Avanir Pharmaceuticals (Nasdaq: AVNR) is a biotechnology company developing therapies focused on the central nervous system. It has one drug currently approved by the Food and Drug Administration, Nuedexta, for the treatment of pseudobulbar affect.

Today, let's look at three things investors should be watching regarding Avanir Pharmaceuticals, as they will provide us better insight into the company.

1. Nuedexta sales and EMA ruling
It's becoming an almost all-too-common theme to see the FDA approve a drug and then see the hope slowly drained out of a biotech company's share price whose drug doesn't live up to high expectations.

Nuedexta was approved in 2010 as the only treatment for pseudobulbar affect, a neurological disorder characterized by uncontrollable emotional displays. Research firm Canaccord Genuity placed Nuedexta's peak potential at $350 million in the U.S. and $300 million in Europe. Some analysts said it could be as much as $500 million domestically. Truth be told, those estimates are about as realistic as a flying unicorn with Nuedexta sales still limping out of the gate.

In Avanir's third-quarter results, net Nuedexta sales were just $10.1 million, and net revenue among all of its drugs (Nuedexta plus royalty revenue) totaled just $27.7 million versus $5.7 million in the previous nine-month period. Nuedexta sales are growing, but are nowhere near the pace they need to be to lessen Avanir's cash burn rate.

Also important will be the ruling by the European Medicines Agency regarding the company's ability to market Nuedexta in Europe. Avanir submitted its application in October and the review process takes at least 210 days. Therefore, we should be very close to an answer as to whether or not Avanir gains approval there.

2. AVP-923 and licensed drugs
In addition to Nuedexta, investors should be keeping a close eye on what's going on with the remainder of Avanir's pipeline.

For one, Avanir has two out-licensed products. It has a marketing partnership in place with GlaxoSmithKline (NYSE: GSK) on cold sore treatment Abreva, and has licensed out its anthrax antibody and Xenerex technology platform to Emergent BioSolutions (NYSE: EBS), which entitles Avanir to certain development milestones.

The next big thing, however, looks like AVP-923, which is being tested in multiple studies, including those focused on multiple sclerosis and, more recently, Alzheimer's. Both studies are mid-stage trials and could provide a nice boost to Avanir's minimally diversified pipeline.

However, things won't be a cakewalk -- especially with regard to Alzheimer's research. Elan (NYSE: ELN) shares were crushed when its investment in Alzheimer's drug bapineuzumab (aka bapi) was completely written off after marketing partners Pfizer and Johnson & Johnson noted two consecutive trial failures. Eli Lilly's (NYSE: LLY) experimental Alzheimer's drug, solanezumab, is also widely expected to fail in late-stage trials when results come out later this month.

3. Eyeing the cash
As with all relatively nondiversified biotech companies, the last factor you almost always want to keep an eye on is the company's cash burn rate. It takes money to make money, and since its inception, Avanir has accumulated a deficit that's just shy of $400 million. Avanir has financed much of its research through dilutive share offerings, which hurts investors. Since 2007, Avanir's outstanding share count has ballooned from 43 million to 136 million.

Therefore, it's imperative that Avanir take steps now to control its cash costs, and that investors keep a close eye on Avanir's cash burn rate. As of its most recent quarter, Avanir maintained $84.1 million in cash and investments on hand, or roughly enough to get the company through another 18 months based on its recent loss rates.

Foolish roundup
Now that you know what to watch for, it should be easier to analyze Avanir Pharmaceutical's successes and pitfalls in the future and hopefully get a competitive investing edge.

If you're still craving more info on Avanir Pharmaceuticals, I would recommend adding the stock to your free and personalized watchlist so you can keep up on all of the latest news with the company.

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