By George Dimopoulos, Ph.D. And Jerry Isaacson, Ph.D.
This note is part of our ongoing efforts to highlight interesting binary events for small-cap biotechnology companies. Here we discuss the upcoming FDA panel meeting and PDUFA date for Zogenix's (ZGNX) experimental pain killer Zohydro ER. We also cover expected data announcements from Amicus (FOLD) for a Fabry Disease product and Biogen Idec (BIIB) for its experimental treatment for ALS.
Zogenix -A therapy for pain management around the corner
Zogenix develops and commercializes treatments for central nervous disorders and pain management. Currently, the company markets Sumavel Dose Pro, a delivery system for needle-free subcutaneous administration of sumatripan. Sales of this treatment for migraine and cluster headaches approached $30 million in 2011 and are expected to grow in the future. However, Zogenix's future revenue expansion hinges on its lead drug in clinical development, Zohydro ER for management of moderate to severe pain. A Phase III clinical trial, called Study 801, investigated Zohydro ER in patients with chronic moderate to severe pain. The study, comparing patients treated with Zohydro ER versus placebo, met the primary endpoint of efficacy, demonstrating that Zohydro ER resulted in significantly improved chronic pain relief (p=0.008). The drug is being developed in collaboration with Alkermes (ALKS), which provided the technology that allows for extended release of the drug and will handle manufacturing.
An additional Phase III clinical trial, dubbed Study 802, examined Zohydro ER in chronic pain patients over a 12 month period and confirmed the efficacy endpoints and safety profile of Study 801. Zogenix recently submitted a new drug application to the FDA, and an advisory committee review date for Zohydro ER has been arranged for December 7, 2012, while a PDUFA date is slated for March 1, 2013. If finally approved, Zohydro ER will be the first hydrocodone medication on the market that is an oral extended-release formulation without acetaminophen, requiring dosing every 12 hours. Usually, hydrocodone therapies such as, Lortab (UCB SA, UCBJY) and Vicodin (Abbott Labs, ABT) are available in immediate-release, combination formulations, most commonly with analgesic acetaminophen, and requires dosing every 4-6 hours. The benefit of excluding acetaminophen from the formulation is this eliminates the risk of liver toxicity associated with high doses of the analgesic acetaminophen combination.
However, the downside with Zohydro ER is the potential health hazards associated with abuse. According to an FDA staff briefing released ahead of the panel meeting, the pure hydrocodone alternative may be abused at higher rates than hydrocodone-combination painkillers. Release of the FDA documents on Wednesday led to a 5.1% drop in share price, underscoring investor fears related to an FDA rejection of Zohydro ER or even a more restrictive label or risk management scheme than is currently expected. FDA advisors will convene Friday and one of their tasks will be to weigh the effectiveness of the drug against its risk of abuse, and a positive recommendation should be compelling enough for investors to re-engage the stock. A negative panel vote will likely send the shares reeling, although the Company may have numerous routes to the market available, even if it requires a stricter risk management plan or reformulation of the drug to make the pills tamper-proof to discourage abuse.
Hydrocodone drugs are the most commonly prescribed medications in the United States, generating $3 billion in annual sales. Zohydro ER's unique extended-release formulation without acetaminophen will likely help Zogenix gain market share in the hydrocodone therapeutic area, which will accelerate revenue growth for the company. Given a stock price of $2.43, cash of $49.5 MM, shares outstanding of 100.67 MM, and an EV of $220.46 MM, the market views Zohydro ER's potential for increasing Zogenix's revenue as uncertain at best. With estimated annual sales of $248M for Zohydro ER, though, the stock price may gain by multiples if a successful launch follows the approval news.
Amicus Therapeutics -Phase III data of lead drug for Fabry Disease
Amicus Therapeutics is scheduled to announce Phase III clinical data for its lead candidate migalastate in late Q4 2012, meaning any day now. Favorable results may serve as a potential catalyst for the stock. In Study 011, the efficacy of migalastat vs. placebo is investigated in patients with Fabry Disease. People with this disorder have genetic mutations in alpha-galactosidase A (alpha-gal A), resulting in improper folding of the protein and loss of enzyme function. Migalastat, a pharmacological chaperone, binds and stabilizes alpha-gal A, which then restores its enzymatic activity in degrading lysosomal lipids, specifically globotriaosylceramide (GL-3), in tissues of the nervous system, heart, blood vessels, kidney, and skin. The primary outcome of Study 011 is efficacy based on kidney Gl-3 levels and secondary outcomes include urine GL-3 levels, renal function, and safety/tolerability.
Due to the dearth of therapies for Fabry disease and to the severe symptoms such as, pain, premature cardiovascular events, and kidney failure often experienced by patients, positive news related to Study 011 data will bode well for Amicus. With a stock price of $5.54, total cash of $106 MM, 49.48 MM shares outstanding, and an EV of $171.11 MM, there may be significant potential upside in the shares in the short term. Furthermore, very little debt ($1 MM), a strong cash position, and a relatively low quarterly cash burn, are indicative of ample funds for future clinical development and a limited need for additional fundraising/dilution. On the flip side, risk with these shares exist and may precipitously decline on any clinical outcome disappointment related to Study 011. Failure of the company to produce the study results before the end of the year will also cause investors to question the reason for the delay and may harm the share price.
Biogen Idec - Dexpramipexole , a potential-game changer for ALS
Biogen Idec may have a potential game-changer for amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease. The drug, dexpramipexole, is thought to improve the efficiency of mitochondria in neurons that are brought under stress by ALS. Biogen licensed dexpramipexole from Knopp Biosciences in 2010 with the arrangement that Biogen will develop and commercialize the drug worldwide. In a Phase II trial comparing treatment with dexpramipexole 300 mg to placebo, the dexpramipexole arm had a 31% lower rate of decline than patients on placebo. Furthermore, the drug appears to be safe, with few adverse events. These auspicious results prompted the launch of a large multinational Phase III study (EMPOWER), which is presently examining efficacy and safety of the treatment. The EMPOWER study is evaluating trial participants treated with dexpramipexole 150 mg twice daily versus participants on placebo. The primary endpoint is improvement in neuro-muscular function and will be assessed by use of the ALS Revised Functional Rating Scale. Results from this study are due later this month or early next year.
At present, the only ALS drug on the market, Rilutek, is marketed by Sanofi (SNY) and due to its marginal efficacy, sales of the drug peaked at $50 million. If approved, the consensus among analysts is that annual sales of dexpramipexole may reach $1 billion, making it a blockbuster drug for Biogen. Annual revenues for the company may increase 20%, which would add nicely to the bottom line. With an outstanding share count of 236.6M, a stock price of $150.55, total cash of 1.61B, and total debt of 1.11B, the company has an EV of $35.44B. The addition of dexpramipexole to its arsenal of marketed drugs should bring substantial upside to its stock price in the long term. In the short term, investors are likely much more focused on the upcoming PDUFA date for Biogen's multiple sclerosis pill BG-12. This may have allowed investors to overlook the potential of dexpramipexole, which may have a significant positive effect on the company's future earnings. Positive data should therefore a boost the company's fundamental outlook going forward.
- Wolters Klumer Pharna Solutions, Source Pharmaceutical Audit Suite Retail, January 2010-December 2010.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.