One day after shares of
New River Pharmaceuticals
went through the roof, investors erected a new ceiling.
At the end of the session, New River's stock was up $5.50, or 13%, to $47.82 in torrid trading. The stock rose as high as $51.04, and the close set a 52-week high for the second day in a row. On Monday, the Radford, Va.-based company's stock climbed 61% to close at $42.32.
The excitement was caused by the Food and Drug Administration granting
conditional approval to a New River drug for treating attention deficit hyperactivity disorder.
New River and its marketing partner, Britain's
, say they expect to start selling the drug, NRP-104, during the second quarter of 2007.
The FDA's conditions include final wording on the drug's label and the designation of an
abuse-potential rating by the Drug Enforcement Administration. The DEA ranks controlled substances from Schedule I, the highest risk of abuse, to Schedule V, the lowest risk.
Regulators from the FDA have recommended that NRP-104 receive a Schedule II rating, the same as other stimulant-type ADHD drugs.
New River's stock surged anew even as two investment banking firms cut their ratings. First Albany reduced its rating to buy from strong buy and Friedman Billings Ramsey dropped the stock to market perform from outperform.
Robert Uhl of FBR says the big advance Monday outran his price target of $45 a share. "We believe that the significant short position in the shares, 5.9 million reported in early September, has played a role in the sharply higher share price," he told clients in a research report. Uhl doesn't own shares.
However, Andrew Forman of WR Hambrecht remains bullish on New River, raising his price target to $50 and keeping his buy rating. "We cannot ignore the obvious," he says. "To what extent could Shire conclude that buying New River Pharmaceuticals sooner, rather than later, be the better scenario rather than paying a potentially larger share of profits to New River should NRP-104 be the potential blockbuster we expect?"
Forman doesn't own shares. His firm has had an investment banking relationship with New River.
Shire is interested in NRP-104 as an
eventual replacement for Adderall XR, the market leader among ADHD drugs, that could face generic competition as soon as April 2009. Since clinical trials suggest that NRP-104 has fewer side effects than Adderall XR and other ADHD drugs, Shire is looking to protect and expand its franchise in ADHD.
Shire also markets Daytrana, an ADHD drug delivered through a skin patch that was developed by
, and is developing two other ADHD drugs.
Meanwhile, Shire's shares slipped, losing $4.06, or 7.1%, to $53.10 in very heavy trading. On Monday, Shire's stock rose 15.7% to close at $57.16.
Karl Keegan of Canaccord/Adams says he is "a little disappointed" that the FDA recommended a Schedule II abuse rating for NRP-104. He was hoping for a less restrictive rating, adding that it will be more difficult for Shire to switch patients from Adderall XR to NRP-104 if both have the same rating.
"However, there is a possibility that the NRP-104 label may contain language that includes lower abuse potential and lower potential for addiction," says Keegan, in a research report.
He says such a label would help Shire market the new drug as a replacement for Adderall XR, which accounts for half of the company's revenue. Keegan, who has a hold rating on Shire, doesn't own shares. His firm doesn't have an investment banking relationship.