Many traders were able to make solid gains trading Titan Pharma (OTCQB:TTNP) before its FDA panel. In the course of about a week, shares of TTNP ran up from $1.40s to a high of $2.53, representing a gain of over 80%. One of the benefits we have as run-up traders is the opportunity to trade multiple catalysts for the same company, even for the same drug.
Titan is now offering us this opportunity, as we are expecting shares to run-up in anticipation of the FDA's decision (PDUFA date) on April 30, 2013. The FDA panel was completed on March 21, 2013, and resulted in the recommendation for approval -- with 10 yes votes and four no votes -- ultimately supporting approval for Probuphine. The FDA raised some serious concerns in their briefing documents and shares traded wildly, swinging to a low of $1.00 during the FDA presentation and hitting a high of $1.90 when trading resumed the following day on the positive vote. (Shares were not halted during the panel, as TTNP trades on the OTCBB.)
Trading has since settled down and TTNP is now trading within the $1.70 range, well off its previous highs. As we approve the FDA decisions, I expect shares to run up in anticipation of approval. It appears that currently, investors and traders are overly concerned about the possibility of a three-month extension of the PDUFA date. To understand why I believe this is an overreaction, let's review Titan and its drug Probuphine.
TTNP is developing Probuphine, a proprietary, long-acting form of the opioid dependence drug buprenorphine. Probuphine is implanted just under the skin of the upper arm and provides continuous delivery of drug for six months. The company has a very lucrative licensing deal with Braeburn Pharma. At the time of the deal, Titan received $15.75 million upfront, and they are very close to the $50 million milestone upon FDA approval.
Royalties are in the double digits and Breaburn has committed $75 million toward the commercial launch. The current market cap for TTNP is only around $116 million. The market they are targeting is also very lucrative, with Suboxone selling well over $1 billion annually.
During the FDA panel we learned that the company had just submitted an entirely new REMS to the FDA for consideration. This new REMS, which is being handled by Braeburn and not Titan, was to replace the REMS reviewed and broken down by the FDA. The document did not have time to even be reviewed by the FDA before the panel. Considering that the PDUFA date was less than six weeks from the PDUFA date, many are speculating that the company will receive an extension to their existing PDUFA date. This very well may be the case, but I do not view the PDUFA extension as a negative.
The new REMS should be able to address any of the deficiencies outlined by the FDA. According to the FDA briefing material, the previous REMS was submitted by Titan on Oct. 31, 2012. The above mentioned deal with Braeburn was not completed until Dec. 17, and according to Titan company conference calls, Braeburn is now handling the REMS and communication with the FDA. I view this as a positive for the chances of approval, as Braeburn has much more experience navigating these through the complicated bureaucracy of the FDA.
In the past, the market has viewed it as a positive sign that a company receives a PDUFA extension from the FDA for REMS consideration. Take for example Vivus (VVUS) in April 2012. When VVUS announced the PDUFA extension the share price briefly dipped to $21.48 before running up to $29.99 in the coming months before an FDA decision. The logic is that if the FDA was going to issue a company a CRL for efficacy, safety, trial designs, or manufacturing-related issues (CMC), they would simply do so by the PDUFA date. An extension for REMS consideration is hinting at a coming approval, as REMS is only a concern if the drug is approved for marketing.
Another recent and interesting trend by the FDA is issuing a PDUFA extension without the formal process of adding on three months to the PDUFA date. The FDA did this with Hyperion Therapeutics (HPTX), issuing this informal extension on Jan. 16, 2013, before approving the drug two weeks later. More recently the FDA has issued a similar extension to Zogenix (ZGNX). I believe that if the FDA issues this type of extension the market will view this as positive and send shares higher.
I expect the FDA to use up almost all of their short priority review period before we hear of an extension. As always, run-up traders would want to exit their positions before the catalyst date of April 30, 2013. If we are fortunate, we may get a three-month extension and have an opportunity to trade a TTNP FDA run-up, round three.