Evoke Pharma, Inc. EVOK shares have lost about 51% of their value year to date compared to the 9.4%-gain in the iShares NASDAQ Biotechnology Index IBB and a steeper 20% jump in the broader S&P 500 Index.
In early March, the stock hit a long-term support around the $2.35 level and subsequently fell sharply, finding support around 50-60 cents.
After wallowing in penny stock territory until mid-July, the stock has broken the downtrend seen since early March and is experiencing some upward momentum. Volume has also picked up in recent sessions, reflecting investor interest in the stock.
Source: Y Charts
Is the stock primed for a sustainable uptrend in the near-term? Here's a brief on where Evoke stands fundamentally.
One-Trick Pony
Evoke, a specialty pharma company that focuses on developing drugs for gastrointestinal disorders, has a single product in development: Gimoti.
The company bought the rights to the investigational asset from Questcor Pharma in 2007 by paying $650,000 upfront and an additional $500,000 in May 2014 as a milestone payment.
Gimoti is a novel nasal spray formulation of metoclopramide that ensures systemic delivery of the molecule through the nasal mucosa. It is being evaluated as a treatment option for relieving symptoms in adult women with acute and recurrent diabetic gastroparesis.
Diabetic gastroparesis is characterized by slow or delayed gastric emptying; it can lead to various serious digestive system symptoms and other complications.
Metoclopramide in tablet and injection form are the only available treatment options today for diabetic gastroparesis.
About 16 million patients suffer from gastroparesis systems, according to Evoke. The company estimates the market potential at $3-$4 billion.
A Peek Into Financials
Evoke, which has a market cap of $28.714 million and average trading volume of 730,225, has yet to post revenue.
For the fiscal year 2018, the company expended $8.02 million on an operating basis, evenly split between R&D and general and administrative expenses.
The California-based company generated a loss of 46 cents per share in 2018, narrower than the 82-cents-per-share loss in 2017. For the three months ended March 2019, Evoke's operating expenditures stood at $1.97 million. Its net loss per share was 11 cents compared to the year-ago loss of 13 cents.
As of March 31, 2019, the company had cash and cash equivalents of $4.26 million.
Rocky Regulatory Pathway
Following the submission of a 505(b)(2) NDA for Gimoti to the FDA, the regulatory agency accepted the application in August of 2018 and set a PDUFA date of April 1, 2019.
On March 1, the company received a multidisciplinary review letter from the FDA that named the following deficiencies:
- Insufficient evidence regarding product quality control and reproducibility for the commercially available sprayer device used with Gimoto.
- A lack of adequate information to support sex-based efficacy claims.
- Pharmacology data not demonstrating bioavailability to the listed drug.
Evoke stock shed about 57% March 4 in reaction to the FDA letter.
The company submitted a response to the letter March 14 and met with the FDA March 21.
Notwithstanding the interactions, the FDA handed down a complete response letter to the NDA on April 1. The stock lost an incremental 48% on the adverse development.
The CRL highlighted two issues, clinical pharmacology and product/device quality, although the FDA said they did not warrant additional clinical data or raise any safety concerns.
Evoke communicated to the public on June 27 that it has requested a Type A meeting with the FDA.
A Type A meeting is one that is immediately necessary for an otherwise stalled drug development program to proceed, and has to be scheduled within 30 days of the receipt of the request.
Key Catalysts Ahead
This suggests Evoke could have meet with the FDA in the days ahead, which could explain the recent momentum in the stock.
The final minutes are likely to be released within 30 days of the meeting taking place. Once the final minutes are out, Evoke is likely to work out a schedule for the resubmission of the NDA.
Will the second time be the charm? The company sounds upbeat.
"As recommended by FDA, we have initiated the following: a root cause analysis of the variability observed in the pharmacokinetic bridging study, and manufacture of registration batches of Gimoti. We expect both these initiatives will support resubmission of our NDA," Evoke CEO Dave Gonyer said in a statement.
Stock Take
If the FDA meeting goes in Evoke's favor, the stock could extend the recent rally and attempt to reclaim the level it was trading at prior to the March 1 multidisciplinary review letter.
Technically, the recent rally has put the shares in overbought territory, with the 14-day relative strength index now at 75.89.
In the eventuality of the rally extending, the stock could face resistance at its 200-day SMA, currently at 1.78.
If the level is violated to the upside, the $2.3-$2.5 region could serve as resistance. On the downside, the stock is likely to find support at its 50-day SMA at 71.4 cents.
Source: Y Charts
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