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The Probable Reason Why Adamas Pharmaceuticals Inc. Is Down Big Today

By Brian Feroldi – Nov 2, 2018 at 10:37AM

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Shares fall hard after the company reports good news. What's going on?

What happened

After the company reported third-quarter results, shares of Adamas Pharmaceuticals (ADMS), a commercial-stage biopharma focused on chronic neurological disorders, fell 23% as of 11:20 a.m. EDT on Friday. 

So what

Here's a look at the key numbers from the third quarter:

  • Revenue from sales of the Parkinson's disease drug Gocovri were $10.6 million during the quarter. That topped Wall Street's estimate of $10.1 million.
  • Net loss per share was $33.2 million, or $1.22 per share. That was higher than the year-ago period, but it was lower than the $1.34 loss that market watchers were expecting.
  • Cash balance at quarter end was $233.2 million.
Coins slipping through a man's fingers.

Image source: Getty Images.

In a separate news item, Adamas' shares were given a "buy" rating by Cowen today, and a price target of $30 has been set.

So if the results were strong and the company received a "buy" rating, why are shares down today? The answer to that question isn't clear at this time, but it is possible that investors still don't know how much the FDA approval of Osmotica Pharmaceuticals and Vertical Pharmaceuticals' drug Osmolex will impact Gocovri's sales in the long run. That concern has been weighing on the share price all year, so it's possible that today's price action is just a continuation of that narrative.

Another potential nitpick from Wall Street might be that the rate of new prescribers isn't as robust as expected When pressed on this issue on the call with investors, management stated that they were deliberately targeting a greater penetration rate within the highest-volume offices.

Either way, the net result is that shareholders are having another tough day.

Now what

Given the upbeat sales results and falling share price, today is likely to be a frustrating day for Adamas' bulls.

On the call with investors, management said that it remained "confident" in its ongoing patent enforcement action against Osmotica. However, the company didn't have any news to share with investors at this time. 

There's not much that Adamas' bulls can do about today's share price action beyond waiting for the sentiment to turn. That should happen eventually if Gocovri sales continue to grow and the potential threat from Osmotica proves to be overblown.

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

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