How Biotech Freed Itself From FDA Shackles: Trevena’s 108.72% Stock Rise

How Biotech Freed Itself From FDA Shackles

This article was written by Graham Ellinson, a Financial Analyst at I Know First currently studying Mathematics at Northumbria University Newcastle.

 

“There is an urgent need for a novel analgesic that delivers powerful pain relief with improved safety and tolerability.” – Trevena CEO Maxine Gowen, Ph.D.

 Source: logosandbrands.directory

Highlights

        • OLINVO and other pipeline products drive TRVN growth
        • The rate of FDA drug approval has risen significantly across the board over the last year
        • I Know First algorithm is currently bullish on TRVN

TRVN and its pipeline products

Trevena’s expertise lies in engineering “biased ligands” that activate only the beneficial signalling pathways downstream of a GPCR to unlock new biology and avoid drug adverse effects. Trevena’s pipeline currently includes a clinical stage mu-opioid biased ligand for post-operative pain, and discovery-stage programs for chronic pain, migraine, and Parkinson’s disease.

Source: www.trevena.com

Oliceridine injection (OLINVO) is Trevena’s flagship pipeline drug that aims to replace conventional morphine based intravenous pain relief without adverse side effects such as respiratory depression, sedation, nausea, and vomiting.  Although it is an already over-saturated market with many different IV treatments available the market has long been in search of an improved opioid and the classical market hype one would expect from FDA approval leads us to question if the eventual approval had already been priced.

In 2018 Trevena stock has risen by 94.37% this is in line with the recent biotech industry turnaround. Investors are attracted by the innovation these biotech companies can offer despite the change in FDA policy. While Trevena also has another two pipeline drugs: TRV250 and TRV734 for migraines and moderate to severe pain respectively, both with an improved side effect profile than traditional pain reliefs currently on the market.

In respect to mid-term stock outlook for Trevena it remains bullish and as the TRV250 and TRV734 clinical trials progress market confidence has recently increased. However, be wary for a common trend where shares are being priced prior to FDA approval with these other pipeline products.

The rate of FDA drug approval has risen significantly across the board over the last year.

 

Source: Wikimedia commons

The FDA’s new commissioner, Dr. Scott Gottlieb, has extensively argued that the agency is in need of regulatory reform to get critical medical products to patients more quickly and efficiently. The policy changes he has implemented aims to offset safety concerns with improved regulations. This highlights the reduced significance approval has on pipeline drugs as under this new policy FDA approval is less likely to be unnecessarily held up.

Additionally, the FDA granted OLINVO Breakthrough Therapy status back in 2016. Whilst this of course is not a guarantee of approval in itself, if sufficient interest can be demonstrated, as was the case for OLINVO, an expedited path will be granted which further increases the probability of eventual approval.

Consequently, the expected bump in share price is far lower than what previous pharmaceutical companies experienced.

Pain medication

Pain relief can be considered an over-saturated market with a host of different available options from over the counter pain relievers such as Acetaminophen (Tylenol), Nonsteroidal anti-inflammatory drugs (NSAIDs), including: ibuprofen (Motrin, Advil) or naproxen (Aleve, Naprosyn) to prescription pain relievers such as Corticosteroids and Opioids, with the latter being the most popular. Opioid drugs bind to opioid receptors in the brain, spinal cord, and other areas of the body. They tell your brain you’re not in pain. They are used to treat moderate to severe pain that may not respond well to other pain medications. Opioid side effects include: Constipation, Drowsiness and Nausea.

Nonetheless, although there is a host of existing pain medication Trevena seems to still have room to grow with it outperforming almost all of its competitors.

Source: money.cnn.com

Has FDA approval lost its influence over the biotech industry?

Over the last three months TRVN stock has risen by 108.72% with the NASDAQ Biotechnology Index rising by 0.30%. While the biotech industry has suffered of late, with a decline of 5% in the first three months of 2018. TRVN itself received a muted market reaction to the FDAs acceptance of its new drug application for OLINVO its 11% share price hike of $2.02 following this news was short lived with its stock rapidly going back to $1.76.

While this kind of activity may not surprise many as the Biotech industry is notoriously fraught with ups and downs as many companies simply fail to produce consistent results. Consequently, the market value of a clinical stage bio-pharmaceutical company such as Trevena relies heavily on its progress through clinical trials and, ultimately approval. However, this does not explain the lacklustre reaction to the FDA acceptance of OLINVO which should be seen as a positive indicator.

Analyst recommendation for TRVN

Source: Yahoo Finance

The current analyst consensus rating supposed at 1.8 on company shares (1.0 Strong Buy, 2.0 Buy, 3.0 Hold, 4.0 Sell, 5.0 Strong Sell). This is in agreement with current I Know First forecast.

Conclusion

TRVN has both short-term and long-term growth potential. Demand for fewer side effects in pain relief will always remain enticing. It will be the main drive for TRVN stock in the long run with each successful phase in the clinical trials being the short-term outcome for TRVN stock growth. Moreover, the biotech industry seems to have recovered from its previous slump and has evolved with the change of FDA policy. With the global pain management therapeutics market valued at approximately USD 61 b. in 2017 and is expected to generate revenue of around USD 79 b. by end of 2024, Trevena will look to capitalise on this especially as the US accounts for over 50% of this market. OLINVO looks set to become the leading product in this market and replace the current leader morphine, currently at 75%.

Current I Know First Forecast

The I Know First self learning algorithm has a bullish outlook for TRVN over the next three months with a signal at 105.67 and a predictability indicator of 0.48.

07_October_2018

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