Business Corpus: Why A Key Drug Launch Wasn't Enough To Help This Biotech StockFlexion toppled Friday on a wider-than-expected fourth-quarter loss, but analysts remained upbeat on prospects for newly launched knee-pain med Zilretta.

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Flexion Therapeutics (FLXN) toppled Friday on a wider-than-expected fourth-quarter loss, but analysts remained bullish on the prospects for newly launched knee-pain med Zilretta.

Zilretta was approved in October to treat osteoarthritis pain in the knee. It launched in November. In 27 selling days of the fourth quarter, Zilretta booked $355 million in net sales. RBC analyst Randall Stanicky called the launch "on track but still early."

Stanicky lists Flexion as a top pick for 2019. He has an outperform rating and 44 price target on the small-cap biotech, valued about $970 million.

"As expected, revenue in the fourth quarter was de minimis but Flexion continues to report positive feedback from patients/physicians and is making progress on the payer front," he said in a note to clients.

By the end of December, Flexion had called 39% of targeted physicians for the Zilretta launch, 11% of target accounts had gained product experience either through samples or purchases and 20 key commercial insurers had been engaged in discussions.

Wider insurer adoption is expected through 2018, Needham analyst Serge Belanger said in a report. Flexion also expects Medicare coverage for Zilretta in 2019. Wall Street is calling for $28 million in 2018 sales, which Belanger says is manageable.

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Flexion stock fell 1% to 26.73 on the stock market today. Earlier in the session, it was down as much as 9.2%. Shares have been consolidating since early October with a buy point at 32.35.

During the fourth quarter, Flexion reported a $1.38 per-share loss vs. Belanger's view for $1.31 a share. Flexion ended the year with $423.9 million in cash, which is expected to fund operations into profitability. RBC's Stanicky expects Flexion to be profitable in 2020.

Both analysts note 2018 is catalyst-rich for Flexion. Zilretta is being tested vs. a steroid in bilateral knee pain. A repeat-dosing trial of Zilretta is also expected in the third quarter. A Phase 2 trial is also testing Zilretta in shoulder and hip pain.

Updates are also expected during the year for drugs called FX101 and FX201 in large-joint osteoarthritis pain and osteoarthritis knee pain, respectively. Both are in the preclinical stage of development.

Needham's Belanger kept his buy rating and 42 price target on Flexion.

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