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On July 28, 2009, the U.S. Food and Drug Administration's (FDA) Cardiovascular and Renal Drugs Advisory Committee is expected to review the marketing application of King Pharmaceuticals, Inc.’s (KG) Corvue. Corvue is an investigational stress agent designed for use during Myocardial Perfusion Imaging (MPI) tests, which are performed to detect the presence and severity of coronary artery disease (CAD).

  • Cardiovascular and Renal Drugs Advisory Committee: a panel of experts, which reviews and evaluates the safety and efficacy data of investigational drugs for the treatment and diagnosis of cardiovascular and kidney diseases. It provides the FDA with scientific and medical guidance to facilitate the marketing approval decisions of the drugs under review.

  • CAD: a condition where the arteries supplying blood to the heart muscles (coronary arteries) become narrow due to the deposit of fat-like substances, called plaque, on the inner arterial walls. The deposition of plaque narrows the coronary arteries, limiting the blood-flow to the heart, which in turn, affects the normal functioning of the heart.

  • MPI tests: cardiac tests that are performed to view the blood-flow throughout the heart in order to detect the presence as well as the severity of any heart disease. These tests spot the areas with poor blood-flow in the heart.

For obtaining the best possible images during a MPI test, the blood-flow through the coronary arteries needs to be significantly increased. Usually, this increase in the blood-flow can be obtained by exercising on a treadmill.

However, many individuals are unable to do adequate level of exercises because of various physical limitations or certain underlying disease conditions. In such individuals, a drug is used to temporarily dilate the coronary arteries so that the blood-flow through them can be increased in order to conduct MPI tests. These drugs (which are used during MPI tests) are called stress agents.

In the U.S, approximately 6 million patients undergo MPI tests each year. Of these, approximately 3 million MPI tests are performed using a stress agent. The existing market leading stress agent for MPI tests is adenosine.

Even though this stress agent is effective in increasing the blood-flow to the heart, it is associated with various serious side effects including flushing (reddening of face), angina (chest pain), nausea, shortness of breath and incidences of heart block (a problem related to the heartbeat).

Corvue, a major pipeline candidate of KG, is an upcoming stress agent for use during MPI tests. In previous clinical trials, the drug demonstrated a better safety profile compared to existing stress agents, with fewer incidences of flushing, angina, shortness of breath and no cases of heart block. If approved and successfully commercialized, the drug is estimated to generate peak revenues of approximately $350 million, or 15.09% of the company’s current market capitalization.

The existing market leading stress agent for use during MPI tests is adenosine. However, this agent is associated with various serious side effects including flushing, angina, nausea, shortness of breath and incidences of heart block.

Another drug, Lexiscan by Gilead Sciences, Inc. (GILD), has been recently approved by the U.S. FDA for use as a stress agent during MPI tests. Lexiscan received approval in April 2008 and was commercially launched in June 2008. Currently, it is the only drug in the market with a comparatively better side effect profile, demonstrating fewer incidences of flushing, angina and heart block than adenosine. The presence of only one approved stress agent has left the market open for newer stress agents with superior side effect profiles.

Expectations

We expect the FDA’s Cardiovascular and Renal Drugs Advisory Committee to recommend the approval of Corvue as a stress agent to be used during MPI tests to detect the presence and severity of CAD. Our opinion is based on the promising data from the Phase III trials of the drug.

In December 2008, KG submitted the NDA of Corvue, primarily based on the data from two Phase III trials, VISION-302 and VISION-305.

The efficacy analysis of the two trials demonstrated that both the trials met the primary endpoint by achieving equivalent efficacy to adenosine in detecting ischemia (insufficient oxygen-rich blood reaching the heart due to narrowed coronary arteries).

In addition, the safety analysis from the two trials demonstrated that Corvue subjects experienced fewer side effects than adenosine subjects.

The Product

The coronary arteries have specific proteins called adenosine receptors, which are present in the cells forming the arterial wall. There are four types of such proteins: A1, A2A, A2B and A3 adenosine receptors. Out of these four, it is only the A2A adenosine receptor that is able to promote the dilation of these arteries.

Most of the currently available stress agents are non-selective in their action. These agents work by activating all four types of adenosine receptors. As a result, while the activation of the A2A adenosine receptor dilates the coronary arteries and increases the blood-flow to the heart, the activation of A1, A2B and A3 adenosine receptors contributes to unwanted side effects, such as flushing, angina, and shortness of breath.

Corvue is designed to address the side effects associated with the most of the currently available stress agents. It works by selectively activating the A2A adenosine receptors. Due to its selective action on the A2A adenosine receptors, the drug is highly effective in dilating the coronary arteries (hence, increasing the blood-flow to the heart) during the MPI tests and it avoids the side effects associated with the other stress agents.

The Market

  • Market Size of Stress Agents for MPI Tests: Approximately $550 million (US)
  • Patient Population: Approximately 3 million MPI procedures require a stress agent annually (US)

Conclusion

Although the FDA is not obligated to have to follow the panel's recommendations on drugs, it usually does so, more often than not, given that the panelists are experts in the specific disease area.

Thus, a positive recommendation by the panel after the July 28th meeting should result in a positive move in KG's stock price.

Financial data for KG (data as of July 07, 2009):

  • Current price: $9.36
  • 52 wk range: $5.86 - $12.60
  • Market Cap ($MM): $2,320.00
  • EPS (FY08): -$1.37
  • Revenue ($MM) FY08: $1,565.10
  • Revenue ($MM) FY09E: $1,729.90
  • Cash per Share: $1.85
  • Historic Cash Burn /share: $2.38
  • R&D ($MM) FY08: $145.20

Source: Revere Research

Disclosure: Long KG

Source: King Pharma: FDA Should Like Corvue - And So Will Investors