AEGR Pulls Back, But
Remains Sheltered From Major Losses
After a seemingly unstoppable rally since the US launch of
HoFH (Homozygous familial hypercholesterolemia) drug Juxtapid (lomitapide), Aegerion
Pharmaceuticals (NASDAQ: AEGR) finally “cooled off” to some extent, although it’s
worth noting that the CHMP decision contained very positive commentary
regarding the drug’s efficacy in the treatment of high cholesterol. This paves
the way for a smooth launch into Europe, and an eventual realization of the
sales revenues that analysts have been justifying their high price targets
with. Note that Lojuxta is the commercial name for lomitapide in Europe, and has
the same active ingredient as Juxtapid.
JP Morgan and Canaccord, probably the two most bullish firms
covering Aegerion, have 88 and 90 price targets on the stock respectively.
Although many have pointed out the tiny pool of patients
that Aegerion and competitor ISIS will be fighting over, Aegerion has the
luxury of commercializing the most efficacious drug in the indication (based on
clinical trial data). In late stage trials, the drug was able to reduce LDL-cholesterol
in patients by 40%. Lomitapide is a selective inhibitor of microsomal transfer
protein (MTP), which is involved in the assembly of lipoproteins that ultimately
build LDL levels in HoFH patients.
Kynamro (mipmersen sodium) instead inhibits apolipoprotein B
– another protein that is involved in the formation of lipoproteins and acts as
a ligand for LDL receptors.
The prices of the two drug (patient/year) are extremely high
too – at $295,000 and $176,000. This pricing makes it feasible for Aegerion to
sell to only 600 or so HoFH patients while justifying its market capitalization
at a revenue multiple just north of 10, although the upside is also limited due
to the scarcity of HoFH patients.
Aegerion retains full rights to the most efficacious drug for
a deadly and rare orphan indication, which allows the company to justify
extremely high prices for the drug while enjoying a competitive advantage
against ISIS. The patient population limits the upside of AEGR, although the
stock has some more room to run – especially after the recent pullback. A
downside situation should still have a hard time bringing AEGR below ~$50/share
or so based on the pricing of the drug and the efficacy profile that the drug
has established up to this point. This might be a good stock to write puts on,
with the strike being adjusted for each investor’s risk appetite.