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Why Avanir Shares Popped and Then Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnologist Avanir Pharmaceuticals (UNKNOWN: AVNR.DL  ) surged as high as 21% today after a European regulatory body recommended approval of is drug Nuedexta.

So what: The Committee for Medicinal Products for Human Use, or CHMP, recommended that Nuedexta be used to treat pseudobulbar affect, or PBA, in Europe, quickly triggering plenty of optimism over Avanir's revenue growth going forward. Unfortunately for Avanir bulls, however, the stock has drifted down steadily ever since the opening surge, suggesting that the news isn't as huge as investors initially thought.

Now what: The European Commission -- which has the final say on drug approval in Europe -- typically follows the recommendations of the CHMP, and usually comes to a decision within three months of the CHMP opinion. "We will continue to work with the European Medicines Agency and the European Commission toward the marketing authorization so that patients suffering from PBA have ready access to NUEDEXTA in Europe," said Chief Scientic Officer Dr. Joao Siffert. So while the stock remains just too risky for average Fools, speculative types might want to pounce on today's manic price action and buy into those prospects.

Interested in more info on Avanir? Add it to your watchlist.

Read/Post Comments (2) | Recommend This Article (2)

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.

  • Report this Comment On April 26, 2013, at 4:53 PM, trdrgg wrote:


    There have been more than a few "spot secondaries" of late. Why pass up the opportunity to add 30M to the coffers? It is for the ultimate good of the shareholders after all.


  • Report this Comment On April 29, 2013, at 2:37 PM, 1Evan wrote:

    Brian, maybe the news is as big as investors originally thought. They may double their sales with Europe on board. There is a large short position in AVNR and it's market capitalization is just $450 million. This is very small compared to many institutional investors which can sell AVNR shares short to keep the price down very easily, which may have happened here.

    If there is no good purpose for being able to short or buy options for small market cap companies then maybe the SEC should stop these types of "investments" with them.

    If the fools at Motley Fool agree then look into it and see if you can help change the rules which would help small market cap companies, the economy and investor fools.

    Thank you

    Tom (not foolery)

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