeline
that appear quite promising. The stock is currently trading about $2.50 away
from the 52-week low and outlook for the next three months is certainly greater
than the previous three months performance. With proper direction from
management, this stock should be flying high in no time.
Source: FactSet
