Biopharmaceutical company Zalicus
What it means
The FDA approval primarily benefits Covidien
Covidien's CEO publicly stated that he expected the drug's peak sales to be in the $200 million range. With analysts estimating that Zalicus' royalties are around 12.5%, Exalgo sales should have provided a nice bit of ongoing cash for the company. However, as of June 30, 2012, Zalicus received only $6.5 million in royalties. That's a disappointing sum.
That's not the only bad news for Zalicus. Earlier this year, Watson Pharmaceuticals
The 32 milligram dosage, though, was not included in the terms of the settlement between Covidien and Watson. That means that Zalicus will receive its full tiered royalties for the higher dosage since no generics will be introduced for it under the current settlement.
Sales of Exalgo should increase with the recent FDA approval. Rival drug Opana ER, made by Endo Pharmaceuticals
Waiting for more news
While the approval of the 32 milligram dosage of Exalgo is definitely good news for Zalicus, the company is eagerly anticipating more news that will be even more important to its future. It is currently in a phase 2b clinical trial for arthritis treatment Synavive and is in phase 1 trials for Z160 and Z944 pain medications.
These products in Zalicus' pipeline hold the potential to catapult the company into the next level -- or cause it to flame out. Results from the clinical trials will make this week's good news on Exalgo largely irrelevant.
Zalicus is one of many biopharmaceutical companies with high risk and potentially high reward. Another firm with this risk/reward opportunity is Arena Pharmaceuticals. Arena's primary drug, Belviq, is used for weight management in obese adults -- an area of huge opportunity and high investor interest.
However, investors need in-depth information to make informed decisions before buying stocks like these. To help out, one of our top biotech analysts has created a new premium report on Arena Pharmaceuticals. In it, you'll learn all about the key risks, opportunities, and things to watch as the company rolls out Belviq. It also comes with a full year of analyst updates, so click here to get your copy now!
Fool contributor Keith Speights owns no shares in the stocks mentioned above. Motley Fool newsletter serviceshave recommended buying shares of Covidien. The Motley Fool has a disclosure policy.
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