800-742-7730     This email address is being protected from spambots. You need JavaScript enabled to view it.     Offices     News     Family of Companies

NHLD logo
NAM Logo
NationalInsurance Logo
vfin logo
GC logo

Heron Therapeutics, Inc. - Initiation Note

Heron Therapeutics, Inc.

BUY (HRTX, $13.35)

Financing Overhang Removed, HTX-011 Delivering Consistently, CINV Franchise Materializing: Intiating BUY/$28 TP 

February 13, 2017

Jonathan Aschoff, Ph.D.

212.417.8277

This email address is being protected from spambots. You need JavaScript enabled to view it.


We are initiating coverage of Heron Therapeutics with a Buy rating and a 12-month target price of $28. Our valuation includes US revenue from Sustol, Cinvanti and HTX-011. All 3 drugs benefit from Heron’s proprietary long acting Biochronomer drug delivery technology. Both Sustol (launched 4Q16) and Cinvanti (NDA filed 1Q17) prevent chemotherapy-induced nausea and vomiting (CINV), and are drugs that would typically be used in combination, thereby leveraging Heron’s salesforce, and HTX-011 (Phase 3 starts 2017) is in development for post-operative pain. We expect 2017 to bring additional Phase 2 and potentially initial Phase 3 HTX-01r1 data, Cinvanti approval and launch, and steadily increasing Sustol adoption.

Sustol, Cinvanti and HTX-011 address significant markets, and we project combined peak sales of about $1.1 billion. Sustol, a subcutaneously administered long-acting 5-HT3 antagonist, is differentiated in being approved for delayed-onset CINV in most highly emetogenic chemotherapy (HEC) and all moderately emetogenic chemotherapy (MEC) regimens, as well as for immediate-onset CINV after such chemotherapeutic regimens. Cinvanti, an NDA for which was filed in 1Q17, is differentiated from closest peer, Emend, by its lack of polysorbate 80, which may cause hypersensitivity and infusion site reactions. HTX-011, with four positive Phase 2 trials in multiple surgical models spanning small to large incisions, is differentiated from postoperative
standards of care by its ability to better control pain for an extended time.


We note that under buy-and-bill reimbursement, community oncologists should prefer Sustol to lower cost branded Aloxi and generic players. We believe that the clinically proven advantages of Sustol versus ondansetron (and by extension versus Aloxi, albeit arguably a lesser difference), has allowed Sustol’s WAC to be enough of a premium to Aloxi’s ASP such that Heron can attractively rebate the drug. Despite no reimbursement J-code until January 2018, Sustol’s attractive net cost
recovery in the community oncologist setting against other competitors should grant enough of an incentive to do some extra paperwork to receive a highly favorable reimbursement. The same metrics should facilitate Cinvanti adoption by YE17.

Comparative data are important when selling into a competitive market and Heron has demonstrated favorable comparisons for its drugs, particularly Sustol and HTX-011. Sustol as part of a triple regimen for CINV statistically beat a standard of care triple regimen in Phase 3. In Phase 2, HTX-011 in post-hernia surgery pain statistically beat generic bupivacaine, even when the data were not manipulated to exclude the beneficial effects of the much greater rescue opioid use in the active control arms. Another HTX-011 Phase 2 in post-bunionectomy pain demonstrated the drug’s ability to alleviate severe pain for 3 days, with 19 of 20 patients taking 400mg HTX-011 being opioid free during the entire 72-hour period post-surgery. This and future results should compare very favorably to competitor Exparel.

AKBA


Request Document


Important Disclosures

This publication does not constitute and should not be construed as an offer or the solicitation of any transaction to buy or sell any securities or any instruments or any derivatives of the securities mentioned herein, or to participate in any particular trading strategies. Although the information contained herein has been obtained from recognized services, and sources believed to be reliable, its accuracy or completeness cannot be guaranteed. Opinions, estimates or projections expressed in this report may make assumptions regarding economic, industry, company and political considerations, and constitute current opinions, at the time of issuance, which are subject to change without notice.

This report is being furnished for informational purposes only, and on the condition that it will not form a primary basis for any investment decision. Any recommendation(s) contained in this report is/are not intended to be, nor should it / they construed or inferred to be, investment advice, as such investments may not be suitable for all investors. When preparing this report, no consideration to one’s investment objectives, risk tolerance and other individual factors was given; as such, as with all investments, purchase or sale of any securities mentioned herein may not be suitable for all investors. By virtue of this publication, neither the Firm nor any of its employees shall be responsible for any investment decisions. Before committing funds to ANY investment, an investor should seek professional advice. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice, or to be used by anyone to provide tax advice. Investors are urged to consult an independent tax professional for advice concerning their particular circumstances. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, either expressed or implied, is made regarding future performance.

National Securities Corporation (NSC) and its affiliated companies, shareholders, officers, directors and / or employees (including persons involved with the preparation or issuance of this report) may, from time to time, have long or short positions in, and buy or sell the securities or derivatives (including options) thereof, of the companies mentioned herein. One or more directors, officers, and / or employees of NSC and its affiliated companies, or independent contractors affiliated with NSC may be a director of the issuer of the securities mentioned herein. NSC and / or its affiliated companies may have managed or co-managed a public offering of, or acted as initial purchaser or placement agent for a private placement of any of the securities of any issuer mentioned in this report within the last three (3) years, or may, from time to time, perform investment banking or other services for, or solicit investment banking business from any company mentioned in this report.

This research may be distributed by affiliated entities of National Securities Corporation (NSC). Affiliated entities of NSC may include, but are not limited to, vFinance Investments, Inc., National Asset Management and other subsidiaries of our parent company, National Holdings Corporation.

The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and the income they produce if any, may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Furthermore, NSC may follow emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This report does not take into account the particular investment objectives, financial situation or needs of individual investors. Before acting on any advice or recommendation in this material, the investor should exercise independent judgment as to whether it is suitable in light of his/her particular circumstances and, if necessary, seek professional advice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.

Additional information relative to securities, other financial products, or issuers discussed in this report is available upon request. Neither this entire report, nor any part thereof, may be reproduced, copied or duplicated in any form or by any means without the prior written consent of National Securities Corporation. All rights reserved. NSC is a member of both the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC).

For disclosures inquiries, please call us at 1-800-417-8000 and ask for your NSC representative, or write us at National Securities Corporation, Attn. Supervision Department, 410 Park Avenue, 14th Floor, New York, NY 10022, or visit our website at www.nationalsecurities.com

NHLD logo
NAM Logo
NationalInsurance Logo
vfin logo
GC logo

Newsletter Sign Up

News letter