Seeking Alpha
Biotech, healthcare, small-cap, special situations
Profile| Send Message| ()  

United Therapeutics Corp. (UTHR), the pharmaceutical partner to Pluristem Therapeutics (PSTI), needs now more than ever a way to compete in the elusive but growing worldwide market for pulmonary arterial hypertension (PAH), or high blood pressure in the lungs. After another FDA rejection for its PAH hopeful oral Remodulin, United finally initiated Phase I trials of Pluristem's PLX cells in PAH, pursuant to a deal signed almost two years ago.

The announcement was made by Pluristem last week, detailing the first human trial for its unique cell therapy in this indication where compelling preclinical data, gathered at the University of Queensland, showed unequivocal safety in a human lung with no sign of blood clotting or significant changes in blood pressure.

As clear evidence that United needs Pluristem, United just received a second complete response letter from the FDA, the agency's way of saying that a drug is not ready to be considered for approval, after oral Remodulin failed to meet important endpoints - clinical improvement in the benchmark 'six-minute walk test' versus placebo and slower progression of disease. Although the FDA was not certain if an additional clinical trial would be helpful after the first rejection, it is unclear what steps United took to dress up or otherwise repurpose the original data in its re-submission. It should be evident to investors that an oral version of United's star drug, accounting for 49.9% of sales last year, just does not work.

PAH is a chronic disorder characterized by abnormally high pressure in arteries leading from the heart to the lungs that cause dizziness, fatigue, and shortness of breath. Its cause is vague - some have blamed HIV, cocaine use, or the former diet drug fen-phen. Incidence in the US is roughly 1,000 people per year; at any one time, perhaps 30,000 are affected. Those with the condition may go years without a proper diagnosis until exercise capacity is significantly limited and life expectancy greatly shortened. There is no cure, and current medications are lacking.

The first drug for PAH, a short-acting intravenous vasodilator from GlaxoSmithKline plc (GSK) appeared in 1995 but has long been associated with blood infection and fatalities if infusion therapy is interrupted. Tracleer, an oral made by Actelion Ltd. (ALIOF.OB) introduced in 2001, is an endothelin receptor blocker that prevents blood vessel constriction. It, however, carries the potential for liver toxicity and excessive bleeding. Actelion also makes a vasodilator inhaler for PAH that causes significant throat irritation, but seems to be having better success with Opsumit, a second-generation Tracleer with a new drug application (NDA) recently approved by the FDA.

The worldwide market for PAH pharmaceuticals, by my estimation based on yearly sales of commercialized compounds, is approximately $2.9 billion with an overall growth rate of 16% despite less-than-desirable drugs. Tracleer is the leader taking in approximately $1.8 billion and United is second with three compounds - injected vasodilator Remodulin, inhaled Tyvasco and a reworking of Eli Lilly & Co.'s (LLY) Cialis - accounting for about $895 million. Pfizer, Inc. (PFE) released Revatio, based on Viagra's science, in 2006 with a small market presence. One of the more recent entrants destined to become an embarrassment to maker Gilead Sciences (GILD) was cicletanine, a vasodilator halted in Phase II clinical trials when results showed no significant effect on an endpoint of exercise. To make matters worse for them in this therapeutic class, Letairis, or ambrisentan, an effective vasodilator in a common class of antihypertensive drugs with a mild side effect profile had revenues of only $410 million after five years on the market - far from a blockbuster.

United's Remodulin was approved in 2002 but has generated reports of sepsis. Tyvasco, made from the same compound as Remodulin but in an inhaled version, underwent a recall last year after some devices caught fire. Adcirca carries all the risks of the erectile dysfunction drug group. United hung its hopes on oral Remodulin, only to be shot down twice, and is suing Sandoz, a unit of Novartis AG (NVS), for its attempt to seek approval for a generic version of injectable Remodulin.

Not a lot of room for error. I'm surprised United didn't move forward with Pluristem's PLX cells sooner, given the problems with United's other compounds for PAH.

Investors may see the orphan PAH market as crowded, but the only real competitors are Opsumit and perhaps Bayer AG's (OTCPK:BAYRY) oral compound riociguat, whose NDA won priority review for several indications, one being PAH, which could put it on the market in less than a year. Riociguat, based on a guanylate cyclase stimulator, is a first-in-class drug for the condition and showed very favorable Phase III data in the six-minute walk test.

Surely United, like any pharma partner, recognizes the simplicity of human trials using PLX cells. United's Phase I Australian study will be done in only one center with varied doses, much like a Phase II yet requires just nine patients. There will be efficacy endpoints at six weeks after treatment to check patients' hearts and walking distance. Safety profiling is really just a regulatory formality (these are the ultimate biologics) but toxicity will be evaluated in a 12 month follow-up and considered a primary endpoint. Contrast this with Actelion's trial for Opsumit that was completed in December 2009 with a total of 742 patients, and is just now four years later up for FDA opinion.

Pluristem landed itself an attractive deal with United: an upfront payment of $7 million (almost as much as Gilead paid for the unlucky cicletanine) with milestones for another possible $48 million. United foots the clinical trial bill and if approved, PLX cells for PAH will be bought by United at a margin over whatever cost Pluristem bears, and a royalty will be paid on gross profits.

With Gilead out of the PAH picture, it was assumed that United and Pluristem would benefit, but who would have guessed United turns out to be its own worst clinical development enemy? Not only is a better drug essential for this disease that carries up to a 30% mortality rate, but I believe that United badly needs a new drug to keep, and expand, its PAH franchise.

Source: United Therapeutics' Second PAH Stumble Emphasizes The Need For Pluristem's Therapy