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Expert Financial Analysis and Reporting

A.P. Pharma: Refiling of NDA for APF530 Could Lead to Stock Price Strength

AP Pharma (APPA.OB) announced that it has resubmitted its New Drug Application (NDA) to the FDA for its lead product candidate, APF530, for the prevention of acute and delayed onset chemotherapy-induced nausea and vomiting (CINV). A.P. Pharma expects to be notified that the FDA has accepted the refiling and has established a Prescription Drug User Fee Act (PDUFA) goal date within the next 60 days or so. The company anticipates a six-month review by FDA which would result in a PDUFA date and FDA decision on approval in late March 2013 or early April 2013.

Investment Significance
The moment of truth for A.P. Pharma is the FDA decision on approval of APF530. One hurdle to leap over in the interim is the FDA notifying APPA that it has accepted the resubmission; this should be known within 60 days. It has become popular for speculators to buy a stock in the months preceding the PDUFA date and to sell sometime before the PDUFA decision. This could cause the stock to trade up in coming weeks, especially if the FDA accepts the NDA refilling.

I will be holding the stock into and through the PDUFA date. I have made the decision that the probability for approval amply warrants taking the approval risk. As I have argued in prior notes, I believe that with approval of APF530, the price could exceed $4.00 by late 2013. If the FDA issues a Complete Response Letter, the company will have cash in early April, 2013 of about $57 million, which is roughly $0.23 per share. This might be a proxy for the downside risk if FDA issues a Complete Response Letter.

Tagged as , , + Categorized as Company Commentary, Market Commentary


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