Small Cap Furiex Pharmaceuticals (FURX) Has the Runs on Its Irritable Bowel Syndrome Drug (IBB & XBI)

Yesterday, small cap drug development collaboration company Furiex Pharmaceuticals Inc (NASDAQ: FURX) surged 129.91% after announcing that its experimental drug had alleviated diarrhea and abdominal pain caused by irritable bowel syndrome in two studies, meaning its worth taking a closer look at the stock because that's a condition that effects millions of people (with no other effective drug to treat it) plus take a look at the performance of biotech benchmarks iShares NASDAQ Biotechnology Index ETF (NASDAQ: IBB) and SPDR S&P Biotech ETF (NYSEARCA: XBI).

What is Furiex Pharmaceuticals Inc?

Small cap Furiex Pharmaceuticals Inc is a drug development collaboration company using "innovative clinical development strategies" to accelerate and increase the value of partnered drug programs by advancing them through development in a cost-efficient manner. Basically, Furiex offers a new approach to help drug developers lower development costs and deliver products to the market more efficiently. Right now, the company has a robust and diversified drug pipeline that includes two marketed products and three programs in development across multiple therapeutic areas.

As for biotech performance benchmarks, the iShares NASDAQ Biotechnology Index ETF tracks the Nasdaq Biotechnology Index through 123 stocks and has a 77.79% weight in "biotechnology" and a 22.29% weight in Pharma while the SPDR S&P Biotech ETF tracks the S&P Biotechnology Select Industry Index with a 100% allocation in 71 biotechnology stocks.

What You Need to Know or Be Warned About Furiex Pharmaceuticals Inc

On Tuesday, Furiex Pharmaceuticals announced that top-line results for its two pivotal Phase III clinical trials evaluating the efficacy and safety of eluxadoline for the treatment of diarrhea-predominant irritable bowel syndrome had met both the FDA and the European Medicines Agency (EMA) formally agreed-upon primary endpoints based on simultaneous improvements in stool consistency and abdominal pain. The announcement went into considerable detail about the results and mentioned that Eluxadoline had a favorable tolerability and safety profile in the trials.

It should be mentioned that irritable bowel syndrome is the most common functional gastrointestinal (GI) disorder with worldwide prevalence rates ranging from 9–23% and US rates generally in the area of 10–15% according to statistics from the International Foundation for Functional Gastrointestinal Disorders. There are between 2.4 and 3.5 million annual physician visits for irritable bowel syndrome in the US alone and it accounts for up to 12% of total visits to primary care providers (35% to 40% of individuals who report IBS are male while approximately 60% to 65% of individuals are female) with the cost to society in terms of direct medical expenses and indirect costs being $21 billion or more annually.  

In other words, Furiex Pharmaceuticals is sitting on a treatment that could help tens of millions of people around the world and the company is on track to apply for eluxadoline's approval by the end of the second quarter. Chairman Fred Eshelman also told investors in an investor call that he estimates annual sales of $750 million to $1 billion.

Investors should note that Furiex Pharmaceuticals has reported revenues of $40.51M (12 months ending 2012-12-31), $4.49M (12 months ending 2011-12-31), $8.90M (12 months ending 2010-12-31) and $6.31M (12 months ending 2009-12-31); but also net losses of $42.87M (12 months ending 2012-12-31), $48.98M (12 months ending 2011-12-31), $54.66M (12 months ending 2010-12-31) and $8.93M (12 months ending 2009-12-31). Last year, the company reported revenues of $15.55M (3 months ending 2013-09-30), $2.99M (3 months ending 2013-06-30) and $39.33M (3 months ending 2013-03-31) as well as net losses of $8.68M (3 months ending 2013-09-30) and $23.45M (3 months ending 2013-06-30) and net income of $8.97M (3 months ending 2013-03-31).

At the end of the third quarter, Furiex Pharmaceuticals had 34.67M in cash to cover $27.47M in current liabilities and $51.12M in long term debt – meaning getting eluxadoline to market will be a big help for the company's financials.

Share Performance: Furiex Pharmaceuticals Inc vs. IBB & XBI

On Tuesday, small cap Furiex Pharmaceuticals surged 129.91% to $105.69 (FURX has a 52 week trading range of $32.01 to $121.97 a share) for a market cap of $1.10 billion plus the stock is up 208.9% over the past year and up 724.4% since June 2010. Here is a look at the long term performance of Furiex Pharmaceuticals along with the iShares NASDAQ Biotechnology Index ETF and the SPDR S&P Biotech ETF:

As you can see from the above performance chart, small cap Furiex Pharmaceuticals has sort of underperformed the biotech ETFs benchmarks up until yesterday.

Finally, here is a look at the latest technical charts for Furiex Pharmaceuticals plus the iShares NASDAQ Biotechnology Index ETF and the SPDR S&P Biotech ETF:

The Bottom Line. Obviously investor not already in on the run small cap Furiex Pharmaceuticals had yesterday should be cautious about getting in now since there is bound to be some pull back after a 129.91% one day rise. Nevertheless and once the dust settles, Furiex Pharmaceuticals could be a long term winner thanks to its irritable bowel syndrome drug.