Adamis Pharmaceuticals (ADMP - Get Report) rose almost 35% in morning trading Monday after it announced a deal with Novartis AG (NVS - Get Report) to make and distribute Adamis' product to treat allergic reactions.
Shares rocketed $1.10 to $4.30 on the news that the San Diego-based biopharmaceutical company would sign over the commercial rights for its Symjepi injector, a competitor to Mylan N.V.'s (MYL - Get Report) EpiPen product, to Novartis' Sandoz Inc. division, which will distribute and sell the 0.3 and 0.15 mg versions of Symjepi, according to a press release from Adamis.
As part of the deal, Novartis will pay Adamis an upfront fee and potential future milestone payments, according to a press release. Profits will be split evenly between the two companies. That exceeded H.C. Wainwright analyst Jason Kolbert's expectation that profits would be split 70-30 in favor of Novartis, according to a research note.
Kolbert estimates the retail cost of Symjepi will be $250 for a pack of two pens, which is below the market average of $380, as calculated by GoodRx. Its competitive pricing could make it an attractive option for first-responders, hospitals and other large entities that would purchase the product in bulk, Kolbert said. He anticipates Symjepi will control a third of the epinephrine market by 2025, totaling $300 million in revenue.
Kolbert views the move by Sandoz as particularly savvy since the U.S. government and other pharmaceutical companies have tried to create a generic option to Mylan's EpiPen after Mylan significantly raised the price of the product during the "Epigate" scandal.
"You'd love to be the company that solves the EpiPen crisis," Kolbert said.
The partnership puts Sandoz in a good place to compete against the EpiPen, Kolbert wrote in his note. Sandoz has been an established presence in the generic medicine realm and has "the manpower and experience" to challenge other epinephrine-based products, Kolbert said.
"It's a best-in-class product," Kolbert said. "When you compare its physical size to EpiPen or to Auvi-Q or any of the competitive products on the marketplace, it's the smallest device. It's very user-friendly."
Kolbert raised his target price for Adamis from $7 to $10 after the 50-50 royalty rate with Novartis was announced. Symjepi is expected to launch in time before school starts this fall, according to the note.
Mylan shares rose 0.5% to $36.31 in morning trading on Monday. Novartis also fell, down $1.28 or 1.7% to $74.26.