Dermira, Inc. (NASDAQ: DERM) is a biopharmaceutical company dedicated to bringing biotech ingenuity to medical dermatology by delivering differentiated, new therapies to the millions of patients living with chronic skin conditions.
On May 3rd, the company announced financial results for the quarter ended March 31, 2018 and provided an update on its clinical development programs. For the past eight years, Dermira has been working towards its goal of offering new therapies for the millions of patients living with chronic skin conditions, and 2018 promises to be an exciting year for the company as it expects to complete its journey from a development stage to a commercial stage company. Moreover, from a financial flexibility perspective, the present liquidity that the company has is expected to provide an operational runway until the first half of 2019.
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As per management, the second half of 2018 holds great potential for the company as it awaits a decision on its new drug application for glycopyrronium tosylate (expected by June 2018) as a potential treatment option for the millions of people suffering from axillary hyperhidrosis and aims to complete the enrollment of its lebrikizumab Phase 2b trial (expected in first half of 2019). Also, with these programs moving towards commercialization, DERM would have relatively increased product development capacity to advance new programs.
Several catalysts are coming over the near to medium term.
Analysts tracking the stock believes that the company is well poised for significant value creation via efficient development and commercialization especially given the fact that DERM is targeting a large, growing, underserved market with significant unmet needs. Moreover, the company has a presence in a segment which is consolidating right now with very few entities focussed on innovative and new treatment approaches.
On the flip side, the company is exposed to the risk associated with any biotech play. In fact, the company faced massive setback after Dermira’s acne drug failed to meet the co-primary endpoints of two crucial, late-stage clinical trials. The market is now focussing on glycopyrronium tosylate, and drug lebrikizumab.
The market cap of just $361.5 million and share now ruling at $8.57, can move to a level of about $17.57 in next six months or so. Considering all this, the company is in an extremely favorable risk-reward position, and value investors should consider exposure in this sector as the backdrop remains favorable.
About the company: Dermira is a biopharmaceutical company dedicated to bringing biotech ingenuity to medical dermatology by delivering differentiated, new therapies to the millions of patients living with chronic skin conditions. Dermira is headquartered in Menlo Park, Calif.
Pipeline: Dermira’s pipeline includes two late-stage product candidates that could have a profound impact on the lives of patients: glycopyrronium tosylate (formerly DRM04), for which a New Drug Application is under review by the U.S. Food and Drug Administration for the treatment of primary axillary hyperhidrosis (excessive underarm sweating beyond what is needed for normal body temperature regulation), and lebrikizumab, in Phase 2b development for the treatment of moderate-to-severe atopic dermatitis.
Other Operational Highlights and Clinical Update:
In March 2018, Dermira announced that the investigational treatment olumacostat glasaretil (formerly DRM01) did not meet the co-primary endpoints in its two Phase 3 pivotal trials (CLAREOS-1 and CLAREOS-2) in patients ages nine years and older with moderate-to-severe acne vulgaris, and the company expects to discontinue the program.
In February 2018, Dermira presented new findings from its glycopyrronium tosylate Phase 3 clinical program. The data showed that when applied topically, the investigational therapy improved disease severity, reduced sweat production and was associated with improved quality of life outcomes for pediatric patients (ages 9 to 16) with primary axillary hyperhidrosis (excessive underarm sweating), compared to vehicle-treated patients.
In January 2018, Dermira announced the initiation of a Phase 2b dose-ranging study evaluating lebrikizumab in adult patients with moderate-to-severe atopic dermatitis, the most common form of eczema. The study is expected to enroll approximately 275 patients. Topline results are expected in the first half of 2019.
First Quarter 2018 Results:
Profitability: For the quarter ended March 31, 2018, Dermira reported a net loss of $59.3 million, compared with a net loss of $29.5 million for the same period in 2017.
Liquidity and financial flexibility: As of March 31, 2018, Dermira had cash and investments of $495.8 million, and 41.8 million common shares outstanding.
Key risk factors and potential stock drivers:
• Successful completion of the upcoming milestones would lead future direction for the company. Any adversities related to these upcoming milestones might adversely impact the overall investor sentiments. Also, excessive sweating is an undeveloped market, and the company is exposed to risk related to competition from other drug developers’ new products.
• DERM is still an early stage entity and has not yet generated meaningful revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it. The company’ prospects are significantly dependent on glycopyrronium tosylate, which might have limited sales potential. Moreover, lebrikizumab is still years away from commercialization.
• DERM has a history of operating losses. Therefore, any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor.
Stock Chart:
Comments:
• On Wednesday, May 30th, 2018, DERM is trading at $8.61, on an average volume of 543K million shares exchanging hands. Market capitalization is $361.567 million. The current RSI is at 39.07
• In the past 52 weeks, shares of DERM have traded as low as $6.98 and as high as $31.59
• At $8.61, shares of DERM are trading below its 50-day moving average (MA) at $9.00 and below its 200-day moving average (MA) at $21.14
• The present support and resistance levels for the stock are at $7.98 & $9.18 respectively.
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