Shares of La Jolla Pharmaceutical (NASDAQ:LJPC) were nearly cut in half today, down as much as 47.7%, after the company announced preliminary operating results for 2018 and provided expectations for the year ahead. Analysts and investors were surprised by disappointingly low revenue for the company's prized asset, Giapreza, both last year and in the full-year 2019 guidance. It's not the first time this has happened.
A nearly 50% haircut from setting low expectations may seem a bit harsh, but the business racked up an operating loss of $150 million through the first nine months of 2018. Therefore, slower than expected growth from the company's only commercial product means shareholders will be forced to share in significant losses for longer. That was enough for investors to head for the exits en masse.
As of 3:36 p.m. EST on Monday, the stock had settled to a 47.7% loss.
Giapreza increases low blood pressure in patients with septic or other distributive shock. While that may sound like a relatively niche market, analysts expected peak sales in the United States of around $500 million when the drug earned marketing approval in late 2017. It launched in March 2018, but it's off to a slow start.
La Jolla Pharmaceutical announced net sales were approximately $10.1 million in 2018 and set expectations for revenue in the neighborhood of $26 million in 2019. MarketWatch reported that analysts were expecting an average of $12 million in revenue for last year and $49.6 million for the current year. In other words, there's a pretty big gap between estimates and reality.
It's always a little silly when analyst estimates -- nothing more than predictions and forecasts -- wreak such havoc on a company's share price. The analysts were wrong, not La Jolla.
Either way, the company is now valued at around $150 million. Is that a fair price or is the business undervalued? Well, La Jolla Pharmaceutical exited 2018 with nearly $172 million in cash and cash equivalents and no debt. It expects to use no more than $94 million in cash during the course of operations this year. That means the business could make it to the middle of 2020 before it needs to raise additional capital. There will be at least three significant updates from the pipeline between now and then, with two slated to occur in the second half of 2019.
Therefore, while this company has a lot to prove before investors can decide it's a viable long-term business, it may be a good one to watch this year.
Check out the latest La Jolla Pharmaceutical earnings call transcript.