3 Things to Watch at NPS Pharmaceuticals

NPS Pharmaceuticals (Nasdaq: NPSP  ) has been getting some love. A recent FDA advisory panel unanimously recommended approval for the company's lead drug candidate, and the official decision will come at the end of this month. This decision will be an important catalyst for the stock, but there are a number of other issues investors need to keep an eye on.

Here are three key things to watch with this biotech player.

1. A leading drug that needs expanding
NPS' lead drug candidate Gattex has a PDUFA date of Dec. 30. NPS CEO Francois Nader told Bloomberg that he estimates peak annual sales of $350 million  for this short bowel syndrome treatment.

SBS patients can't absorb nutrients properly because part of the small intestine is missing, due to either surgery or birth defect. Severe forms of SBS can even result in death if left untreated. Current treatments involve daily supplements, which are administered intravenously in sessions lasting up to half a day. Gattex's advantage is that it can increase the body's ability to absorb those nutrients and also cut down on the number of required doses compared to the current treatment.

Fewer than 15,000 patients  in the United States comprise the SBS market. But NPS looks keen to expand the indications for its drug. Gattex is in phase 2 trials  for Crohn's disease, a severe type of irritable bowel syndrome that has a much larger patient population.

Research firm Decision Resources estimates that the Crohn's disease market is set to grow from $3.3 billion in 2010 to $4.5 billion in 2020. However, this would be a tougher market for NPS to compete in. Abbott Laboratories' (NYSE: ABT  ) Humira and Johnson & Johnson's (NYSE: JNJ  ) Remicade are the current leaders in this market, and NPS still has many regulatory hurdles to overcome before it can even compete.

2. A bolstering backup drug
NPS plans to file a biologics license application, or BLA, for Natpara by mid-2013. That date changed from the second half of this year due to an FDA request for instruction rewrites for the drug's delivery device.

Natpara treats hypoparathyroidism, a gland malfunction affecting the hormone that helps keep levels of calcium and phosphate balanced. The treatments currently available can actually make some symptoms worse over time. Natpara, as a hormone replacement therapy, should be able to meet patients' needs much more effectively.

In line with NPS' strategy of developing drugs for small patient populations, this disease afflicts around 80,000 people in the United States. CEO Nader's revenue estimate for peak annual sales is $250 million a year. Natpara is already available in Europe under the name Preotact, where a subsidiary of Japanese pharma company Takeda markets it for the treatment of osteoporosis under a licensing agreement. However, although NPS previously received substantial upfront payments for the drug it only received $1.1 million from this licensing agreement last quarter, and FDA approval for the hypoparathyroidism indication could be a bigger win for the company.

3. Royalties
NPS' future revenue projections depend on FDA approvals, but the company has some healthy fundamentals happening. For example, it's earning royalty payments from Amgen's Sensipar and Mimpara, which earned $808 million in total sales for the biotech giant last year. NPS is using its royalties, which amounted to $77.6 million last year, to help pay down its debt.

Foolish final thoughts
NPS shares are up more than 30% in the last three months, trading about 10% less than the 52-week high, largely based on the run-up to the Gattex FDA decision. The decision on Natpara's BLA will be the next chronological catalyst, but the approval for Gattex in Crohn's disease has more potential for earnings, in my view. The company has additional projects in the pipeline, but they're further behind in clinical development compared to its leading drugs.

Want to dig deeper on one of NPS' potential Crohn's competitors? With the impending spinoff of its branded-drug business, Abbott Labs is losing a massive blockbuster drug in Humira. It's a confusing event to understand, with many investors left wondering what to do with these two stocks once they're separated. To help investors better understand the upcoming event, the Fool has created a brand new premium report outlining both Abbott Labs and its spinoff, AbbVie. Inside, we outline all of the must-know opportunities and risks facing both companies, so make sure to claim this 2-for-1 report by clicking here now


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2140643, ~/Articles/ArticleHandler.aspx, 10/21/2014 8:31:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement