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3 Catalysts Rockwell Medical Investors Need to Watch

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Few stocks have generated as much excitement recently as Rockwell Medical (NASDAQ: RMTI  ) . Shares have more than tripled in value over the last three months. What's next for this biopharmaceutical company? Here are three catalysts that investors should watch.

1. Earnings results
With a lot of buzz about great phase 3 results for iron-delivery drug Triferic (formerly known as Soluble Ferric Pyrophosphate, or SFP), it nearly seems mundane to focus on upcoming earnings results. However, while Rockwell's future might largely be about Triferic, it's present is tied to other products.

Dialysis concentrate Citrapure will be an important driver for earnings when Rockwell announces third-quarter financial results on Nov. 4. Last quarter, the company said that Citrapure sales climbed an impressive 61%. 

Expect that growth trend to continue into the third quarter. Analysts expect revenue to come in around $18.7 million, up from nearly $13 million in the second quarter. A loss of $0.17 per share is also expected, but that's a significant improvement from recent quarters.

2. Triferic decision
This catalyst isn't as near at hand, but its importance can't be overstated. After the stellar late-stage results for Triferic were announced in September, regulatory approval for the drug appeared to be a shoo-in. But anyone who has watched the U.S. Food and Drug Administration knows that there are no sure things with regulatory approval. 

That being said, the prospects for Triferic certainly look good. There shouldn't be any qualms about efficacy. No red flags were raised on safety, either. I agree with Rockwell's CEO Rob Chioini that the chances of FDA approval look very strong. If Triferic is first reviewed by the FDA's hematology advisory panel, that would present the first of two catalysts related to the approval process (with the other being the final decision from the FDA itself).

3. Partner round-up
Rockwell is already talking with potential partners about commercializing Triferic. Chioini said in August that these discussions have also included marketing a couple of other dialysis products, Calcitriol and CitraPure. He remarked that the talks with partner or partners "involve many different geographies and structures."

Triferic would likely be a commercial success even without a new partnership -- thanks mainly to Rockwell's tight relationship with dialysis provider DaVita Healthcare Partners (NYSE: DVA  ) . The two companies signed a five-year agreement in the second quarter of this year for DaVita to use more of Rockwell's products in more of its dialysis centers.

Both DaVita, which operates 2,010 dialysis centers in the U.S., and Fresenius Medical Care (NYSE: FMS  ) , with 2,082 U.S. dialysis centers, participated with Rockwell in the phase 3 studies of Triferic. DaVita and Fresenius together provide dialysis services for around two-thirds of U.S. hemodialysis patients.

But news about a solid partnership to promote Triferic and other products across the world would give a boost to Rockwell's stock. There's no way to predict the exact timing of any such announcement, but I wouldn't be surprised if one or more partners are lined up even before an FDA decision.

Great expectations
Many observers expect Triferic to easily obtain regulatory approval and quickly become the standard of care in the dialysis market. Peak annual sales for the drug range from $150 million to $250 million. Considering that Rockwell's market cap currently stands just over $450 million, there appears to be plenty of room for the stock to run.

I expect that decent earnings results could push the stock up perhaps even more than those results warrant on their own, as investors are reminded about Triferic's potential. Ultimate approval of the drug and/or a commercialization partnership deal would give shares a really nice bump. I suspect more excitement is in store for Rockwell Medical over the coming months.

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  • Report this Comment On October 03, 2013, at 7:15 AM, ohonemorething wrote:

    Even though it appears Rockwell dialysate sales are transitioning to Citrapure, the gross margin improvement is modest vs std dialysate or mid teens to significantly impact earnings this year or 2014. According to the CEO on the last earnings call, Calcitroil has 60% gross margins, but company is still waiting for FDA approval to begin manufacturing this low-cost generic Vit D drug. Upon FDA approval, company is positioned to commercially launch in the U.S to target the est'd $350Mn market. For every $10Mn in incremental Calcitroil sales, est. $5Mn positive upside to net income or $.13 EPS. Not sure what multiple to apply to this new earnings stream, but the avg biotech P/E is 20x.

    According to the company's web site, "In the U.S approx. $400-600 million per year is currently spent on IV iron to treat anemia for ESRD patients. The Company estimates by 2015, the expected Triferic U.S. addressable iron market at commerical launch to be $695 million and $1.8 billion world-wide, growing 5-7% annually." Rockwell 100% owns Triferic, the only water-soluble iron in the world and hasn't licensed the drug yet. Typical royality agreements are 20% of sales, which is 100% gross margins to Rockwell.

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