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Robert Gadimian from Hot Bio Stock (hotbiotechstocks.com) explains why the market has expressed an overreaction to the approval of Osmolex.

Robert Gadmian

Mar 12, 2018 at 4:00PM

Osmolex, like  Adamas’ Gocovri, is an extended release form of Amantadine. This article explains why Osmolex is not a threat to Gocovri and how the dip in the Adamas share price (NASDAQ: ADMP) provides a great buying opportunity

Adamas has the first and only drug for the treatment of levodopa-induced dyskinesia (LID) in Parkinson’s disease and the company is confident that it will result in a fast pick-up in sales. Adamas’ main drug, Gocovri, is a high-dose, extended-release formulation of a generic drug called amantadine. It is a smart drug development path for a company to use already-approved drugs. Why? It allows them skip the preclinical phase of the drug development, go directly to the clinical phase, and conduct the clinical studies required by the FDA for NDA submission (i.e. the 505(b) (2) route).

Adamas has received some criticism about Gocovri. Critics claim that the drug is only a repackaging of an existing drug in an improved formulation.

I disagree with the critics. think the 505(b) (2) route is a brilliant route that any pharma company can take. First, it shortens your drug development timeline significantly and decreases your risk before approval (since you are working with an approved compound). Second, it blocks the generics for many years as you get market exclusivity. Adamas has used this route and has managed to get approval of their drug for a very attractive use with huge market potential. I commend them for this.

Another fact which the critics miss is NO other generic, extended-release formulation of amantadine is FDA-approved for dyskinesia. Also, none has ever satisfactorily convinced anybody of its work in this indication. There are several cases where the pharmacokinetics of a drug has a major impact on the clinical outcome. Many companies use already-approved drugs and come up with new delivery methods or formulations which make the drugs safer (with fewer side effects) or more effective. This is what Adamas has done.

They proved in their Phase 3 study that Gocovri works in levodopa-induced dyskinesia (LID), and the data was so good that it led to eventual FDA approval. I mention the above facts to explain why there was a big drop in the stock price when on February 20th, FDA approved Osmotica Pharmaceutical’s (osmotica.com) extended release amantadine. The critics thought that it could be used in the same indication as Gocovri was approved for and take market share from Gocovri.

But my key point is that Osmolex is NOT approved for the same indication as Gocovri. Instead, it is an approved treatment of Parkinson’s disease and drug-induced extrapyramidal reactions in adult patients. Gocovri is approved for levodopa-induced dyskinesia or LID in patients of Parkinson’s disease. Right now, Gocovri remains the ONLY approved drug for the treatment of levodopa-induced dyskinesia or LID in Parkinson’s disease. Osmotica did initiate a trial in Parkinson’s disease patients with LID but the study was terminated in 2016.

For example, in early February, Adamas reported data that further strengthens the Gocovri’s story. Adamas reported that a subgroup analysis of Parkinson’s disease patients enrolled in an ongoing open-label EASE LID study, who were still experiencing uncontrolled involuntary movement, showed improvements after switching to Gocovri. Osmolex does not have these kinds of remarkable data.

The skeptics might say that Osmolex could be used off-label for the same indication as Gocovri but we have to keep these 3 facts in mind:

  • Osmotica drug is not approved for this indication and will have issues with the reimbursement.
  • There is no data to show that it works in levodopa-induced dyskinesia or LID in Parkinson’s disease. So, physicians will not feel comfortable prescribing it.
  • Privately-held Osmotica does not have the resources to compete with Adamas which has sufficient cash and resources to aggressively market Gocovri.

If the fear is that a pharma company will acquire Osmolex and promote it off-label for the same use as Gocovri, I have to say that this is unlikely because:

  • No company acquires a product so that they can market if off-label
  • Even if they did, Adamas’ lawyers and FDA will go after them since you are not supposed to promote the off-label use of a product.

My conclusion – the market exaggerated the Osmotica’s drug approval, and it is time to get in ADMP after this big drop.

Adamas Financials

As of December 31, 2017, the company reported $176.4 million in cash. In January 2018, following a secondary, the company netted $134.1 million in proceeds. So the total cash now is nothing less than $300 million. For Gocovri’s full commercialization, the company projects $115-$125 million in expenses.

In 2018, the company plans to complete the Gocovri open-label study with data readout in the second quarter. Similarly, they hope to initiate the MS walking Phase III study and prepare for the initiation of the ADS-4101 Phase III study. Accordingly, R&D expense in 2018 will increase to a range of $45-$50 million.

In summary, the company has the funds to commercialize Gocovri, finalize, and initiate studies in 2018 that will bring increased value to the shares. I estimate that a loan or secondary offering will happen in Q1 2019 (most likely a loan).

Adamas’ Other Pipeline Candidates

The company has a broad, differentiated pipeline which adds to the bullish thesis. Company’s pipeline is presented below (source company website).

The next big asset is ADS-5102 which is being studied for use in multiple sclerosis walking impairment. A mid-stage study showed statistically significant improvements in walking speed at 4 weeks. There are almost 400,000 multiple sclerosis patients in the United States and most experience walking impairment.

This indication, if approved, could easily generate as much value as Gocovri in Parkinson’s disease. My take from Gocovri’s Phase 2 results in MS is that the drug works better than Acorda’s drug, Ampyra.

Adamas’ other asset is ADS-4101 which is being developed for the treatment of partial onset seizures in patients with epilepsy. It showed in a phase 1b study, a 1.5 to 2.5 times increase in average lacosamide concentrations throughout the day as compared to the approved maximum daily dose of approved drug, Vimpat. So, this one also has a big promise.

Final Thoughts from Robert:

The market has overblown worries about the approval of Osmolex and this provides a good buying opportunity. Considering the company’s pipeline, the cash position, and the dip in the stock price, the risk/reward in the investment seems very favorable.