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Biotech Stock Mailbag: Labopharm

Stocks in this article: DDSS VNDA NVS RNN CLDX CTIC DNDN

Labopharm still has no marketing partner for Oleptro, even as the drug's third-quarter launch date approaches. More recently, the company has been dropping hints that it may launch Oleptro on its own using a contract sales force.

Doug Miehm, an analyst with RBC Dominion Securities, told clients recently that an Oleptro launch using a contract sales force has the potential to boost Labopharm's profit margin for the drug, since it will retain most of the drug's economics. But that only works if the drug launch is successful. However, the mere fact that Labopharm is considering selling Oleptro on its own -- and raised money through a stock sale after the drug's approval -- could suggest that potential marketing partners have sniffed around Oleptro but passed on it because the commercial prospects aren't lucrative enough.

Assuming Labopharm does launch Oleptro next quarter, investors should pay attention to the pricing and the level of acceptance of the drug by insurance companies. Will payors substitute Oleptro for generic trazadone? If not, how high of a co-pay will they require for an Oleptro prescription?

In terms of sales, the Canadian drug analyst at TD Newhouse says one measure of market acceptance for Oleptro will be $20 million in 2010 sales, which equates to about 5% market share. (For the record, the TD Newhouse analyst doesn't expect Labopharm to clear that sales hurdle, which is why he has a sell rating on the stock.)

Staying with the theme of commercial launches of newly-approved drugs, Jugdeep S. asks about Fanapt, the schizophrenia drug owned by Vanda Pharmaceuticals (VNDA) that debuted in the market in January and is sold by marketing partner Novartis (NVS).

"I am curious as to why you think we may need multiple quarters of Fanapt sales before we can understand where Titan and Vanda are going? If we hit big or lose big, wouldn't it justify a move along that route and why is it highly unlikely to see such moves," Jugdeep asks.

Novartis announced first-quarter Fanapt sales of $21 million Tuesday in conjunction with the drug firm's earnings report. Novartis didn't offer any commentary on the Fanapt sales performance during its conference call. Vanda and Titan Pharmaceuticals (TTNP.PK) receive a royalty based on Fanapt sales by Novartis; Vanda reports first-quarter financials on April 29.

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