Adamas Pharmaceuticals: Short or Short Squeeze Candidate?

Small cap pharmaceutical stock Adamas Pharmaceuticals Inc (NASDAQ: ADMS) is thefourteenth most shorted stock on theNASDAQ with short interest of 40.18% according to Adamas Pharmaceuticals portfolio includes: GOCOVRITM (amantadine) extended release capsules (previously ADS-5102), the first and only FDA-approved medicine for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications; ADS-5102 in development for the treatment of multiple sclerosis walking impairment; and ADS-4101, a high-dose, modified-release lacosamide in Phase 1 clinical development for the treatment of partial onset seizures in patients with epilepsy.

A technical chart for Adamas Pharmaceuticals shows shares starting to movehigher in August:

The surge came afterthe FDA approved Gocovri to become the only approved drug to treat dyskinesia (uncontrolled movements)in patients with Parkinson’s disease. The firm is also looking at Gocovri as a potential treatment to improve walking gait in patients with multiple sclerosis.

In September, Adamas Pharmaceuticals said it planned to charge $28,500 per patient per year for the drug. Mizuho analyst Irina Koffler had written that the Company would charge$14,400 per patient annually and thenraised her peak sales estimate on Gocovri to $266 million with reimbursement issues likely to be sorted in 2019 with approval for MS in 2020. She wrote:

“We heard investor concerns about a slow launch in 2018 and unrealistic consensus estimates, and we agree that numbers may come down. However, Adamas is not a one-trick pony, in our view, and we expect a stream of catalysts to maintain visibility.”

Koffler expected takeout chatter to escalate as Gocovri’s quarterly run rate increases while Needham analyst Serge Belanger added that he sees peak sales for the drug as a treatment for dyskinesia in the $500 million range and that the “current valuation of Adamas fails to capture Gocovri’s potential in levodopa-induced dyskinesia and its late-stage pipeline opportunities.

In November, shares rose further when Point72 Asset Management disclosed in an SEC filing that it had bought more shares of Adamas Pharmaceuticals during the third quarter. Adamas Pharmaceuticalsalso reportedthird quarter results and that it had hired six regional sales leaders to manage its planned 59 neurology account specialist sales force. The CFO commented:

“With the $65 million proceeds from HCRP, together with our current available cash, cash equivalents and investments of $130.7 million as of September 30, 2017, we believe we will be sufficiently capitalized to launch and commercialize GOCOVRI, complete the Phase 3 studies of ADS-5102 in multiple sclerosis patients with walking impairment and initiate a Phase 3 study of ADS-4101 in epilepsy patients with partial onset seizures.

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