Cadence Pharmaceuticals, Inc. (NASDAQ:CADX)

Cadence Pharmaceuticals, Inc. (Cadence) is a biopharmaceutical company focused on in licensing, developing and ultimately commercializing its product candidates principally for use in the hospital setting. The company had in-licensed rights to two Phase III product candidates, both of which have been studied in prior Phase III clinical trials conducted by its licensors.

The company has in-licensed the United States and Canadian rights to IV APAP, a formulation of acetaminophen that is marketed in Europe for the treatment of acute pain and fever by Bristol-Myers Squibb (BMS). Cadence has also in-licensed the North American and European rights to omiganan pentahydrochloride 1% aqueous gel (omiganan), for the prevention and treatment of device-related, surgical wound-related and burn-related infections.

The company’s product candidate, IV APAP, is meant to treat acute pain. It’s estimated that around 251 million units of injectable analgesics, typically used to treat acute pain, were sold in the United States in 2005. Its other product candidate Omigard is meant for the prevention of intravascular catheter-related (CVC) infections.

The company is very much in its development phase. It has no revenue stream as yet. If and when its products get commercialized it will have to incur substantial expenditure to in selling and marketing the same. To cut a long story short, it is few years away from generating cash from operations and having a positive bottom-line.

The company’s valuation on the face of it looks expensive. We are living in times where risk aversion is the norm. Investors these days have a distinct bias towards stock which generates strong and stable cash flows. Thus this stock may not find favor in medium term. Although in short term, with mother momentum firmly on its side it can do well.