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Friday, February 4, 2011

Titan: The Fanapt Royalty


After weeks of a running share price amid speculation that a buyout may be in the works, Titan Pharmaceuticals announced its share of the fourth quarter Fanapt sales during Thursday's late evening (EST) hours.

When the numbers cleared, Titan was due $409,000 out of the $5.1 million in sales that Fanapt raked in for the fourth quarter of 2010, up - although not significantly - from the payment of $395,000 for the third quarter.

The Fanapt number, although higher on a quarter-over-quarter basis, is not quite where many investors of both Titan and Vanda were expecting and some are now predicting a price drop in the TTNP and VNDA share price as a result. 

That said, VNDA has fallen since the new year began while shares of Titan have been on the upswing.  If the price moves of each respective stock are to be assumed as in relation to the fourth quarter Fanapt numbers, then it could only mean that investors see any 'free money' to Titan as a positive event, while the lower-than-expected growth in the Fanapt numbers hurts Vanda especially since Fanapt is its flagship product and not producing the expected cash flow.

On the other hand, Titan has Probuphine news imminent, as well, and speculation about a buyout is little effected by the Fanapt news, in my opinion.  It is true that some entities could use the Fanpt sales as a reason to put some downward pressure on the Titan stock, but in reality, nothing has changed in terms of potential. 

This little company is still ripe for a buyout.

January's rise in the TTNP share price looked more like accumulation than it did a rise into the Fanapt numbers, now that we know what they are - and at the same time shares of VNDA were declining into the Fanapt numbers, so it's hard to assume that the price moves were related.

In fact, with Fanapt not catching on as quickly as expected, it may add more credence to the fact that Vanda is looking to use its cash and shelf offering to aqcuire Titan Pharmaceuticals, for Probuphine data is just around the corner.  In being just a confirmatory trial, chances are pretty high that Probuphine will show the positive results of previous trials. 

There's talk of ROW and a depo formulation of Fanapt in the works that would offer Vanda more revenue potential than the current licensing deal with Novartis does, but the writing may be on the wall that Vanda needs something else to bank on - and quick - hence the speculation of a Titan (and in effect, Probuphine and ProNeura) buyout.

The market action on Friday will offer an indication of what January's move was all about; a significant dip back towards a dollar could mean that the January action was in anticipation of the Fanapt numbers, but any resistance to a dropping price may be the indicator that there's something else that Titan has to tell us pretty soon, and it may or may not have anything to do with Fanapt.

No doubt that Vanda, Titan and Novartis will spin the modest increase in prescriptions as a positive event - and any growth should always be considered positive - but the fact is, you've got to believe that all three entities expected Fanapt sales to be significantly higher by now, a year after the commercial launch of the product

For Titan, however, free money is free money, and that's exactly what this Fanapt royalty provides - free money while Probuphine and ProNeura are advanced through the pipeline.

Barring any Probuphine trial news in the meantime, investors of both Titan and Vanda should be looking towards the upcoming Vanda earnings call next week, which could - or could not - lend credence to any buyout or merger speculation between the two companies.

Oh the life of biotech investing, ain't it exciting?

Disclosure:  Long TTNP, no position VNDA.




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