A Pivotal Time for DARA with Commercial Launches, NASDAQ Compliance, and Investor Interest

DARA BioSciences (NASDAQ:DARA) released some much-needed positive news Monday morning, reporting the domestic launch of Soltamox, the first oral, liquid formulation of the breast-cancer drug tamoxifen. Just after the open Monday, DARA is up 7% to $0.99; DARA only regained compliance with the NASDAQ’s $1.00 minimum bid rule on October 2, but dipped back below the mark last week. In consideration of a delisting, DARA called a special meeting of shareholders for November 8 to discuss a possible reverse-stock split; the meeting was subsequently cancelled, but the risk still lingers as shares hover just above the cut-off point. Near-term price action depends largely on the company’s ability to launch three products and begin generating revenues before existing capital runs low and the company is forced to initiate another round of financing.

Trading volume has increased considerably in the last two months, as DARA is on the edge of moving from a development-stage organization to a profit-generating specialty pharmaceutical. In September, the company announced that it would be handling the U.S. commercialization of Gelclair, a treatment for oral mucositis developed by the Helsinn Group, and in June launched Bionect, a treatment for radiation-related burns and irritation. DARA also plans to file an Abbreviated New Drug Application for the widely-used generic chemotherapy agent gemcitibane by the end of the year. Add Soltamox to the list and the company will have a franchise of supportive-care products that target an enormous domestic market – cancer care. And while the company has made major moves towards streamlining commercialization, DARA still has to demonstrate that its oncology-focused strategy will pan out.

As of Sept. 27, DARA had over $8M in cash and burns roughly $1.8M quarterly, suggesting that the company may be able to operate for a year without further capital. Of course, rarely do small companies cut it so close to the wire, and without a substantial revenue stream, DARA’s cash position will be in need of a boost in the near-term. Gelclair won’t hit the market until the first quarter of next year and revenues from Bionect and Soltamox won’t immediately make their way to the balance sheet. If shares can maintain a price over $1.25, however, a capital infusion may come in the form of warrant exercising. Substantial overhang still exists following the company’s April stock offering, a double-edged sword that will both improve the balance sheet but dilute shareholders. While DARA should be strong on Monday, betting on the stock may not be prudent until the company either raises cash or demonstrates material revenues. Take a close look at the company’s third quarter results, due out any time, for better insight.

It is worth noting that DARA still has two products in development, KRN5500 for the treatment of neuropathic pain in patients with cancer, and DB959, a novel treatment for type 2 diabetes and dyslipidemia which the company is currently attempting to out-license.