Why Hyperion Therapeutics Shares Shot Higher

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 Hyperion Therapeutics (NASDAQ: HPTX  ) , a biopharmaceutical company focused on treatments for orphan diseases and hepatology, rose as much as 10% after receiving orphan drug exclusivity status for Ravicti from the Food and Drug Administration, and exercising an option to acquire two additional urea cycle drugs from Valeant Pharmaceuticals (NYSE: VRX  ) .

So what: Ravicti, Hyperion's urea cycle disorder drug that was approved in February, will now get a seven-year period of exclusivity in treating the rare disease. This secures Hyperion's revenue stream by making sure competitors won't be able to swoop in a few years from now with similar products.

In addition to this news, Hyperion exercised an option to acquire Buphenyl and Ammonul from Valeant. If Valeant chooses to keep Ammonul (it has 20 days to decide) it must pay Hyperion $13 million. If Valeant chooses to sell the drug, Hyperion owes Valeant $22 million.

Now what: To me it seemed like a foregone conclusion that Ravicti was going to eventually gain orphan drug approval. While this will certainly protect Hyperion's UCD drug, I'm not sure $100 million in peak sales estimates in the U.S. is enough to justify the company's $358 million market value as of this writing. I'll be certainly curious to see what Valeant does with Ammonul, but I don't think it's a big enough game changer to sway my opinion that Hyperion's valuation is a bit frothy.

Craving more input? Start by adding Hyperion Therapeutics to your free and personalized Watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in biotechs like Hyperion, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


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: 2404803, ~/Articles/ArticleHandler.aspx, 9/16/2014 1:56:48 PM

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