Santarus' Zegrid Facing Back-to-Back FDA Approval Dates

Santarus’ (SNTS) main drug, Zegerid, is coming up on back-to-back FDA approval dates in early December. Zegerid is a proprietary immediate-release formulation that combines the proton pump inhibitor omeprazole with the antacid sodium bicarbonate indicated for upper gastrointestinal diseases and disorders, including gastrointestinal reflux disease (GERD). It is the first and only immediate release proton pump inhibitor on the market.

The first of these FDA approval dates is December 4^th, for a 505(b)(2) application of a tablet form of Zegerid to be marketed by Santarus by prescription. The tablet formulation would add to Santarus’ current capsule and powder form of the drug. The 505(b)(2) pathway is an abbreviated application used for approval of a different format of currently approved drugs, and historically these applications have a high rate of approval with the FDA.

The second FDA date is of higher importance to the company; it is following on December 9^th. This is the PDUFA date for Santarus’ partner Schering Plough (Merck (MRK)) and is for the first over-the-counter (OTC) version of Zegerid branded omeprazole with sodium bicarbonate in a 20mg omeprazole dose strength. This PDUFA date is the second time around for Schering Plough; a response to a January complete response letter, and should therefore have a good chance of approval this time.

An approval of the OTC version of Zegerid will trigger a $20 million milestone payment to Santarus, and Santarus will receive low double-digit royalties on net sales of OTC Zegerid.

The OTC version of Zegerid through the partnership will make Zegerid a household name, just like Prilosec and other current drugs for the indication. Schering Plough’s marketing will include direct-to-patient advertising through regular media outlets, and the impact of this should be very positive for the prescription Zegerid products currently marketed and sold by Santarus. When a patient asks the physician about a drug by name, the physician has a strong tendency to prescribe it rather than spending valuable time explaining why another drug should be used – this is the bottom line of direct-to-patient advertising.

As Santarus is currently a profitable company without these events, the impact of both to the already stellar performance of this company will have analysts make drastic changes to upcoming quarterly estimates. We are already seeing adjustments in estimates after the surprisingly good third quarter without accounting for these upcoming catalysts. With annual revenue of $150 million, Santarus is currently undervalued with a market capitalization of just $225 million.

Author's Disclosure: Long SNTS

Comments

[Tina L]

Why didn't OTC get approved initially? How long between approval and launch?

With capsule and powder versions already available, how much incremental revenue is expected for the Zegerid tablet?

2009 Nov 20 11:14 AM

[R. Saito]

Congratulations to all who followed this one.
On the question about time between approval and launch, nobody really knows, but the size of the company is important. SP should be able to roll it out very quickly, especially since they had very good reasons to expect an approval this time around.
As for the next FDA date, it is of lesser importance to the stock price. An added form of the drug may aid in some sales, but will also detract some from powder and capsules.

2009 Dec 01 06:17 PM

[Hustle617]

this was posted word for word on biomedreports.com i think im on to something? ugh dat sucks...

2009 Dec 02 12:10 PM