Trevena (TRVN): The AdCom Vote Was a Lot Closer Than You Think

Some investors might love biotech stocks for their lottery ticket-like returns when a company wins the regulator’s blessing. A lottery ticket, however, costs only a buck or two, while getting a biotech company wrong can hurt a lot more than that. Case in point: Trevena (TRVN), whose shares plunged over 70% this week after the FDA poured a bucket of ice water on the company’s lead drug application.

Yesterday, at the Anesthetic and Analgesic Drug Products Advisory Committee (AADPAC) meeting reviewing the NDA of Trevena’s pain drug candidate Oliceridine, the vote on approvability was mixed [8 No, 7 Yes, 0 Abstain], narrowly rejecting the drug for the management of moderate-to-severe acute pain in adult patients for whom an intravenous (IV) opioid is warranted.

In reaction, H.C. Wainwright analyst Ed Arce slashed his price target on TRVN to $3.00 from $7.00, while keeping his rating at Buy. The new price target implies an upside of 245% from current levels. (To watch Arce’s track record, click here)

Arce commented, “We believe the vote was a lot closer than many would have thought two days ago. Indeed, after the vote, at least three panelists who voted “no” stated that they struggled with their decision and could have easily voted “yes”. The consensus view of the panel was that oliceridine is clearly efficacious relative to placebo (the appropriate control per FDA guidance) and that while oliceridine was not shown to have any definitive safety advantage over morphine, it’s safety profile is unlikely to be any worse.”

“Ultimately, however, despite what the FDA views as data insufficiency due to statistical limitations, some panelists, like Marjorie Phillips, believed that it is better to “approve with qualifications, than to reject with qualifications”, while others, like Lonnie Zeltzer felt that oliceridine is “almost ready for prime time, but just not quite”. Further, we believe the panel’s more balanced view of the NDA data package may have swayed the Agency to be more constructive. We note that at the closing of the meeting, the FDA Division Director, Sharon Hertz, thanked the panel for their perspectives and lamented, “not sure you made our job any easier”. On balance, though, with the PDUFA date three weeks away, there may not be enough time for the Agency to gain sufficient comfort with any final labeling negotiations,” the analyst continued.

Overall, Wall Street sizes up TRVN as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the drug maker. In the last 3 months, the stock has received 3 bullish ratings versus 2 analysts hedging their bets. With a potential return potential of 733%, the stock’s consensus target price stands at $7.25. (See TRVN’s price targets and analyst ratings on TipRanks)


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