What happened

Shares of Adamas Pharmaceuticals (NASDAQ:ADMS) were crashing 29.6% lower as of 11:39 a.m. EST on Tuesday. The biopharmaceutical company reported its fourth-quarter and full-year 2018 results after the market closed on Monday. It gave a sneak peek at its Q4 results in January and delivered on those preliminary results. So why did the stock plunge?

CEO Greg Went said in Adamas' Q4 conference call that prescription volume growth was slowing for Parkinson's disease dyskinesia drug Gocovri and would likely continue to do so into the first quarter. This news prompted analysts at Mizuho and Cowen to downgrade Adamas Pharmaceuticals stock.

Businessman looking at falling line chart

Image source: Getty Images.

So what

It's not a good sign when a drug that was only launched a little over a year ago is already experiencing slowing prescription volume growth. And it's even more concerning when that drug is the only medication approved by the Food and Drug Administration for its indication. But that's what is happening with Gocovri. 

However, there could be reasons investors shouldn't be overly alarmed. Several seasonal factors could be slowing growth for Gocovri, especially in the first quarter. For example, patients have to reset their deductibles at the beginning of the year and could be less likely to have prescriptions filled. Adamas has also rolled out a free drug trial that could hurt paid prescriptions over the next few months.

But it's also possible that the commercial launch for the drug simply isn't going as well as hoped. This is the first drug that Adamas has marketed on its own. The company's commercialization strategy could have been too optimistic or not executed very well. 

Check out the latest earnings call transcript for Adamas Pharmaceuticals.

Now what

It remains to be seen whether the issues hurting the growth of Gocovri are temporary or more persistent. And in the second half of the year, Adamas expects to announce top-line results from its phase 3 study of ADS-5102 for treating walking impairment in multiple sclerosis patients.

The company shouldn't have to worry about running out of cash while it tries to get the launch of Gocovri on track. Adamas reported cash, cash equivalents, and marketable securities totaling $210.9 million at the end of 2018. That should be sufficient to fund operations at least through 2020.

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