Why Supernus Pharmaceuticals Shares Surged

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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 Supernus Pharmaceuticals Inc. (NASDAQ: SUPN  ) , a biopharmaceutical company focused on developing therapies to treat central nervous system disorders, surged as much as 27% after announcing the approval of Trokendi XR by the Food and Drug Administration.

So what: Trokendi XR is a once-daily extended-release pill to treat epilepsy and will join the company's other FDA-approved drug, Oxtellar XR, to combat the disease. Trokendi XR can be used on children as young as six years old, with the FDA granting Supernus a waiver on certain pediatric study requirements and a deferral until 2019 on its post-marketing pediatric pharmacokinetic assessment of the drug. Plans are for the company to launch Trokendi XR over the next couple of weeks.

Now what: Based on purely illustrative estimates from Supernus in May of 4% annual market growth in epilepsy prescriptions and 5% price growth, its two drugs could combine to total more than $400 million in revenue five years from now. Of course, that's a utopian scenario and assumes no other drug approvals, but it points to a relatively big opportunity in antiepileptic drugs. However, as I said less than a week ago, even with the company's prognostication of being cash-flow breakeven by the end of next year, I'd rather wait a few quarters and see how Trokendi XR and Oxtellar XR's sales shape up rather than just assume that the launch of Trokendi XR will go smoothly.

Supernus Pharmaceuticals may be soaring today, but it's still losing money in the interim. If this isn't a reminder that the best investment strategy is to pick great companies and stick with them for the long term, then I'm not sure what is! The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.

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