Avanir Pharma: Nuedexta Sales Launch Slow

ALISO VIEJO, Calif. ( TheStreet) -- Avanir Pharmaceuticals ( AVNR) is finding the launch of its new drug Nuedexta to be slow going.

Nuedexta gross sales totaled $505,000 for the fiscal second quarter ended March 31, Avanir reported Monday night. Avanir executives expressed optimism about Nuedexta's launch considering marketing didn't kick off until February and over 1,000 new prescriptions for the drug have been written through the end of March.

Investors and analysts were expecting better results and are now expressing concerns that Nuedexta prescriptions aren't growing as fast as they could.

Avanir shares were down 26 cents, or 6%, to $3.86 Tuesday as analysts cut near-term Nuedexta sales forecasts and reduced price targets while maintaining hopeful optimism that the drug could still hit long-term peak sales forecasts.

Nuedexta was approved last year as the first-ever treatment for pseudobulbar affect (PBA), a relatively obscure neurological condition that causes patients to experience uncontrollable bouts of laughter and crying. PBA can be associated with patients suffering from multiple sclerosis or amyotrophic lateral sclerosis.

"Nuedexta's launch has been more challenging than we forecast, but we still strongly believe in the drug's ultimate commercial potential and still anticipate peak annual US sales of $350 million and EU sales of $300 million, wrote Cannaccord Genuity analyst Ritu Baral in a Tuesday morning note to clients.

Baral, however, cut her Avanir price target to $6 from $10 after sharply lowering projected Nuedexta sales for 2011 and 2012 by 88% and 81%, respectively. Baral maintained her peak sales estimate for Nuedexta but pushed out the timing of that estimate by two years.

Wedbush analyst Greg Wade said Nuedexta sales in the quarter beat his estimate, but that's only because he whacked his forecast last Friday.

Wade had been forecasting Nuedexta end-user sales of $1.6 million for the fiscal second quarter but reduced that estimate to $400,000 on Friday due to weaker-than-expected prescriptions. Wade also cut his fiscal year Nuedexta sales estimate but maintained his $13 price target on Avanir.

"We believe that physicians are experimenting with Nuedexta therapy on a limited basis and anticipate positive results to lead to broader prescribing. Given that PBA is a condition for which no approved therapies existed prior to Nuedexta and that physicians generally may not screen for PBA, we would expect this launch to take some time to accelerate; current script growth is not surprising, in our opinion," wrote Wade in a Tuesday note to clients.

On a conference call Monday night, Avanir CEO Keith Katkin said the company's early marketing efforts to educate doctors about PBA is paying off with Nuedexta prescriptions that are growing week over week.

"I am pleased that despite the fact in April many of our core neurologist prescribing physicians were at the American Academy of Neurology (AAN) meeting in Honolulu, we continued to see positive trends in the prescription number for Nuedexta. In addition, over 10% of our field sales force are were also at the AAN meeting in Honolulu," Katkin said, on the call.

Katkin did not give Nuedexta sales guidance for the rest of the year.

Favus Institutional Research analyst Elliot Favus sees trouble in the Nuedexta prescription data released so far because the gap between total scripts and new scripts remains narrow, suggesting that most patients are not staying on Nuedexta for more than one, 30-day prescription.

"In our view, this could be due to lack of efficacy, intolerable side effects or prohibitive cost," writes Favus in a Tuesday note reiterating his sell rating on Avanir.

For the fiscal second quarter, Avanir lost $14.5 million, or 12 cents a share, on total net revenue of $1.4 million. The company's operating expenses more than doubled to $15.8 million in the quarter due to the cost of launching Nuedexta. Avanir ended the quarter with cash totaling $103 million.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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