What happened
Shares of Amneal Pharmaceuticals (AMRX -0.51%) gained over 52% today after the company announced that the U.S. Food and Drug Administration (FDA) has approved its abbreviated new drug application (ANDA) for EluRyng (etonogestrel/ethinyl estradiol vaginal ring). The branded birth control product will become the first generic version of NuvaRing to launch on the market.
EluRyng is also the first of 15 new specialty generic drugs that Amneal Pharmaceuticals expects to bring to market within the next two years. The idea is that drug products with more complex formulations, such as those that elute active pharmaceutical ingredients over time, may have higher margins and less competition.
As of 11:47 a.m. EST, the pharma stock had settled to a 44.5% gain.
Image source: Getty Images.
So what
According to Amneal Pharmaceuticals, NuvaRing generated U.S. sales of $976 million in the 12 months ended Oct. 31. While EluRyng might capture only a sliver of that market and should be priced lower than the innovator product, investors are clearly excited about the potential to add another $100 million or more in higher-margin annual sales.
The business could use the help. In the first nine months of 2019, Amneal Pharmaceuticals generated $1.2 billion in revenue and reported an operating loss of $225 million. Asset impairments and legal costs have nudged the company deeper into the red this year, and investors surely want to see a more sustainable business being built.
Now what
The generic drug market faces numerous headwinds right now, which helps to explain how shares of Amneal Pharmaceuticals have lost 69% of their value in the last year alone. That prompted the business to write off certain assets and refocus on specialty products where it might be able to build a competitive advantage. The approval and launch of EluRyng starts that process, but investors need to see concrete results before calling the strategy a success.
