Summary
- Today, we revisit a small biopharma named Flexion Therapeutics.
- Its stock has held its own this August thanks to better than Q2 results that showed its flagship Zilretta franchise is gaining traction.
- We revisit Flexion Therapeutics in the paragraphs below.
- Looking for more stock ideas like this one? Get them exclusively at The Biotech Forum. Get started today »
"Is that gallantry I smell, or just stupidity? The two scents are much alike, as I recall.” ? George R.R. Martin, A Knight of the Seven Kingdoms
We continue our series of reviews of Q2 results at previously profiled small biotech concerns today. In today's post, we revisit Flexion Therapeutics (FLXN) Q2 results that showed impressive revenue growth that was significantly over expectations. The 'Tier 3' concern finally seems like it is gaining some traction within a skittish market. We highlight key Q2 data points and look back on Flexion in the paragraphs below.
Company Overview:
Flexion Therapeutics is a Boston based biopharma. Its primary compound is Zilretta. Zilretta got approved to treat the pain associated with osteoarthritis (OA) of the knee in October of 2017. Osteoarthritis affects some 30 million Americans annually with the knee being the most common joint impacted. Like most 'Tier 3' concerns, the initial ramp up in Zilretta post approval was slower than most investors would have liked. However, based on Q2 results, Zilretta's rollout is gaining steam. Flexion currently has a market cap of $425 million and the stock sells right at $11.00 a share.
- The company posted a loss of 96 cents a share, about a dime a share above the consensus.
- Zilretta net sales came in at $17 million, approximately $2 million north of expectations. This was up 60% sequentially from the first quarter and compares to just $3.8 million in sales in the same period a year ago. Solid growth no matter how you slice it.
- A FDA abbreviated new drug application or ANDA to allow for multiple injections of Zilretta into the knee should be approved in mid-October. This should be a nice tailwind for sales growth starting early in the fourth quarter. Zilretta sales already seemed to have benefited from the product getting a coveted dedicated 'J-Code', which became effective January 1st, and makes accurate/timely reimbursement much easier for providers.
- The company also recently completed a round of debt financing. This replaced previous term loans and provides up to $60 million in non-dilutive capital.
- Finally, the company advanced two other early-stage candidates to clinical-stage development in the quarter.
Analyst Commentary & Balance Sheet:
The company ended the quarter with just over $175 million in cash and marketable securities on the balance sheet. This is down from just under $260 million at the end of 2018.
After earnings posted, both Northland Securities and RBC Capital reiterated Buy ratings with identical $20 price targets, which is also where the median analyst price target currently sits on Flexion. Northland's analyst noted "We view FLXN shares as being significantly oversold, w/ the current valuation representing a compelling risk/reward profile.”
