One number really jumps out when you examine the recent history of Repros Therapeutics (NASDAQ: RPRX).: 264%. That's how much shares of the biotech have surged over the past six months. When a stock beats the S&P 500 by nearly sixty-fold, it's doing pretty well.
But that's history. How will Repros perform moving forward? The answer to that question depends on the answers to these three questions.
1. Will Androxal achieve success?
This question really consists of two parts. The first part relates to how well the phase 3 study for Androxal will go.
The drug targets the treatment of low testosterone because of secondary hypogonadism. Repros completed a phase 2b study of Androxal in December 2011. The study found that the drug raised testosterone levels in men and was well tolerated in general. No warning flags have been raised thus far, so Repros expects success in the phase 3 trial.
The second part of the question relates to how successful Androxal will be in the marketplace. Several rivals have already entered the fray. Abbott Labs (NYSE: ABT) makes AndroGel. Auxilium Pharmaceutical (NASDAQ: AUXL) sells Testim. Bio-T-Gel is another new product entering the market. BioSante Pharmaceuticals (NASDAQ: BPAX) received FDA clearance in February and is sold by Teva Pharmaceuticals (NYSE: TEVA).
There's a good reason for such interest. An estimated 13 million men in the U.S. alone suffer from low testosterone levels. Sales of products for the treatment of the condition top $1 billion annually. The challenge for Repros is in positioning Androxal to grab its share of that market, assuming the drug gains approval from the Food and Drug Administration.
2. What is the prognosis for Proellex?
The other drug potentially bolstering Repros' outlook is Proellex. The drug, intended for treating endometriosis and uterine fibroids, encountered a bumpy path earlier but appears to be moving forward now.
The FDA placed a full clinical hold on Proellex in 2009 after patients in a study experienced increased liver enzymes. However, in 2011, Repros was allowed to conduct another study using low dosages of the drug. This study found no increases in liver enzymes. Based on these results, the FDA agreed to move Proellex to a partial clinical hold.
Repros plans to begin a phase 2 study the fourth quarter of 2012 with low dosages of Proellex in treating endometriosis. The company still has a long road to travel before the possibility of approval. However, positive news for Proellex should improve the likelihood for more stock success.
3. Will profit-taking kick in?
Perhaps the biggest immediate risk for Repros shares is that those who bought the stock earlier this year will begin to take profits off the table. Seeing an initial investment nearly triple could incent investors to bank some of those quickly made bucks.
So far, shares continue to hover in the $15 to $16 per share range. However, with a short percent of float over 20%, some people clearly expect the stock to fall. Their view appears to be gaining momentum. The short interest in the stock has increased by 50% since mid-June.
While falling share prices could mean bad news temporarily, it also could present an opportunity for those who want to buy Repros stock but didn't get in earlier.
Other concerns also exist. Repros will face the need to raise additional cash not too far down the road. The company anticipates that current cash levels should carry it into the second quarter of 2013.
If Androxal gains FDA approval, Repros will need a partner to help commercialize the product. No announcements have been made on this front yet, but should things go well with Androxal, my guess is that a deal will be struck with a larger pharma.
Overall, Repros' prospects look pretty good. However, investors should wait for a pullback after the stock's impressive climb. Another near-triple isn't likely in the cards, but Repros doesn't seem to be completely done with its upward movement yet.
Fool contributor Keith Speights has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.