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Rare Disease Drug Maker NPS Pharmaceuticals Looks Undervalued

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A stock rally following positive study data for a new drug ended abruptly this week. Some analysts think the shares can double or triple.

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There are only about 65,000 people in the US with a rare disease known as hypoparathyroidism, a condition that disrupts the body's ability to process calcium.

Francois Nader tells Minyanville that he feels strongly that these people need a treatment that can help them function. Currently, people afflicted with the disease may take almost 50 calcium supplements in a day, says Nader, chief executive of biotech NPS Pharmaceuticals (NPSP). Without the supplements, patients are at risk of vitamin D deficiency, kidney stones, weak bones, and a lot of discomfort.

NPS said this week that its drug, a hormone replacement tested in a study of 90 patients, helped more than half of them reduce their supplement dosage by at least 50%. The drug is in the final stage of testing usually needed for US approval and NPS plans to meet with the Food and Drug Administration next year about getting the product on the market.

"Diabetes patients are lucky enough to have a hormone replacement," Nader says, referring to insulin therapy. "We think this (drug) should be part of a good clinical practice."

Despite the good news from the study data, NPS's stock's rally was short-lived this week. After shooting up to $6.18 on Monday, the stock dropped 13% to $5.35 in midday trading Wednesday. The shares lost more than a third of their value at the beginning of the month on concerns over a bowel disease product. Investors sold off the stock after a study of that drug reported a couple of patients died of cancer during a trial of NPS's experimental drug Gattex.

Some analysts say the stock can double or triple in the next year. Leerink Swann analyst Joshua Schimmer recommends buying the shares with a $14 to $16 price target. Stifel Nicolaus analyst Maged Shenouda also recommends buying NPS and has set an $11 a share target. Both analysts are expecting Gattex and the hormone replacement, Natpara, to win US approval.

Nader estimates sales of Natpara can reach $250 million a year, a figure that he says he's reviewing given the strength of the study results released this week.

"We'll revisit our assumptions," he says. "We'll continue to look at the market size and market potential.over the next few months."

Natpara is aimed at patients with moderate to severe cases of the condition.

A subsidiary of Japanese pharmaceutical company Takeda (TKPYY.PK) has sold the drug outside the US for osteoporosis under a licensing agreement. Marketed as Preotact, the drug has been sold to treat osteoporosis in post-menopausal women at risk of fractures. If approved for hypoparathyroidism, Nader says NPS will sell the drug for that use in the US.

To help launch the drug, Nader recently hired a chief commercial officer: Eric Pauwels, a former executive of Irish drug maker Shire (SHPGY). A sales force for a treatment with such a small patient population doesn't need to be very big, Nader says.


Twitter: @brettchase

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No positions in stocks mentioned.
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