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Expert Financial Analysis and Reporting

Initiating Coverage of A.P. Pharma with a Buy (APPA, $0.42)

I have just published a report initiating coverage on A.P. Pharma (APPA, $0.42) in which I recommend purchase; my 2015 price target is $5.00+. The recommendation is keyed to the projected approval of APF530 for the treatment of chemotherapy induced nausea and vomiting in early 2013 and launch in the US in mid-2013. Most newly introduced products in the biotechnology industry have been hitting strong headwinds in the launch phase from physician concern about safety and difficulty in gaining formulary approval. Some hedge funds have adopted a policy of shorting into a new product launch for this reason. I am arguing the APF530 will prove the exception. I am looking for sales of $46 million in 2013 even though I am looking for a mid-year introduction and $200 million in 2014, the first full year of marketing. The reasoning behind this lies in the peculiarities of reimbursement under Medicare part B that encourage quick uptake, the proven safety of APF530's active pharmaceutical ingredient granisetron and the need for a long acting product when Aloxi fails. These are all discussed in detail in my report along with details on the assumptions underlying my sales estimates.

Tagged as , , , , , + Categorized as Company Commentary, Smith On Stocks Blog


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