Adamas Pharma's Gocovri Will Achieve 'Blockbuster' Status, Says Kerrisdale

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Adamas Pharmaceuticals Inc (NASDAQ:ADMS), a small-cap pharmaceutical company that develops therapies to treat chronic neurologic disorders, is a

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"misunderstood" stock that has a potential upside of four times, Kerrisdale Capital said in a new report.Adamas is expected to soon launch its first product, called Gocovri, for patients with Parkinson's and recent "high-quality" phase 3 studies have shown the therapy significantly reduces dyskinesias and improves patients' overall conditions, the report said. As such, the U.S. Food and Drug Administration has already designated Gocovri as the only approved therapy for levodopa-induced dyskinesia.As such, Adamas will be well positioned to "deeply penetrate" the $3.5 billion addressable market. The issue at hand is that while Gocovri is worth $1.6 billion, or $65 per share, the stock is trading at a 64 percent discount to the value, Kerrisdale Capital wrote. On top of that, the stock remains heavily shorted as short interest currently stands at 33 percent of all shares outstanding.

"Clearly many investors have little faith that Adamas will be able to capitalize on the Gocovri opportunity," the report said. "We believe this skepticism is misplaced."

Bearish and short investors argue that Gocovri is an extended-release formulation of an already existing generic drug called amantadine and the company is as working on a therapy that is "nothing more than an unsustainable cash grab." However, this thesis falls apart when considering the fact that the generic counterpart is not FDA-approved for dyskinesia and has never been convincingly shown to work.

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On the other hand, Gocovri's efficacy, even over the long term, is "well-documented," Kerrisdale Capital further wrote. At its core, Gocovri is a "good drug" that offers a "far more convincing story."

Finally, beyond Gocovri, Adamas is overseeing two other phase-3 trials that aren't receiving much attention but could represent a $300 million opportunity.

"Overall, we believe Adamas is realistically worth over $100 per share — more than 4x higher than its current price," the report concluded.

At publication, shares of Adamas were up 7.1 percent at $26.41.

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