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Shares of Ampio Pharmaceuticals (NASDAQ: AMPE) are on a roll after the company reported on April 24th that it completed enrollment for its Phase III run-in trial with Ampion, a naturally occurring anti-inflammatory compound that is under development for the treatment of osteoarthritis of the knee. From the clinical program update posted one day earlier:

Ampio has recently met with the CBER division of the FDA and received guidance for the conduct of pivotal trials for approval in the US. Both open label and placebo controlled trials will be conducted over the next year to provide the full 1,500 patient exposure for safety and clinical efficacy data. The recent FDA discussions have indicated that if the results of these trials mirror the successful outcomes seen in the Australian trials it will be sufficient for registration as a chronic use therapy and an IND is being prepared.

Less than a month ago, the company received approval from the FDA to begin this run-in trial to test two doses of Ampion, an anti-inflammatory that already has already established its safety and preliminary efficacy data from a Phase I trial that was reported on in May 2012.

Ampio had originally intended to enroll patients in two pivotal Phase III trials, but was advised by the FDA to conduct a single dose-escalation run-in study to ensure an optimal dose. The company is now testing both the 4 mL and the 10 mL dosages, which are administered via injection directly into the patient's knee (intra-articular) in the run-in trial. The relative efficacy of the optimal dose of Ampion versus placebo will help determine the size of the patient population needed for the phase III trial as well.

The fact that Ampio saw full enrollment in the trial so quickly indicates that the medical community (and patients) are very interested in Ampion due to the shortcomings of existing therapies.

Patients with osteoarthritis of the knee would typically take analgesics like ibuprofen like Pfizer's (NYSE: PFE) Celebrex to manage pain symptoms. There are several injection-based options for patients who are not responding to pain relievers alone, including steroid and hyaluronic acid (HA) injections. The biggest player in the HA market is Sanofi's (NYSE: SNY) Synvisc/Synvisc-One, with $473 million in sales last year according to company reports.

The generic NSAID (non-steroidal anti-inflammatory) drug meloxicam, marketed by the big private pharmaceutical company Boehringer Ingelheim, is the best-selling drug approved for the broader osteoarthritis indication. Ampion is considered a biologic, and another NSAID although it has established a particularly strong safety profile and benefits from the fact that it is a naturally occurring molecule in the human body.

Ampion (also referred to as DMI 9523 in some of the literature) is a small-molecule made up of two amino acids that are derived from albumin, which is the main constituent of plasma in humans. Ampion has been shown to be effective in causing a reduction of pro-inflammatory molecules, as well as inhibition of transcription factors involved in inflammation. The overall profile of the biologic is unique, and distinguished in comparison to other NSAIDs. Since the safety profile has been well established in previous studies, it's especially important that the finalized version of the trial establishes its efficacy and clinical utility ahead of the FDA's final review.

Note: The profile of the current run-in trial can be seen here. It's entitled "A Efficacy and Safety Study of Two Doses of Intra-Articular Injection of Ampion™ in Adults With Pain Due to Osteoarthritis of the Knee"

The trial is a randomized, placebo-controlled double-blind study to monitor the safety and efficacy of over 300 patients with rheumatoid arthritis of the knee. Patients will receive one of two doses (4mL or 10mL) of either Ampion or placebo as mentioned earlier. The primary endpoint of the study is the improvement in knee pain as determined by the WOMAC (Western Ontario and McMaster Universities Arthritis Index) scale, which is essentially the gold standard of efficacy for clinical trials in this indication.

As mentioned on the April 25th press release, the company enrolled in excess of the 300 patients who were originally intended for the study and that treatment was issued to all of them. These patients will be monitored for a 12 week post-treatment period, which would pave the way for a data release (likely in Q3 2013) and initiation of the final pivotal trial before the end of the year or in Q1 2014. This would result in data in the second half of 2014, along with an NDA submission.

Investors will have to wait for quite some time for Ampion's potential approval, although the stock's recent action suggests that a good number of investors want to buy early. Shares of AMPE are up over 33% YTD bringing the company's valuation to $177 M.

Investors who may be interested in Ampio should also pay attention to Optina, which is a reformulated dosage of danazol that is eligible for a 505(b)(2) application. The target indication is Diabetic Macular Edema (DME), which is lucrative, and currently dominated by Roche's (OTCQX:RHHBY) Lucentis. Rival company Regeneron (NASDAQ: REGN), which has been immensely successful in the wet AMD indication with EYLEA, also wants to expand into the DME market. Optina would undoubtedly command a smaller piece of this drug market, although it has niche potential since doctors are using steroids off-label for DMD due to a lack of an FDA approved alternative.

Source: Ampio Pharma Initiates Phase III, Investors Extend Momentum