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Aliso Viejo, California-based Avanir Pharmaceuticals, Inc. (AVNR) is a biopharmaceutical company focused on the research and development of drugs treating central nervous system disorders that have a high unmet medical need.

Avanir's lead product, Nuedexta, is not only the first and only FDA-approved product for the treatment of pseudobulbar affect (PBA), but Nuedexta has also provided the company with a platform, or as Avanir's CEO, Keith A. Katlin, states, Nuedexta represents "a pipeline in a pill."

As Katlin explains, "Given the mechanism of Nuedexta, we're able to study Nuedexta in a number of additional potential indications including various forms of pain, various mood and behavior disorders as well as movement disorders, and we have programs in all three of those areas currently ongoing."

Nuedexta is also known as AVP-923, which is Nuedexta's clinical name when in development.

Nuedexta

On October 29, 2010, the U.S. Food and Drug Administration (FDA) approved Nuedexta (dextromethorphan/quinidine), for the treatment of pseudobulbar affect (PBA).

On April 26, 2013, Avanir announced that the Committee for Medicinal Products for Human Use (OTCQB:CHMP) of the European Medicines Agency (EMA) recommended that Nuedexta be approved for the treatment of PBA irrespective of neurological cause. The CHMP also recommended approval of two dose strengths (20/10 mg and 30/10 mg) of the drug.

The European Commission, which has the authority to approve medicines for use in the European Union, generally follows the recommendations of the CHMP and typically renders a final decision within three months of the CHMP opinion. If the CHMP recommendation is formally adopted by the European Commission, Nuedexta would be approved for marketing in all 27 member states of the European Union plus Iceland and Norway.

Nuedexta is a combination of quinidine, a generic drug that prevents heart arrhythmia, and dextromethorphan, a cough suppressant. The combination is thought to affect the neurotransmitter glutamate. Although the drug acts on sigma-1 and NMDA receptors in the brain and spinal cord, the mechanism by which Nuedexta exerts therapeutic effects in patients with PBA is unknown.

In 2006, the FDA refused to approve the drug due to heart rhythm safety concerns. The FDA's primary concern was whether quinidine caused QT prolongation, a change in electrical rhythm that can increase heart attack risk. As a result, Avanir reformulated the drug with a lower dose of quinidine and conducted new trials to test the safety and efficacy of the new formulation.

In the Phase 3 STAR trial completed in 2009, patients treated with Nuedexta reported an average 82% reduction in PBA episodes at the end of the 12-week study compared to baseline, with an average 44% reduction in episodes after the first week of treatment. Over the course of the 12-week study, patients receiving Nuedexta experienced significantly lower PBA episode rates versus placebo. Over the final two weeks of the STAR trial, 51% of patients treated with Nuedexta achieved episode-free remission.

At the time of FDA approval, Nuedexta had not been shown to be safe and effective in other types of emotional lability that can commonly occur in Alzheimer's disease and other dementias.

Pseudobulbar affect (PBA)

According to Avanir, an estimated 18 million to 20 million people in the United States suffer from the underlying neurological conditions that may lead to PBA. These underlying neurological conditions include amyotrophic lateral sclerosis (ALS) (also known as Lou Gehrig's disease), MS, Alzheimer's disease, Parkinson's disease, stroke and traumatic brain injury.

Based on the epidemiologic medical literature, physician estimates, market research, an Avanir-sponsored patient survey of 2,464 neurological patients and their caregivers, and the PRISM PBA registry which enrolled 5,290 neurological patients across 173 investigator sites in the United States, Avanir estimates that approximately 10% of people in the United States who suffer from neurological disease or injury also suffer from moderate to severe PBA symptoms, with many more suffering from mild PBA symptoms. This research found that approximately 1.8 million patients are believed to have PBA.

PBA is a distinct neurological syndrome characterized by a loss of control of emotional expression. The syndrome occurs when a traumatic brain injury (TBI) or disorder damages the areas of the brain that controls emotional expression, causing uncontrollable episodes of crying or laughing. These outbursts are often contrary or exaggerated to the patient's inner emotional state. People with PBA tend to have higher incidence of depressive symptoms and often avoid social activities they would normally enjoy.

Other than Nuedexta, there are no FDA-approved therapies indicated to treat PBA. Some physicians treat PBA using a range of drugs off-label, including selective serotonin reuptake inhibitors/serotonin-norepinephrine reuptake inhibitors ((SSRIs/SNRIs)), antidepressants and atypical antipsychotics.

According to Avanir's research, physicians are generally only moderately satisfied with these off-label therapies as a treatment for PBA. The company conducted this market research through an Internet-based survey of 240 physicians, consisting of neurologists, internists, geriatric specialists, psychiatrists and long-term care affiliated physicians.

In addition to approved for PBA, studies have found that Nuedexta may be a safe and effective treatment for diabetic peripheral neuropathic pain. AVP-923 is currently being tested as a treatment for neuropathic pain in multiple sclerosis, agitation in Alzheimer's program and Levodopa Induced Dyskinesia in Parkinson's disease patients.

Multiple Sclerosis Neuropathic Pain

Multiple sclerosis (MS) is a nervous system disease that affects the brain and spinal cord by damaging the myelin sheath, the material that surrounds and protects your nerve cells. This damage slows down or blocks messages between the brain and the body.

MS is one of the most frequent chronic neurological diseases causing significant disability in young adults. Among the many neurological complications of MS, chronic pain has a significant impact on the daily life of patients with this disease.

In September 2009, Avanir reported the secondary efficacy endpoints from the double-blind phase of the AVP-923 STAR trial in PBA, including an endpoint measuring reduction of MS-related pain. AVP-923 30/10 mg demonstrated statistically significant decrease in pain scores compared to placebo in the subset of MS patients with moderate-to-severe pain. Based on these results, in April 2011, the company filed an Investigational New Drug (IND) application with FDA to begin a large Phase 2 clinical trial of Nuedexta for the treatment of central neuropathic pain in patients with MS

The objectives of the study, known as Pain Research In Multiple sclErosis (("PRIME")), are to evaluate the safety, tolerability, and efficacy of three dose levels of AVP-923 capsules for the treatment of central neuropathic pain in a population of patients with MS.

Avanir expects to enroll approximately 400 patients both in the United States and internationally. The company enrolled the first patient into the trial in November 2011.

On February 7, 2013, Avanir announced that the company intended to modify the enrollment target of its ongoing Phase 2 clinical study of AVP-923 in central neuropathic pain in MS to 200 patients.

"With the encouraging pharmacokinetic results in hand, we have made the decision to accelerate the completion of the PRIME study, as we believe AVP-786 has the potential to be a preferable development compound," said Joao Siffert, MD. "We plan to use the data from the PRIME study to guide the further development of AVP-786."

The objectives of the PRIME (Pain Research In Multiple sclErosis) study are to evaluate the safety, tolerability, and efficacy of AVP-923 for the treatment of central neuropathic pain in MS patients. The primary efficacy endpoint will be measured based on the Numeric Pain Rating Scale as recorded in patient diaries. Secondary assessments include measures of fatigue, impact of MS on daily life, sleep quality, cognition and depression. Safety will be assessed by monitoring adverse events, clinical laboratory tests, ECGs and physical examinations.

As a result of this change, the company now expects to have data from the PRIME study in the fourth calendar quarter of 2013.

Approximately 400,000 patients in the United States have been diagnosed with multiple sclerosis. About 30% of these patients have central neuropathic pain, representing a sizable patient population with no FDA approved therapies currently available.

Diabetic Peripheral Neuropathic Pain

Diabetic peripheral neuropathic (DPN) pain, which arises from nerve injury, can result in a chronic and debilitating form of pain that has historically been poorly diagnosed and treated. An estimated 3.5 million people in the United States experience DPN pain.

DPN pain currently is most commonly treated with antidepressants, anticonvulsants, opioid analgesics and local anesthetics. Most of these treatments have limited effectiveness or undesirable side effects resulting in a high degree of unmet medical need.

In the United States, Japan, France, Germany, Italy, Spain and the United Kingdom, the neuropathic pain market is expected to grow from $2.4 billion in 2010 to reach $3.6 billion by 2020.

AVP-923 successfully completed a Phase 3 trial for the treatment of patients with diabetic peripheral neuropathic pain. On February 8, 2012, Avanir announced the results of the study entitled "Efficacy and Safety of Dextromethorphan/Quinidine (AVP-923) at Two Dosage Levels for Diabetic Neuropathic Pain: A Double-Blind, Placebo-Controlled, Multicenter Study" in the February 2012 edition of the journal, Pain Medicine.

Throughout the 13-week trial, AVP-923 was found to be effective, with an acceptable safety profile, for treatment of diabetic peripheral neuropathic pain. The findings also indicated that other fixed-dose combinations of AVP-923 should be studied to improve overall tolerability while maintaining significant efficacy.

Traumatic Brain Injury

On March 6, 2013, Avanir in collaboration with the U.S. Department of Veterans Affairs (VA) and United BioSource Corporation (UBC) announced a pilot study to screen for PBA symptoms in approximately 1,000 veterans with traumatic brain injury (TBI) . According to the Bob Woodruff Foundation, it is estimated that more than 320,000 service members have sustained traumatic brain injuries.

"This is the first study prospectively assessing PBA symptoms in veterans with TBI," said Randall Kaye, MD, chief medical officer at Avanir Pharmaceuticals. "This research will provide key insights including the estimated prevalence of PBA symptoms in this population."

TBI is widely regarded as the "signature wound" of the Iraq and Afghanistan wars, accounting for 22% of all injuries and 59% of blast-related injuries. Based on existing data, veterans' advocates and the Brain Trauma Foundation believe that between 10% and 20% of Iraq veterans, or 150,000 to 300,000 people, have some level of TBI. Among wounded troops, the rate of TBI rises to 33%. In the past decade, more than 230,000 American soldiers were diagnosed with TBI.

Avanir is also studying AVP-923 in several clinical trials including agitation in Alzheimer's disease, neuropathic pain in MS, levodopa-induced dyskinesia in Parkinson's disease, and behavioral symptoms of autism.

Levodopa-induced-Dyskinesia in Parkinson's disease

On October 23, 2012, Avanir announced that the Michael J. Fox Foundation for Parkinson's Research awarded the company a grant to evaluate the safety and efficacy of AVP-923 for the treatment of levodopa-induced-dyskinesia (LID) in Parkinson's disease.

LID occurs in most patients with Parkinson's disease after several years of treatment, generally in association with other motor response complications. Dyskinesia may be as disabling as the parkinsonism itself, and current treatment options are limited and are not always effective.

Over one million people in the United States and an estimated 5 million people globally suffer from Parkinson's disease, a neurodegenerative disorder leading to diminished production of dopamine, a key neurotransmitter, resulting primarily in progressive impairment of motor function characterized by tremors, rigidity and slow movements. Some studies have found that over 30% of those with Parkinson's disease have developed levodopa-induced-dyskinesia, representing a potentially large market opportunity for Avanir and Nuedexta, especially when one considers that there are currently no FDA approved therapies available.

Agitation in Alzheimer's disease

On June 11, 2012 Avanir announced that the FDA accepted the company's Investigational New Drug (IND) application for the study of AVP-923 for the treatment of agitation in patients with Alzheimer's disease. This applications was the fourth IND for the AVP-923 program reflecting the company's belief that dual sigma-1 and NMDA receptor pharmacology has significant potential. This IND also represented the next step in Avanir's plan to develop AVP-923 for a broad range of neurological and psychiatric conditions.

On September 4, 2012, Avanir announced the enrollment of the first patient in a Phase 2 clinical trial investigating the use of AVP-923 for the treatment of agitation in patients with Alzheimer's disease.

An estimated 5 million Americans have Alzheimer's disease, a number that has doubled since 1980 and is expected to be as high as 16 million by 2050. Alzheimer's disease is generally characterized by cognitive decline, impaired performance of daily activities, and behavioral disturbances. Most patients exhibit agitation, hostility, anger, and aggression. As the disease progresses, behavioral symptoms often increase in frequency and severity.

The objectives of this proof of concept study are to evaluate the safety, tolerability, and efficacy of AVP-923 for the treatment of agitation in Alzheimer's patients. The main efficacy measure is the Neuropsychiatric Inventory (NPI). Secondary outcome measures include assessments of disease severity, behavioral abnormalities, cognition, activities of daily living, quality of life and caregiver strain. Standard safety assessments will also be conducted.

Agitation in Alzheimer's disease is experienced by a large patient population. Researchers have found that about 70% of these patients experience agitation, representing a patient population in excess of 3 million patients. There are no currently approved FDA products for the treatment of agitation in Alzheimer's disease.

Deuterium-modified Dextromethorphan

On February 29, 2012, Avanir and Concert Pharmaceuticals, Inc. entered into a $200 million-plus exclusive license agreement that provided Avanir worldwide rights to develop and commercialize Concert's deuterium-modified dextromethorphan (d-DM) for the potential treatment of neurological and psychiatric disorders. The agreement includes the rights to multiple deuterium-modified dextromethorphan compounds.

Under the terms of the agreement, Concert will receive an upfront payment and is eligible to receive additional milestone payments upon achievement of certain predefined clinical, regulatory and commercial targets as well as tiered royalties on worldwide sales of products containing d-DM. Avanir will have overall responsibility for research, development and commercialization of d-DM. Concert will provide manufacturing support for investigational new drug enabling studies.

"Concert's DCE Platform (Deuterated Chemical Entity Platform) has produced several deuterium-modified dextromethorphan compounds that we believe may provide therapeutically effective levels of dextromethorphan, potentially without the need for an enzyme inhibitor such as quinidine," said Greg Flesher, senior vice president of corporate development and chief business officer of Avanir Pharmaceuticals. "As part of our portfolio strategy, we intend to explore the utility of d-DM in neurological and psychiatric disorders where dual NMDA antagonists and sigma-1 agonists may be beneficial."

AVP-786

AVP-786 is a novel compound developed through incorporation of deuterium into specific molecular positions of dextromethorphan. The compound maintains similar pharmacology to that of dextromethorphan, but is less susceptible to metabolism by the CYP2D6 enzyme. Avanir licensed exclusive worldwide rights to AVP-786 from Concert Pharmaceuticals, Inc.

AVP-786 is a deuterated form of dextromethorphan. Avanir scientists are currently evaluating deuterated dextromethorphan and the indications they feel would be safely and effectively treated with this new compound.

The AVP-786 Phase 1 study
assessed the pharmacokinetic profile, safety, and tolerability of single and multiple doses of AVP-786 (alone and in combination with low-dose quinidine). AVP-923 was used as a control. The first stage of this study included 36 healthy subjects. In the second stage of the study, 12 additional subjects are enrolled to evaluate the effects further reductions in quinidine.

On February 7, 2013, Avanir announced that it had successfully completed the first of a two-stage pharmacokinetic study with AVP-786.

Based on interim data, Avanir researchers believe that they identified a formulation of AVP-786 with a comparable pharmacokinetic, safety and tolerability profile to AVP-923 (dextromethorphan hydrobromide and quinidine sulfate). The company has requested a meeting with the FDA to discuss the full development path for AVP-786.

"The results of this study are very encouraging," said Joao Siffert, MD, chief scientific officer for Avanir. "We were able to successfully replicate the steady-state plasma levels of AVP-923, but with a substantially lower dose of quinidine. Given these results, we believe that AVP-786 would be an ideal candidate to test in one or more of our ongoing clinical programs."

Avanir scientists believe the AVP-786 platform has the potential to deliver therapeutically effective levels of dextromethorphan, with a reduced need or even elimination of a co-administered enzyme inhibitor such as quinidine. As part of its portfolio strategy, Avanir intends to explore the utility of the deuterium-modified dextromethorphan program in several neurological and psychiatric disorders.

Abreva

Abreva (docosanol) is a topical treatment for cold sores. In 2000, Avanir received FDA approval for marketing docosanol 10% cream as an over-the-counter product. Since that time, docosanol 10% cream has been approved by regulatory agencies in Asia, North America, and Europe.

In March 2000, Avanir granted a subsidiary of GlaxoSmithKline(GSK), SB Pharmco Puerto Rico, Inc. the exclusive rights under a license to market docosanol 10% cream in the United States and Canada.

Under the terms of the GSK License Agreement, GSK is responsible for all sales and marketing activities and the manufacturing and distribution of docosanol 10% cream. Under the GSK license agreement, Abreva received a total of $25 million in milestone payments from GSK and Avanir was entitled to receive an 8% royalty onnet sales of Abreva by GSK.

In November 2002, Avanir sold to Drug Royalty USA an undivided interest in its right to receive future Abreva royalties under the GSK License Agreement for $24.1 million. Under the Drug Royalty Agreement, Drug Royalty USA has the right to receive royalties from GSK on sales of Abreva until the later of December 13, 2013 or until the expiration of the patent for Abreva on April 30, 2014.

Avanir retained the right to receive 50% of all royalties (a net of 4%) under the GSK License Agreement for annual net sales of Abreva in the United States and Canada in excess of $62 million.

From the effective date of the GSK License Agreement up to the 2002 sale of its royalty rights to Drug Royalty USA, Inc., the company has received approximately $5.9 million in royalty payments from GSK attributed to the 8% royalty on net sales by GSK, according to the company's annual report for the fiscal year ending September 30, 2012.

Under the terms of the docosanol license agreements, Avanir's partners are generally responsible for all regulatory approvals, sales and marketing activities, and manufacturing and distribution of the product in the licensed territories.

Nuedexta ANDA Litigation

In August 2011 and March 2012, Avanir filed lawsuits against Par Pharmaceutical, Inc., Actavis, Inc. (ACT), Wockhardt, Impax Laboratories, Inc. (IPXL) and Watson Pharmaceuticals, Inc. (acquired by Actavis in 2012) after these companies filed Abbreviated New Drug Applications ((ANDA)) containing a paragraph IV certification for a generic version of Nuedexta.

On May 31, 2013, Avanir sued Sandoz Inc. to stop the Novartis (NVS) subsidiary from marketing a generic version of Nuedexta.

Avanir promised to vigorously enforce its intellectual property rights relating to Nuedexta. Analysts at Canaccord Genuity, Jefferies, JMP Securities, and Wedbush all expressed their condifence that Avanir's patents would be successfully defended.

Finances

On May 8, 2013, Avanir reported financial results for the three and six months ended March 31, 2013.

For the second quarter of 2013, total company net revenues were $17.4 million compared with $10.0 million for the comparable quarter in fiscal 2012, representing 74% year-over-year growth. Gross and net Nuedexta sales increased to $20.8 million and $16.5 million, respectively, representing growth of 14% and 11% versus the previous quarter. Second quarter fiscal 2013 Nuedexta net revenue increased 81% versus the previous year. Total net revenues consist of Nuedexta net revenue and royalty revenue from Abreva.

For the first six-months of fiscal 2013, total net revenues totaled $34.0 million, compared with $17.2 million for the first six months of fiscal 2012.

Total operating expenses, excluding cost of sales and share-based compensation were $30.1 million in the second quarter of fiscal 2013, compared with $25.3 million in the comparable period in fiscal 2012. Cash used in operations was $9.6 million in the second quarter of fiscal 2013.

Total operating expenses, excluding cost of sales and share-based compensation were $55.4 million in the first six-months of fiscal 2013, compared to $47.0 million in the comparable period for fiscal 2012. Cash used in operations was $22.3 million in the first six months of fiscal 2013.

The net loss for the fiscal 2013 second quarter was $16.5 million, or $0.12 per share, compared with a net loss of $17.0 million, or $0.13 per share, for the same period in fiscal 2012. The company missed the mean analyst estimate of $-0.09.

The net loss for the first six-months of fiscal 2013 was $28.6 million, or $0.21 per share, compared with a net loss of $33.0 million, or $0.25 per share for the comparable period in fiscal 2012.

For the quarter ended March 31, 2013, the company reported Nuedexta gross and net revenue of $20.8 million and $16.5 million respectively. Second quarter fiscal 2013 Nuedexta net revenue increased 81% versus the previous year and 11% over the previous quarter.

As of March 31, 2013, Avanir had cash, cash equivalents and restricted investments totaling $70.2 million, including cash and cash equivalents of $67.9 million.

Conclusion: Buy

Analysts covering Avanir generally have a favorable view of the company, although Zacks currently has a Rank 4 "Sell" rating for Avanir.

On January 3, 2013, Piper Jaffray initiated coverage on Avanir with a Overweight rating and a $6.00 price target.

On November 28, 2012, Canaccord Genuity maintained its Buy rating for Avanir with a $6 price target.

On October 1, 2012, Cowen & Company began coverage of Avanir with an Outperform rating.

On December 13, 2011, Summer Street reiterated its Buy rating for Avanir and increased its price target for the stock to $11, up from $10 per share. On December 13, 2011, Jefferies maintained its Hold raking for Avanir and lowered its price target to $3 from $3.50.

On August 23, 2011, JMP Securities initiated coverage on Avanir with a Market Outperform rating and a $7 price target.

On May 25, 2011, Wedbush released a research report on Avanir with an Outperform rating and a $13 price target.

For the second quarter of 2013, Avanir reported an eighth consecutive quarter of Nuedexta unit growth in both business channels with 13% retail and 4% institutional growth. Although Neudexta sales have been much slower than forecast, the company recently announced that recent prescription numbers annualized to over $90 million in annual gross revenues nearing the $100 million gross revenue run rate mark.

Avanir also achieved a major milestone by receiving a positive CHMP opinion for Nuedexta in Europe. The company is expecting an approval from the EMA in July. The company is attempting to identify a partner that will broadly commercialize in Europe as well as partner with Avanir to help accelerate follow-on indications for the drug.

Over the past year, Avanir has expanded its sales force from 76 representatives focused primarily on office-based neurology practices to 130 representatives promoting Nuedexta to neurologists, psychiatrists and geriatric specialists in both outpatient and institutional settings.

Avanir also has two promising Phase 2 programs underway assessing AVP-923 for the treatment of agitation in Alzheimer's disease and central neuropathic pain in MS. Another trial funded by the Michael J. Fox Foundation is assessing AVP-923 for the treatment of levodopa induced dyskinesia in Parkinson's disease. In addition, Avanir has a new development program of a next generation asset, AVP-786, or deuterium modified dextromethorphan. The company is also supporting two investigator-initiated studies testing Nuedexta in adult autism and speech and swallowing in patients with ALS.

Avanir appears to be making slow but steady progress towards its goal of becoming a leading mid-cap biopharmaceutical company. Building a formidable company takes time. Avanir appears to be on the right track. As Aesop (620-564 BC) advised centuries ago. "slow but steady wins the race."

Source: Avanir Pharmaceuticals Builds A Pipeline In A Pill