Flexion is looking to replace Senior VP of Commercial Operations Dan Deardorf with a Chief Commercial Officer
Shares of Flexion (FLXN) are under pressure on Wednesday after the company’s CEO announced at an investor conference that it has parted ways with its Senior Vice President of Commercial Operations, a move Raymond James analyst Elliot Wilbur calls “completely unanticipated.” While Wells Fargo analyst David Maris acknowledged that the timing of the announcement is “less than ideal,” he believes that if things are not going well or even if they can be better, it “makes sense to bring in additional talent.”
‘COMPLETELY UNANTICIPATED’: Noting that Flexion’s CEO announced at an investor conference that the company has parted ways with its Senior VP of Commercial Operations Dan Deardorf and is looking to replace him with a Chief Commercial Officer, Raymond James’ Wilbur said that the news was “completely unanticipated” and there “will no doubt be a new round of jitters around the launch trajectory of Zilretta” following the announcement. Seeking to ease concerns, the company reiterated its annual revenue guidance of $65M-$80M, Wilbur noted. While the receipt of a dedicated J Code for Zilretta “certainly made the reimbursement process smoother” and is clearly a selling point from the salesforce’s perspective, the analyst pointed out that management recently indicated that it had underestimated the dynamics of payer and reimbursement hurdles at the individual practice level and how the evolution of larger practices had created more encumbrances to initial adoption based on individual practice payer and economic dynamics. Overall, Wilbur believes Zilretta has underperformed an optimistic set of external expectations that should not have been allowed to evolve in the first place, but it is “still early in the Zilretta launch phase and not too late to course correct.” Management and the board seem to have recognized this and made what was no doubt a tough call, he contended. Wilbur reiterated a Strong Buy rating on Flexion shares.
MAKES ‘SENSE’ TO BRING IN ADDED TALENT: After catching up with management briefly, Wells Fargo’s Maris noted that Flexion feels that it is leaving the “building the team mode” and/or initial launch mode and entering a marketing/focus-on-growth mode, and this may require additional senior management. From what the analyst can surmise, the company was not thrilled with 2018 Zilretta growth and is looking for ways to accelerate growth and uptake of Zilretta. Nonetheless, Maris noted that it is “clear from the stock reaction” that this is creating additional uncertainty with investors, especially since earlier this year the 2019 sales guidance fell below consensus. While the timing of the announcement is “less than ideal,” coming during a quiet period ahead of first quarter results, the analyst argued that if things are not going well or even if they can be better, “it makes sense to bring in additional talent.” Maris acknowledged his discomfort with the uncertainty the “unexpected” news brings, but thinks that at two times 2020 sales for a growing product, the shares represent a “compelling value” and believes Zilretta will be a growth product for the next several years. The analyst reiterated an Outperform rating and $26 price target on Flexion shares.
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