Is Dermira (DERM) Poised to Win Big With Hyperhidrosis’ Treatment?

It’s a big day for Dermira (NASDAQ:DERM). This morning, the FDA green-lighted the drug maker’s Qbrexza (formerly DRM04), making it the first FDA-approved, once-daily, topical prescription treatment indicated for people with primary axillary hyperhidrosis.

Dermira shares reacted to the news, rising nearly 30% to $11.43 in pre-market trading.

Dermira CEO Tom Wiggans commented, “For years, dermatologists have been telling us of the need for new treatment options that address primary axillary hyperhidrosis given the stigma and burden associated with this condition […] From the start, our goal was to develop an approach that went beyond masking a person’s excessive underarm sweating and instead focused on treating the condition in a clinically meaningful way. We partnered with dermatologists and the FDA during the development stage and listened to the people who have been living with this condition to understand how they would define a meaningful benefit. It is our hope that Qbrexza will not only provide the clinical benefit these sufferers have been seeking, but help to reduce the overall burden on their lives.”

Cantor analyst Louise Chen highlights three positive takeaways from the news:

  • Obrexza received a broad, robust label, and is indicated to treat adult and pediatric patients 9 years of age and older. This is a differentiator for DERM, especially when one thinks about patients who might choose between Obrexza and other available treatments (like AGN’s [OW] Botox). Also, this will help reimbursement as well. Per AGN’s 10-K, the company reported $67.2MM in 2017 of Botox hyperhidrosis sales.
  • Qbrexza’s label includes long-term safety data and Phase 3 data, which again we think will be positive for payors and shows how the FDA is thinking about usage.
  • The company’s current cash balance was ~$500MM as of 3/31/18, with a company-guided annual cash burn of $250-270MM GAAP ($215-235MM non-GAAP). This gives the company runway until mid-2020 and enough to launch.

Net net, Chen reiterates an Overweight rating on Dermira shares, with a price target of $20, which represents a potential upside of 128% from where the stock is currently trading. (To watch Chen’s track record, click here)

Out of the 7 analysts polled in the past 12 months, 4 rate Dermira stock a Buy, 2 rate the stock a Hold and 1 recommends a Sell. With a return potential of 169%, the stock’s consensus target price stands at $23.60.

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