On September 17, Savient's (SVNT) Krystexxa (pegloticase) faces what could be the end of a tumultuous journey to approval. Krystexxa has had an especially bumpy go of it, with soaring high of a 14-1 panel approval and crushing low of an FDA complete response letter. Investors may be sick from the rollercoaster ride and are certainly looking for relief from the FDA. I want to provide a brief summary of what Krystexxa is, what it has gone through, and what I expect as we get closer to this important catalyst date.
What is Krystexxa?
Krystexxa is a biologic therapy for the treatment of chronic gout in patients refractory to traditional therapies. Gout is a painful joint and tissue affliction that results from what is effectively crystallization of uric acid within the body. Krystexxa is administered via injection once every two weeks and continuously processes this uric acid into a form that is more easily passed from the body.
Krystexxa is actually just uricase, an enzyme that is found in virtually all mammals besides humans and some apes. As it turns out, we carry with us the genes for such an enzyme, but somewhere in our genetic history the expression was turned off. In these other mammals, allantoin is the purine metabolism product of choice, whereas in humans we stop short of the final step of producing allantoin and simply excrete uric acid. Unfortunately, excess uric acid can 'crash out' of solution (namely our blood) and collect in tissues and joints, resulting in the above mentioned painful condition. The uricase enzyme in Krystexxa allows us to processes uric acid - which has relatively low solubility in water - into allantoin - which has relatively high solubility. The allantoin is then excreted from the body, much as it would be in any other mammal, significantly improving the gout situation in the patient.
Savient goes one more step over simply offering the enzyme in which we are deficient. The uricase enzyme is pegylated - a chemical modification in which polyethylene glycol is affixed to the surface of the enzyme. This technology allows biologics to be dosed weekly or monthly, as opposed to daily. Under normal circumstances, a foreign enzyme is quickly degraded, requiring daily injections that often make the therapy practically impossible in all but the more extreme diseases. Pegylation of an enzyme allows it to fly under the body's radar, eluding the processes that would normally break it down, and allowing dosing to occur much less frequently.
The treatment appears safe and efficacious, reducing the number of gout tophi and the number of swollen joints and improving pain and health-related quality of life.
A Brief History
Krystexxa's dealing with the FDA began all the way back in 2001 when the treatment was given orphan drug status. This means that the phase III trials could enroll significantly less than 1,000 patients to prove safety and efficacy and the company gets seven years of market exclusivity. Orphan drug status is usually granted to drugs whose total market amounts to less than 200,000 patients. Patients with treatment failure gout (TFG), the target demographic for Krystexxa, total about 50,000 patients, hence the designation.
The initial BLA (biologics licencing agreement) was then submitted on October 31, 2008. The FDA found it prudent to have a panel review the findings presented by Savient about Krystexxa, setting the date for June 16, 2009. The panel voted overwhelmingly in favor of Krystexxa at a 14-1 vote for approval, citing that improvements in over half the population were encouraging. Savient's stock price tripled immediately prior to and after the panel vote. As the FDA generally follows the recommendation of its panel, investors were rightfully optimistic about the future of Krystexxa, orphan drug or no.
On August 2, 2009, however, the company and its investors were shocked to receive a complete response letter (CRL) over the Krystexxa therapy. While the CRL mainly addressed manufacturing issues - apparently the company had changed its production process of the enzyme and the FDA wanted verification that the therapy would be identical to the treatment used in phase III - the therapy would have to wait another year before getting another crack at approval. The stock took a modest dive of approximately 20% on the news but it would appear most investors remained optimistic of Krystexxa's potential.
Savient apparently addressed the issues brought up in it's CRL and the company's BLA submission was accepted by the FDA on March 15, 2010. The FDA established a PDUFA date of September 14, 2010. Today, SVNT's stock price hovers near $14.30, only about 10% below its pre-CRL price of $15.84.
I'm assuming Savient successfully addressed all production issues associated Kystexxa and the FDA will follow the recommendations of its previous panel and give the drug its OK in September. However, it looks like a potential run-up looks minimal as I don't see a justification for the share price to go any higher than $16 pre-approval. It would appear to me that approval looks mostly priced in as well, but perhaps a 10-15% profit is possible. When investing, you need to consider the small potential market. Patient numbers in the 50,000 range don't look so hot but I'm guessing Krystexxa stands to get a high portion of this TFG population. Financial analysts have given Savient a one year price target average of $17.90; falling somewhere around this number after approval seems reasonable. You won't get a two- or three-bagger out of this stock, but up to 25% return on a relatively lower risk biotech stock may be right up your alley.
Additional reading: I found the following presentation especially informative.
Disclosure: No positions