FDA Rejects Titan Pharma's Opioid Addiction Implant Probuphine

May. 1.13 | About: Titan Pharmaceuticals, (TTNP)

Shareholders of Titan Pharmaceuticals (NASDAQ:TTNP) are bound to be disappointed with the FDA's final decision on the NDA submission for the company's opioid addiction drug, Probuphine. The complete response letter (rejection) was issued yesterday evening, and Titan confirmed the decision with its unhappy commentary.

Sourced from the Marketwire report:

"'Titan and our partner, Braeburn Pharmaceuticals, are extremely surprised and disappointed with the FDA's response. Probuphine is a diversion-resistant formulation that is consistent with the recently-issued FDA guidance supporting diversion- and abuse-resistant products, and the NDA was designated Priority Review by the FDA. We believe Probuphine has demonstrated both safety and efficacy in accordance with primary endpoints that were pre-agreed with the FDA and, moreover, the safety, efficacy and overall approval of Probuphine was strongly supported by the Psychopharmacologic Drugs Advisory Committee,' said Marc Rubin, M.D., executive chairman of Titan Pharmaceuticals. 'Given the nationally-recognized, growing and devastating opioid dependence epidemic, there is critical need for new safe and effective treatments that reduce the likelihood of abuse, diversion and accidental pediatric exposure, and Titan and Braeburn remain committed to making Probuphine available for patients that need it.'"

While it's true that the adcom meeting that was held on March 21st 2013 for the Probuphine NDA ended on a 10-4-1 vote in favor of its approval, there were some major concerns brought up during the meeting that seemed to bug the FDA in the CRL as well. The specific problems from the adcom meeting, which were initially summarized here, are posted below:

-Probuphine's presumably underwhelming dosage remains a big problem

-Opioid addicted patients may find ways to remove Probuphine from their body and extract the buprenorphine from the "rods"

-Doctors, particularly psychiatrists that may want to use this product will have difficulty due to the fact that it has to be surgically installed and removed

-Many doctors that may use this product don't have an area in their office suited for any type of surgical procedures

The FDA cited reasons for issuing the CRL that were virtually identical

-The ability of Probuphine to provide opioid blockade of relevant doses of agonists

-The effect of higher doses of Probuphine, ideally doses more closely approximating the blood plasma levels associated with sublingual doses of buprenorphine of 12 to 16 mg / day

-Human factors testing of the training associated with Probuphine's insertion and removal

This essentially means that the FDA does not want the product on the market until further data is gathered on the risks brought up during the advisory committee meeting. Titan and its investors will likely view the decision as overly cautious and possibly "foolish" due to the enormous need for additional opioid-addiction treatments in the United States. As mentioned by Titan management, this was also extremely shocking due to the fact that the FDA had issued guidance through late-stage clinical development leading up to the PDUFA date (which had priority review). Nonetheless, the decision has been made.

It's hard to determine just how much TTNP will (or should) drop in reaction to this news, although we can make some inferences based on the company's financial data.

In its most recent 10-K filing from March 18th 2013, Titan reported an operating loss of $15.18M for year ended December 31st, 2012, implying that this was (and will be) the company's cash burn rate. The company's balance sheet revealed $18.1M in cash, offset by $11.9M in debt obligations.

Assuming that the CRL will set the company back by two years (including the completion of another clinical trial and the full wait for the PDUFA goal date of a NDA resubmission), we imagine that Titan would want to raise roughly $20M in cash through a debt or equity financing before the end of 2013. At a valuation of $136M as of the market close on April 30th 2013, this would equate to a ~15% dilution if Titan decided to hold a public offering of common stock.

Due to this, I don't expect TTNP above $1.40 per share without a positive development.

This does not account for the psychological turmoil that this stock may undergo tomorrow and for the next few weeks. TTNP shareholders were clearly expecting an FDA approval based on the adcom vote and overall profile of Probuphine. It can easily return to penny-stock territory if the selling perpetuates itself.

The Takeaway

Titan Pharmaceuticals just received a rejection letter, or CRL, from the FDA regarding its application for the marketing of the subdermal implant Probuphine in opioid addicted patients. As discussed in the adcom meeting in March 2013, the product has some issues with its dosing and quirky safety issues that should be explored further. The REMS packaged with the NDA submission was not enough. To finance itself, Titan will probably have to offer shares to the public. Due to this, and investor disappointment over the FDA decision, expect TTNP to move down sharply. Since we don't know where the bottom is for this stock, investors may want to stay on the sidelines.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.