Is Evoke Pharma Stock A Buy? - Financhill

Is Evoke Pharma Stock A Buy?

Is Evoke Pharma Stock A Buy? Pharmaceutical companies can make for solid investments, but the risk can be very high.

Keep in mind that these businesses spend significant amounts of money researching, developing, and testing a product before they ever know that the drug or therapy will receive approval from the FDA, EMA, or other regulatory body.

To combat this risk, many pharma companies tend to maintain several products in their pipeline while others focus on a single drug platform and develop a series of drugs that target a certain mechanism in the body or a particular bodily system.

Evoke Pharma [EVOK] is a good example of this.

What Does Evoke Pharma Do?

Evoke is a specialty pharma company whose primary focus is on drugs that treat gastrointestinal (GI) indications.

Its big product is Gimoti, a nasal spray based on metoclopramide that relieves the symptoms of diabetic gastroparesis.

Before Evoke developed Gimoti, metoclopramide was only available in oral and intravenous preparations, but the intranasal formulation provides novel systemic delivery that enters the bloodstream directly and conveniently.

Drug delivery is important because people with diabetic gastroparesis have a problem with the stomach taking too long to empty its contents, which produces a variety of digestive complaints.

Taking a pill may work but efficacy is limited because absorption is not predictable. With patient stomachs emptying erratically, oral treatments for diabetic gastroparesis are not going to be as effective in practice as something that delivers the dose directly into the bloodstream. Intravenous delivery is an option but an impractical one for many people outside of a medical facility setting.

The nasal dosing bypasses the GI system and begins to work even if the patient vomits or finds the stomach isn’t emptying at that time.

Is Evoke Pharma Stock A Buy?

Evoke Pharma is going to have an opportunity to grow very soon. Gimoti was approved by the FDA in June 2020 and should be available commercially before the end of 2020.

Evoke entered into an agreement with EVERSANA for the launch, allowing the company to effectively offer another entity a piece of the pie (20% of profits to be exact) in exchange for the value of their expertise in product launches.

By the terms of the agreement, EVERSANA is providing non-dilutive financing to support marketing efforts for Gimoti as well as a commercial team to help structure the product debut.

This will enable a rapid product launch and allow Evoke to effectively outsource its non-core operations.

Further, there is the market potential of Gimoti to consider. The standard of care (SOC) includes metoclopramide to help with stomach motility and occasionally erythromycin (taken off-label) or domperidone (which does not have FDA approval).

There are roughly 3 million prescriptions written annually for oral metoclopramide and the estimated value of this prescription market is estimated at $3 to $4 billion.

Many people with diabetic gastroparesis also take PPIs or narcotics to manage the abdominal pain caused by the condition and ondansetron or promethazine to help with associated nausea.

However, the current SOC produces limited efficacy. Additional hospitalization costs related to diabetic gastroparesis average $35,000 per patient.

The costs are high, but the potential market is just as significant. Investors should know that 12-16 million people in the United States have diabetic gastroparesis.

Gimoti could potentially become the new SOC for these people. Also, there is a potential for premium pricing. Various pricing scenarios indicate that reimbursement will be a strong possibility and commercial coverage is likely.

Finally, Evoke has a patent for nasal metoclopramide that expires in 2030 as well as additional patents pending that could expand its exclusivity for several additional years beyond that.

Risks of Investing in Evoke Pharma

Per its own annual report, Evoke is dependent upon the success of Gimoti, and that drug did fail to meet on of its primary endpoints.

When Evoke submitted its application to the FDA, the company “resubmitted our Gimoti NDA based on the results of our completed comparative exposure PK trial,” as explained in the annual report, and the company expressed fears that the “FDA may not agree that we have adequately addressed the issues raised in its CRL from our initial Gimoti NDA submission and we cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, Gimoti.”

In that report, Evoke warned investors that “if we are unable to successfully complete development of and receive regulatory approval of this product candidate, we will be required to curtail all of our activities and may be required to liquidate, dissolve or otherwise wind down our operations. Any of these events could result in the complete loss of an investment in our securities.”

While Evoke did receive approval for Gimoti, its success is precarious. The company will be utterly relying on EVERSANA for the commercialization of Gimoti.

Evoke has no internal capabilities relating to the distribution, marketing, or sales of therapeutic products. While it is in the best interest of EVERSANA to complete these activities well – it is invested in the success of Gimoti as well via its product profit sharing agreement with Evoke – there is no guarantee that the company will be able to deliver on those promises.

Will Evoke Pharma Competitors Beat It?

As promising as Gimoti appears, it does have competitors on the horizon. Allergan is developing Relamorelin, a Ghrelin agonist with subcutaneous delivery.

It is enrolling Phase 3 study participants with results expected before the end of 2020. Early Phase 2 results for the drug show that Relamorelin failed to meet some of its endpoints.

Vanda is another competitor. Its NK-1 antagonist Tradipitant is an oral treatment for diabetic gastroparesis. It is also in Phase 3 and it did meet its Phase 2 endpoints. The progression of these drugs could be limited or delayed by COVID, but these new contenders could still hit the market.

Evoke Pharma Stock Forecast: The Bottom Line

Evoke’s Gimoti offering is promising but nothing is guaranteed, and the company only has that one product on offering. Evoke did see a strong bump in share price after its FDA approval.

However, whether the stock can produce returns on your timeline as an investor is an entirely different matter. Always do your due diligence.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.

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