Avanir Pharmaceuticals (NASDAQ: AVNR) reported its fiscal second-quarter results after the market closed on Wednesday. Here are the key points that investors need to know.

Results
The company reported a net loss for the quarter of $16.5 million, or $0.12 per share. That loss reflects improvement over the net loss of $17.0 million, or $0.13 per share, for the same period in fiscal 2012. However, the net loss failed to meet analyst expectations. The average analysts' estimate called for a loss of $0.09 per share.

Avanir's revenue for the fiscal second quarter totaled $17.4 million, a 74% year-over-year increase. The revenue result met analyst expectations.

Most of the company's revenue stemmed from Nuedexta. The drug used to treat pseudobulbar affect garnered gross revenue of $20.8 million and net revenue of $16.5 million during the quarter. Avanir also received nearly $900,000 in royalties for cold sore medicine Abreva from GlaxoSmithKline (GSK -0.92%).

While revenue growth was strong, the company's expenses derailed any hopes of meeting bottom-line expectations. Avanir reported total operating expenses, excluding cost of sales and share-based compensation, of $30.1 million. This figure was much higher than the $25.3 million in expenses incurred in the same quarter last year, reflecting sizable increases in research and development, selling and marketing, and general and administrative costs.

Avanir reported cash, cash equivalents, and restricted investments of $70.2 million as of the end of March. Of that total, $67.9 million came from cash and cash equivalents.

Looking ahead
The company received welcome news a couple of weeks ago from Europe. The Committee for Medicinal Products for Human Use, or CHMP, announced a positive recommendation for Nuedexta. This bodes well for ultimate approval for the drug in Europe.

Avanir also claims a couple of drugs in its pipeline with potential. AVP-923 is under evaluation in several mid-stage trials for the treatment of levodopa-induced dyskinesia in Parkinson's disease, central neuropathic pain in multiple sclerosis, and agitation in Alzheimer's disease. The company also announced positive results earlier this year from a study of experimental drug AVP-786 that shows possibility for it to treat similar indications.

Abreva loses patent protection in the U.S. in April. This likely means less royalty payments from Glaxo in the not-so-distant future. However, those royalties aren't very large, so this won't be a significant negative for Avanir.

My view is that Nuedexta sales will continue to experience strong growth in the U.S. and get a nice bump if European approval is granted, which I expect will be the case. Avanir does need to get its expenses under control somewhat to please analysts. The latest quarterly results could drive shares down with the earnings miss. However, for investors willing to take on some risk, Avanir offers good upside potential.