By: Jack Senft, AIM student at Marquette
University
Disclosure: The AIM Equity
Fund currently holds this position. This article was written by myself, and it
expresses my own opinions. I am not receiving compensation for it and I have no
business relationship with any company whose stock is mentioned in this
article.
Summary
•
Heron Therapeutics, Inc. (NASDAQ:HRTX)
is targeting more than 28 million annual procedures in the United States that
require postoperative pain management, specifically patients who are suited for
HTX-011.
•
HTX-011 is seeing a unique shift towards blocking both pain and local
inflammation, with possible needle-free administration.
•
HTX-011 achieved all its objectives in both Phase 3 trials.
•
Recent FDA approval of Pacira’s Exparel shows opportunity, along with close
cross-study comparisons between HTX-011, each company’s form of bunionectomy.
•
Overwhelming positive responses by physicians and pharmacists to HTX-011,
enhancing that HTX-011 being preferred over Exparel.
Key points: Heron Therapeutics is in a great position
for future opportunity and positive results.
Being in the opioid and pain market, extensive research has been
conducted showing that more than 40 million patients undergoing surgical
procedures are prescribed opioids for pain management, with only 2.6 million of
those who actually take the opioid to manage that pain. With that said, HRTX sees a theoretical
market size of $9.1 billion. This is a
sum of initial targets, secondary targets, and tertiary targets, or $4.9B,
$1.9B, and $2.3B respectively.
Given
the declared public health emergency announcement in October 2017 for the
opioid epidemic, there is currently intense regulatory pressure to reduce the
number of opioid prescriptions. Professionals
have been made aware that HTX-011 is used for both blocking pain and local
inflammation. On top of this, the
conditions for HTX-011 is suited perfectly for needle-free administration. This means that only a single dose
application is needed, which is applied with a syringe within the surgical
site. Once applied, it takes 72 hours
for all ingredients to be released, helping ensure a low risk of overdose.
While
in the Phase 3 trials, HTX-011 achieved all its primary and key secondary
endpoints. In its 301 study, HTX-011 lowered the incidence of opioid related
adverse events, such as nausea, vomiting, itching, digestive problems, and
difficulty sleeping. This drug has also
shown no serious adverse events and no deaths.
Granted
that Pacira’s Exparel received FDA approval, it still shows that there is
strong desire for opioid-sparing alternatives.
Exparel’s label currently states that, “clinical benefit of this
reduction has not been established.”
Yet, in Phase 3 studies, HTX-011 resulted in statistically significant
improvements in total opioid use, and a higher percentage of patients who were opioid
free through 72 hours. All of these
facts help to back up the point that physicians and pharmacists have positive
responses to HTX-011, and that pharmacy directors strongly preferred HTX-011
over Exparel.
What has the stock done
lately?
Heron
Therapeutics, Inc. has recently completed a secondary stock offering. About 6.9 million new shares were offered,
which equates to about $168.7 million. Granted this was completed towards the end of
2017, the stock has almost doubled in value.
With the announcement of more positive phase 3 trials, along with
continued success might be a strong catalyst to more than double the stock yet
again.
Past Year Performance: HRTX has substantially increased 100.32% in
value over the past year, and it has yet to peak. In late 2017, HRTX stayed
fairly level, before exploding to about $30.
A year ago, the stock was trading at $15.40, with a 52-week low at
$12.70 and a high at $32.70. This peak
will be broken, pushing the price to new highs.
Source: FactSet
My Takeaway
Heron
Therapeutics has seen robust growth in the past year, and they are still in a
great position. HRTX sees continued opportunity, especially compared to the FDA
approval of Exparel, which still shows that there is strong desire for
opioid-sparing alternative. HTX-011
unceasingly shows positive phase 3 trials, as many professionals have positive
response. HTX-011 has great potential after these trials, which could push HRTX
to new 52-week highs even by the end of the week, helping to reiterate a buy
status.
Source: FactSet
