CAPScall of the Week: MAP Pharmaceuticals

For years, satirical late-night TV host Stephen Colbert has been running a series on his show called "Better Know a District," which highlights one of the 435 U.S. districts and its congressional representative. While I am no Stephen Colbert, I am brutally inquisitive when it comes to the 5,000-plus listed companies on the U.S. stock exchanges.

That's why this week and every week from here on out, I'll make it a tradition to examine one seldom-followed company within the Motley Fool CAPS database and make a CAPScall of outperform or underperform on that company.

For this week's round of what I like to call "Better Know a Stock," I'd like to take a closer look at MAP Pharmaceuticals (Nasdaq: MAPP  ) .

What MAP Pharmaceuticals does
MAP Pharmaceuticals is a developmental-stage company focused on creating therapeutic inhalation treatments in the field of neurology. The company's lead product is Levadex, an orally inhaled therapy targeted at treating acute migraines that has completed phase 3 clinical trials.

In March MAP received a complete response letter from the Food and Drug Administration regarding its drug application for Levadex, and while it was denied, it was denied not because of lack of efficacy but for its manufacturing process. MAP anticipates reapplying for approval in the third or fourth quarter.

Whom it competes against
Under normal circumstances I'd be listing more than a handful of competitors -- but migraine medications is an area with mostly unmet needs.

GlaxoSmithKline's (NYSE: GSK  ) Imitrex, prior to losing its patent protection in 2009, was the blockbuster treatment for migraines, but has since lost its luster to generic competitors like Dr. Reddy's Laboratories (NYSE: RDY  ) that manufacture generic Imitrex for a fraction of the drug's original cost. However, Imitrex and its competing drugs are therapies designed to treat chronic migraines whereas Levadex targets acute migraines.

The truth of the matter is that there are far more beneficiaries if MAP succeeds than if it fails. Allergan (NYSE: AGN  ) is MAP's marketing partner in the United States and stands to share in the profits if Levadex is approved by the FDA. Allergan paid MAP an up-front fee of $60 million and MAP has the potential of earning an additional $97 million in milestone payments contingent upon the drug's approval. Similarly, Nektar Therapeutics (Nasdaq: NKTR  ) has an intellectual property agreement with MAP Pharmaceuticals for all global sales of Levadex.

The call
After reviewing MAP Pharmaceuticals' prospects, I've decided to make a CAPScall of outperform on the company.

MAP Pharmaceuticals' skeptics have viable reasons to be leery of Levadex. For one, it'll probably be a good six months to a year before the FDA will rule on Levadex meaning MAP will continue to burn precious cash. Also, there's no guarantee that the changes MAP has made in the manufacturing process and control of the treatment will be sufficient to satisfy the FDA.

However, there's little denying that Levadex's efficacy presents a compelling case for an eventual approval and, as my Fool colleague and health-care editor David Williamson has conjectured, the drug probably has $500 million potential. I anticipate MAP will be healthfully profitable by 2014 and suspect it has the potential to double from its current levels assuming Levadex is approved within the next year.

You can follow this selection, as well as all previous CAPScalls I've made, by clicking here to be immediately whisked away to my CAPS portfolio.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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