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Here's Why Adamas Pharmaceuticals Dropped Today

By Brian Orelli, PhD – Feb 23, 2018 at 11:35AM

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Investors fret over the launch of the biotech's new Parkinson's disease drug Gocovri.

What happened

Shares of Adamas Pharmaceuticals (ADMS) are down nearly 10% at 11:38 a.m. EST after the company announced fourth-quarter earnings yesterday after the bell. Investors are clearly worried about the launch of its new Parkinson's disease drug Gocovri.

So what

Gocovri was launched in the fourth quarter, but Adamas didn't start promoting it with sales reps until January, so the rather low $0.6 million in sales that Gocovri posted in the fourth quarter shouldn't be too surprising.

The sales reps appear to be accomplishing their goal with doctors. Adamas noted that there were 100 distinct prescribers of Gocovri at the end of the year and that figure is already up to over 300 as of last week.

The important number in the long term is, of course, the total number of prescriptions, not the number of doctors who have written at least one. But doctors often try a drug on a patient or two to see how it works for them before increasing their prescription volume, so the number of prescribers is the most important short-term metric for investors to watch.

Definition of Parkinson's disease on paper as seen through a magnifying lens

Image source: Getty Images.

Today's drop could also be the result of investors continuing to feel uneasy about the approval of Osmotica Pharmaceutical and Vertical Pharmaceuticals' Osmolex ER earlier this week. Given the different label and dosing, management doesn't see it as a threat, but investors may not be convinced yet.

Now what

Adamas Pharmaceuticals is arguably worth less than it was before the approval of Osmolex ER because there's increased risk that Gocovri won't live up to its potential. Investors willing to take on that risk by buying at this deflated price should be handsomely rewarded if Adamas can execute on its plan. But climbing that wall of worry is going to take a few quarters to see whether the launch trajectory has Gocovri headed toward fulfilling its promise.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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