VTUS An Oversold Opportunity; Now May Be The Time To Buy
Ventrus Biosciences (NASDAQ:VTUS) released second quarter results last night, and notably, the company reported that it has $29 million in cash, enough to fund operations for the next two years according to management. This means that investors can own the shares at a fraction of what analysts believe the company is worth, without the risk of a financing before lead asset VEN-307 reaches potential value-creating milestones. VTUS caught a bad break in late June when its drug candidate for hemorrhoids failed to meet its primary endpoint in a Phase III trial. Ventrus immediately discontinued development of the drug and has since reigned in costs, but shares have not recovered and remain down roughly 70% since the negative results were announced. However, in May of this year, VTUS had some very good news that the stock seems to have forgotten about.
Ventrus' other lead drug candidate, VEN-307, had positive Phase III results for treating anal fissures. Anal fissures is a very painful condition caused by tears in the anus, and VEN-307 proved to significantly reduce "pain on defecation" the primary endpoint in the trial, as well as speed the healing of the condition, an important secondary endpoint. Management will meet with the agency next month to see if this highly successful Phase III trial is enough to start the regulatory review clock for the drug. If the outcome of that meeting is positive, VTUS is likely to recover some of its losses from earlier this year. Odds are that a second Phase III trial will be needed for final approval, but this is expected by investors, and if VTUS is given the green light to submit a new drug application (NDA) on the single trial, the company should be in position to gain approval in the second half of 2013.
The treatment of anal fissures is wide open for an FDA-approved therapy that is effective and has no major side effects. VEN-307 is intended to be the only FDA-approved formulation of diltiazem cream, which is the first choice of doctors that treat anal fissures. Today, however, patients can only get this treatment at a pharmacy that makes the salve. As a result, the favorable Phase III results from earlier this year and the ready-made market for such a product improve chances that VEN-307 will make it to the market and will sell well. Analysts estimate that the product could have peak sales of $200 million annually, noting that there are approximately 1.1 million visits to physicians each year in the U.S. for the condition.
While one analyst downgraded VTUS to neutral after the hemorrhoids drug failed, other analysts see the stock rising back over $10 a share, implying a market cap of $150 million or more, which seems easily acheived for a company with a Phase III asset that has sales potential in range of expectations. With a current market valuation of just $46 million ($17 million after cash), VTUS looks very cheap, and opportunistic investors can take advantage of the exodus of shareholders that were focused only on the hemorrhoids play. With cash in the bank to reach its goals; a Phase III asset validated by positive trial results; another candidate in mid-stage development; and other drug companies in the GI segment, like Salix Pharmaceuticals (NASDAQ:SLXP) and Ironwood Pharmaceuticals (NASDAQ:IRWD), that could be interested in acquiring the company, VTUS may be poised to stage a recovery off its "bottom" in the coming weeks.
Click here to read this report at PropThink
PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically-complicated companies and equities that are grossly over or under-valued. We offer daily market coverage, weekly feature stories, and a newsletter to investors who subscribe on PropThink.com. To learn more visit us at http://www.propthink.com.
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: PropThink via Thomson Reuters ONE
Copyright 2012 ACN Newswire. All rights reserved. A division of Asia Corporate News Network.