Big Catalysts Coming Within a Week for 2 Specialty Pharmaceutical Stocks

The RBC team points out that not only are the catalysts big, they are imminent, with all of them coming between now and mid-to-late September. They also point out that, depending on the results, there is the potential for meaningful stock moves. Here are two of the catalysts we picked that the RBC analysts take a close look at.

Mylan

Mylan N.V. (NYSE: MYL) has a shareholder vote coming up next week on August 28 to see if the shareholders will approve the purchase of Perrigo Co. PLC (NYSE: PRGO). While the RBC team cautions that the vote could be very close, they do think that ultimately it will pass. If that is indeed the case, they see both stocks staying pretty much range bound after.

Two major shareholders, one of which is Abbott Laboratories, hold almost 19% of the stock and have already said they will support the deal. Assuming the vote passes, then the vote moves to the Perrigo shareholders, where Mylan has lowered the acceptance condition to just above 50%, and with good reason. This is a hostile bid, which many see as way too low for the company. Perrigo got some fuel last week, when proxy adviser Institutional Shareholder Services recommended Mylan shareholders deliver a “no” vote, saying there were too many hurdles to a deal.

The wild card is that if the Mylan vote fails, investors can expect to see Perrigo trade back to the $170 range and Mylan shares trade higher. The RBC team stills think the deal has issues, especially with the low premium, and the potential for Perrigo to look for another deal. Mylan shares closed Wednesday at $55.09 and Perrigo at $195.44.

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Flexion Therapeutics

This company with pending Phase 3 data could be high on the radar. Flexion Therapeutics Inc. (NASDAQ: FLXN) is a clinical-stage specialty pharmaceutical company focused on the development and commercialization of novel pain therapies. The company is currently advancing a portfolio of local, injectable drug candidates that have the potential to provide better and more persistent analgesia compared with existing therapy. The company’s lead program, FX006, is an intra-articular sustained-release steroid in development for patients with moderate to severe osteoarthritis pain and the first of two pivotal trials is set to be released in September.

The RBC team sees a very low hurdle to placebos in the clinical trials and expects that after the release of more positive Phase 3 data in the first quarter of next year, interest should really pick up. Given that some 27 million adults suffer from osteoarthritis pain, the market could be as large as $1.5 billion for the product. They also think companies with pain franchises like Allergan, Teva and Endo could have an immediate interest in the company.

The RBC analysts feel that the stock could trade up to $30 on positive data that will be presented next month, and they think a positive data report early next year could move the stock up as high as $49. Again, interest in a blockbuster game-changing pain product would be very high, and a suitor could move quickly to approach the company.

The consensus price target for the stock is $37.83. Shares closed trading on Wednesday at $24.15.

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While anything can happen, it appears as though the RBC team has handicapped these potential catalysts about as a well as a Wall Street firm can. Now the chips go down on the table, and the final stretch for data and information starts.