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January 23, 2011 is approaching Cumberland Pharmaceuticals (NASDAQ:CPIX) like a iceberg, threatening to sink revenues almost entirely for the small Tennessee biotech. On that date, the comapany’s primary revenue generator, Acetadote, will face generic competition. The company has been frantically trying to replace or extend the revenue of its star product; so far with little success.

One such way that Cumberland hopes to avert disaster is with a potential Acetadote FDA approval for non-acetaminophen acute liver failure. Acetadote is already approved for acetominophen-related acute liver failure and the company hopes to extend it to non-acetaminophen liver failure as well. Acetadote for this indication was granted priority review and the company expects a response by the scheduled September 10 PDUFA date. Along with approval for the new indication, Cumberland has asked for additional market exclusivity for its Acetadote product. While Cumberland stands a good chance to gain approval for the new indication, the potential market exclusivity agreement remains murky.

Acetadote, the only FDA approved IV treatment for acetaminophen poisoning

Acetaminophen poisoning is the most common cause of liver failure in the United States. Acetaminophen is one of the most ubiquitous drugs in the American household and overdoses of the drug number over 120,000 per year with as many as 48,000 receiving treatment. Acetaminophen overdose is also the most common form of acute liver failure, making up nearly 50% of the 2,000 cases per year in the U. S. When acetaminophen toxicity occurs, glutathione – a molecule necessary for proper metabolism of acetaminophen – is used up and the drug is converted to highly toxic N-acetyl-para-benzoquinone imine (NAPQI). NAPQI causes severe damage to the liver and, without treatment, will result in fulminant liver failure and death.

Acetadote is an intravenous formulation of N-acetylcysteine (NAC), a simple derivative of the naturally occurring amino acid cysteine. When given within eight hours of acetaminophen overdose, Acetadote is virtually 100% effective in preventing liver failure and death. The drug works by replenishing the body’s glutathione reserves as NAC is a precursor to glutathione. Acetadote is the only intravenous acetyl-cysteine treatment approved by the FDA for treatment of acetaminophen overdose. Mucomyst, a NAC treatment that is inhaled or orally administered, is also used as a treatment for acetaminophen overdose and is not produced by Cumberland Pharma. In 2009, total revenues for Acetadote accounted for $30 million of the company’s $43 million in total revenues.

Acetadote for non-acetaminophen related liver failure

Acetadote has shown efficacy in non-acetaminophen liver insults as well. A recent article in the journal Gastroenterology states that in liver failure patients with mild coma grades (I & II) transplant-free survival rates rose from 30% to 52%. That’s a 73% increase in survival in those patients. The drug appears to be favorable for drug-induced liver injury and hepatitis B virus liver failures, and less favorable for autoimmune hepatitis. The total number of liver failures in the U.S. total about 2,000 and the non-acetaminophen liver failures make up about half of that, and it’s only the lighter coma grades – so we’re looking at a tremendously small market size.

But Acetadote’s potential new indication isn’t for an increased market of its existing drug. Along with approval of the new indication, Cumberland is looking for additional market exclusivity. Under the current FDA guidelines, a new indication that requires additional clinical testing will give a drug an additional three years of market exclusivity. Furthermore, it seems possible that Cumberland could get seven years exclusivity for the orphan status of the drug. Either exclusivity period, however, may only apply to the new indication. Cumberland management has stated that there is potential that the franchise as a whole is offered additional exclusivity by the FDA. We are not privy to the information enclosed in these discussions, but it would appear that Cumberland is confident in some sort of exclusivity period.

Cash: A possible life-preserver?

The only saving grace for Cumberland if the approval fails to yield additional market exclusivity is its strong cash position. In the company’s recent 10Q, the company stated its cash and cash-equivalent position was over $71 million. With that sort of position, the company may be able to stay afloat while the market for its other drugs, most notably Caldolor, ramp up their revenue generating ability. The market may be worried with the prospects of this outcome, as the company has already revised down its revenue guidance for Caldolor as hospitals are slow to pick up the treatment. Will Cumberland be able to turn around its marketing strategy of Caldolor and realize a respectable market share?

Summary

With the failure to gain a respectable market with its Caldolor product, Cumberland needs additional market exclusivity for Acetadote. Current FDA guidelines do not appear to be strongly in Cumberland’s favor, but management remains hopeful. The question here is how much to trust Cumberland’s management that the potential market exclusivity discussions are indeed productive. With nearly three quarters of its total revenue on the line, the stakes could not be higher for little Cumberland Pharma. If market exclusivity is not granted, there could be a serious sinking feeling down in land-locked Tennessee.

Disclosure: No positions.

Source: Why Cumberland Pharma Needs Acetadote Approval to Avert Disaster