Has Avanir Pharmaceuticals, Inc. (AVNR) Become the Perfect Stock?

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Avanir remains dependent largely on its sole approved drug, Nuedexta, which treats a neurological condition called pseudobulbar affect. Although revenue growth figures look immense, it’s important to realize that the raw numbers here are small, with the company bringing in just $16.5 million in sales during its fiscal first quarter.

Avanir gets other revenue from licensing and royalty income. Emergent BioSolutions Inc (NYSE:EBS) produces vaccines against anthrax using Avanir’s technology, while GlaxoSmithKline plc (ADR) (NYSE:GSK) pays Avanir royalties on its over-the-counter cold-sore medicine Abreva.

What Avanir really needs, though, is either an expansion of Nuedexta’s uses or a new drug from its pipeline with more potential beyond a niche condition. Avanir has waited for the European Medicines Agency to rule on expanding Nuedexta’s indications to include multiple sclerosis, but it hasn’t yet gotten a response. Meanwhile, the company announced favorable phase 1 study results for its AVP-786 drug last week, which could eventually become an MS treatment in its own right. Moreover, with Johnson & Johnson (NYSE:JNJ) and Elan Corporation, plc (ADR) (NYSE:ELN) having seen failures in Alzheimer’s drug bapineuzumab, they may be interested if Avanir’s AVP-923 proves useful in treating the disease.

For Avanir to improve, it needs to get sales of Nuedexta rising to the point at which they can make the company profitable. At that point, the company would look much more promising as an acquisition candidate.

The article Has Avanir Pharmaceuticals Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Emergent BioSolutions and Johnson & Johnson and owns shares of Johnson & Johnson.

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