Shares of Titan Pharmaceuticals (OTCQB:TTNP), developer of the subdermal implant formulation Probuphine, has yet to recover from a massive crash in its share price following the release of documents suggesting that the FDA didn't find Probuphine's buprenorphine dosage adequate for its target indication. The market seemed quite taken aback by this news, and dropped TTNP from a comfortable spot above $2/share to nearly $1/share in reaction.
Probuphine is a subdermal implant that delivers a generic drug known as buprenorphine into patients' bodies for up to six months to combat opioid addiction. According to the company's own estimates, buprenorphine sales are a worth over $1.3 billion annually and rapidly growing due to the massive growth we've seen in opioid addition in North America. Probuphine looks to take a share of this market by offering an (extremely) extended release version of buprenorphine that patients' won't have to worry about.
Although the concept is quite simple, the FDA's recent concerns point to two potential flaws with Probuphine's design - first being the dosage equivalence. Apparently, four buprenorphine implants only release about 1/3rd of the dosage of standard buprenorphine tablets, which is just enough for opioid addicted patients to continue illicit use of other drugs without experiencing withdrawal symptoms. Second is related to the subdermal aspect of Probuphine, which requires a relatively simply but potentially harmful surgical procedure.
Parallels were drawn to an implant known as Norplant, which was previously FDA approved but had to be pulled from the market after a number of reports were filed regarding complications induced by the implantation surgery itself. While subdermal implants are increasingly common in the healthcare environment, previous disasters may work against Probuphine's chances of an easy FDA approval.
While Titan shareholders seem to believe in Probuphine's long-term potential, the FDA's recent wording regarding the problems with the implant suggests that they are looking for a few modifications which can be considered "discouraging" in a sense. Upping the dosage will require additional testing, which delays Probuphine's overall development and adds extra expenses for Titan going forward.
Shares of TTNP were experiencing a typical speculative run-up prior to the FDA Psychopharmacologic Drugs Advisory Committee (PDAC) meeting scheduled for March 21st 2013, and investors were expecting a good vote and an approval for Probuphine's NDA, which has a PDUFA date of April 30th 2013.
After seeing the results of the vote today, we should have a very good read on whether the recent dosage concerns brought up by the FDA will indeed lead to a rejection at the end of April. Based on recent price action, it seems that the market became much more pessimistic about the drug's chances.
Of course, this also implies that TTNP has substantial upside potential in the event that the PDAC panel is happy with Probuphine in its current form and votes heavily in favor of approval. While a very positive advisory committee vote is certainly not a guarantee of FDA approval, the FDA generally develops the same opinions as the committees. It is because of this that heavily slanted advisory committee votes are often considered "early" FDA approvals or rejections.
Financially speaking, Titan is not in the best situation as its $5 million pile of cash is being used at a rate of ~$2.6 million each quarter. If the company has to undergo another trial to change Probuphine's dosage, expect the company to undergo a round of financing (possibly through the sale of common stock) perhaps in the next quarter depending on the shares' performance following the advisory committee vote. This could be psychologically damaging to Titan's investing base, since it'd likely bring TTNP below the key $1/share mark (which separates the "penny stocks" from the other ones).
Another thing we may see is FDA approval under REMS (risk evaluation and mitigation strategies), which is a fairer compromise between the concerned FDA and companies with potentially risky products that still have decent clinical trial data. This was what happened with Vivus (VVUS) in July 2012 with the approval of Qsymia, which was surprising due to the drug's cardiovascular risk profile.