Why Adamas Pharmaceuticals Inc Stock Skyrocketed Today

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What happened

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Shares of Adamas Pharmaceuticals (NASDAQ: ADMS) have skyrocketed today, up 42.3% as of 12:02 p.m. EDT, after the company announced yesterday evening that the Food and Drug Administration approved Gocovri, the biotech's drug for treating dyskinesia in patients with Parkinson's disease.

So what

Dykinesia is uncontrolled involuntary movements, which are caused by levodopa-based therapies that Parkinson's disease patients take to control their main symptoms. It's the first drug approved for the indication, but there's a catch here. The active ingredient in Gocovri is amantadine, which is available as a cheap generic. Generic amantadine isn't approved for the indication, but doctors prescribe the drug off-label to treat Parkinson's disease patients with dykinesia nevertheless.

Gocovri is formulated as an extended release capsule that only has to be taken once a day, which is certainly more convenient, especially for Parkinson's disease patients who are taking other medications. But whether that will be enough for patients to justify the potentially higher copay for a branded drug versus a generic remains to be seen.

It's possible that Gocovri actually works better than taking multiple doses of amantadine, where levels of the drug might drop between doses, but Adamas Pharmaceuticals tested Gocovri versus placebo in the clinical trials used to gain approval, so it isn't clear if Gocovri actually works better than immediate-release amantadine.

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Now what

Gocovri will be available in the fourth quarter, but Adamas Pharmaceuticals doesn't plan to start its launch with a full sales force until January 2018, so investors will have to wait a few quarters to see the trajectory of the launch.

Adamas Pharmaceuticals is also testing Gocovri for patients with multiple sclerosis who have trouble walking, which affects about 80% of patients. A second indication would help boost sales, but investors will have to wait for pivotal clinical trial data and then a potential approval before those sales start rolling in.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.