Actavis: Abuse-Deterrent Opioid Connections

| About: Allergan plc (AGN)

One of the hotter items these days has been the development of abuse-deterrent opioid formulations, the success of a couple companies and the failure of others. There is certainly a need for these products as prescription drug abuse remains a national health priority and the FDA and government officials press for solutions.

Actavis (ACT) recently entered into a litigation settlement with Purdue over Oxycontin whereby they will be able to market a certain amount of their own abuse deterrent formulation on January 1st 2014. Should Actavis be unable to gain approval of their own formulation by September 2014, they may market a certain amount of Purdue's manufactured generic. Actavis expects more than $100 million in gross profit from generic OxyContin sales through 2015, and declining after that time.

The question I have not seen asked nor answered in an article is where is Actavis planning to get their technology and IP rights for these formulations? It seems that much of the technology and IP used by companies attempting these formulations were not developed in-house but acquired via acquisition or other types of licensing arrangements. So let's look at some of these connections for Actavis.

There is an interesting history here because Actavis manufactured Embeda for Pfizer (NYSE:PFE). Embeda is the abuse deterrent version of morphine developed by King and Pfizer. Embeda is the combination of morphine and an opioid antagonist, Naltrexone in a single bead where the Naltrexone is sequestered unless it is tampered with. Should the Naltrexone be released, it counteracts the morphine and the drug abuser does not get the "high" they are seeking and may even experience mild withdrawal symptoms.

Pfizer bought King for 3.6 billion dollars in 2010 for this technology as well as other pain medicine technology. Embeda has had manufacturing and stability issues and was recalled by Pfizer in 2011. What makes this interesting is that before the merger, Watson was sued by Pfizer over patent infringement in their attempt to market a generic Embeda. When Watson and Actavis merged, they were required to divest this drug and technology. And this is where it gets interesting as I have identified some unique and interesting connections in this space.

In reading the divestiture documents, a company named Mikah Pharmaceuticals is identified. Mikah has several products that were divested under the agreements. In reviewing their website, they have a number of current products identified and these drugs seem to be old Actavis Totowa ANDA applications. They also have a number of pending applications. They also indicate that their leading products will be manufactured by Elite Pharmaceuticals (OTCQB:ELTP).

Mikah Pharma has contracted Elite Pharmaceuticals to develop and manufacture our top leading products.

Elite will develop MIK001's formulation, analytical methodology, and manufacture, test and release the clinical supplies necessary for our clinical trials and NDA approval.

So does it mean anything? Who is Mikah Pharmaceuticals and who is Elite Pharmaceuticals? It would seem that based on the company's website that Mikah is a private company run by Nasrat Hakim and Kristine Hakim. And the address of Mikah seems to be a nice house in New Jersey. Apparently, Nasrat Hakim is the Vice President, Quality, Compliance and Technical Services at Actavis based on a quick web search. Ok, so either Actavis decided to give Nasrat a side pharmaceutical manufacturing business out of a residential location or there is more here than it seems. Well actually it immediately seems odd from the get go.

A little further digging indicates that Elite Pharmaceuticals is contract manufacturing Phendimetrazine, a bariatric type diet drug for Mikah. And who is marketing this drug? Turns out that as expected it is Actavis marketing these Mikah Products. It's not a big revenue product with an IMS revenue number of 3.5 million dollars and it seems that much of these sales go unreported to IMS as they are often sold through diet clinics. However, it is pretty clear that Mikah is certainly working for Actavis. So what does this have to do with abuse deterrent opioids? Almost there…..

Looking more into Mr. Hakim, it seems he was also a Consultant to the CEO, Quality & Compliance Epic Pharma, Laurelton, NY. Well who is Epic Pharmaceuticals? Epic Pharmaceuticals is a large private contract manufacturing pharmaceutical company who also manufactures for themselves. They also happen to have a strategic alliance with Elite Pharmaceuticals. They also happen to have received an ANDA for generic OxyContin prior to the FDA's ruling and are being sued by Purdue for patent infringement as Purdue strives to hold onto their OxyContin monopoly as long as possible. As we know now, generic OxyContin will only be approved by the FDA if it has abuse deterrent capabilities.

So we know who Epic and Mikah are, but who is Elite Pharmaceuticals? Elite is a little company that's been around a long time. And their specialty and focus? Extended release and abuse resistant opioids. And they have already passed an Oxycontin product (a once a day Oxycontin) through both Phase 1 and Phase 2 trials and seem to looking for a partner to go into Ph3 based on conference call transcripts. Also seems they are looking more at abuse resistant generic opioid products that they will manufacture for themselves. The company's website identities these products as in "scaleup". The CEO noted on a recent PR they were about ready to enter studies for at least one product. Also just so happens that the Chief Scientific Officer at Elite Pharmaceuticals developing these formulations is none other than the President of Epic.

Elite has 8 approved FDA drugs but two of them are what ties this together. Hydromorphone, an often abused opioid known as Dilaudid and Naltrexone the key antagonist noted above in Embeda. And where did these two products and ANDA applications come from? Turns out that they came from Mikah Pharmaceuticals originally from Actavis Totowa in trade for some cash and R&D work. And as part of the Naltrexone agreement, Elite and Mikah signed a deal to develop a 505B2 NDA identified as MIK001. Elite would also contract manufacture this product for Mikah. The 505B2 pathway is the likely requirement for drug submission and approval by the FDA for abuse resistant opioid formulations of current opioid products. And what is Elite's technology and IP based on? The antagonist (Naltrexone) and agonist (opioid) approach. They received two patents in the past year for this technology and formulation capability and have others pending.

While the Embeda concept described above is to put both the Naltrexone and Opioid on the same bead, Elite uses their patented formulation to sequester the Naltrexone using multiple beads, identical looking and indistinguishable except one carries the opioid and one carries the antagonist. The company has put over 100 million dollars into their R&D over the years and you have probably never heard of them.

So where might Actavis get its IP and technology? It would seem that they already have at least one partner in this business, with patent protection using the agonist/antagonist approach similar to Embeda. Remember this article, I am betting that you hear more about these relationships in the future. Actavis, Epic, Mikah, Elite...

Disclosure: I am long OTCQB:ELTP. 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.