Neos Therapeutics ($NEOS) is a manufacturer of extended release (XR) products. XR drugs have attributes which enable them to dissolve over time after being ingested, hence being released slowly in the blood stream. Therefore, the key advantage of XR drugs is the fact that the patients are required to take them far less frequently.
Neos has developed a unique, patented form of XR technology. So far, their product development strategy has been to use their proprietary technology in drug combinations that are already approved by the FDA. This is referred to as the 505(b)(2) NDA pathway: rather than developing a completely new drug with a combination of ingredients that have not been approved before, the company adds changes (in this case extended release) to already existing drugs. This is advantageous because there is higher chance of drug approval, and a faster, more cost-effective approval process.
Neos Therapeutics has been focused on treatments for ADHD. They currently have two FDA approved ADHD drugs in their portfolio, with the market launch of the latest one expected to be this October. On their webpage, they hint that they may be tackling central nervous system diseases next.
The September 15 PDUFA: On Thursday the FDA is expected to announce their approval decision on the drug Amphetemine XR Oral Suspension, a once-a-day treatment for ADHD. Considering that they have already received two approvals for drugs containing their proprietary XR technology, and that they have filed for a 505(b)(2), the probability of the new drug getting approved seems to be high.
After trading in a $6.45-$7.20 range for almost two months, the stock price began to increase mid-August in anticipation of the PDUFA, and is currently trading at $9. Keeping in mind that $9 was the peak price during their last PDUFA in June, one may argue that the peak price will be higher this time around. However, when making your trading strategy for this catalyst, it is important to remember the fact that the price plummeted and remained steadily low after the last approval!
With their latest drug Cotempla XR-ODT hitting the markets in fall, the market share of their star-earner Adzensys XR-ODT increasing consistently, and an upcoming PDUFA date for a new drug with rather high chances of being approved, $NEOS appears to be a promising long-term investment. Those who want to go long on the stock may choose to wait until after the FDA announcement to take a position, whereas a majority of the swing traders will probably be taking their profits before the announcement hits!
If you are new to catalyst trading and the FDA process, you can check out introductory article here!