Silver Lining for Affymax in Likely Drug Submission Next Year

| About: Affymax, Inc. (AFFY)

Affymax (NASDAQ:AFFY) has seen a recent run-up in its shares since presenting data on its pivotal trials for the red blood-cell booster Hematide and confirming that it will file for US approval next year. Industry observers are seeing a better outlook now for a regulatory blessing in the set of kidney failure patients already on dialysis, resurrecting the fortunes of a drug whose future was cloudy following a safety signal in non-dialysis patients (Affymax reeling from Hematide safety scare, June 21, 2010).

Whilst FDA approval is far from a sure thing, especially given the uncertainties hanging over erythropoietin-stimulating agents (ESAs), positive signals about the fate of the drug have revived hopes for a therapy some observers had thought was finished in midsummer. Executives of the California company believe that if approved, Hematide (peginesatide) as a once-a-month treatment can position itself as a cost-effective and convenient alternative to standard ESAs as bundled dialysis payments come into force in the US (Medicare dialysis rules to re-shape ESA market, July 28, 2010).

Filing next year

Following a meeting with FDA officials, Affymax and partner Takeda (OTCPK:TKPHF) plan to file for approval in the dialysis population in the second quarter of 2011, putting potential approval as early as 2012. Speaking in an investor call Monday, the executives said no safety or efficacy issues were raised at the meeting that will not be addressed by Hematide’s pivotal trials program, which featured two trials in chronic kidney disease patients, not on dialysis and on dialysis.

It was the patients not yet on dialysis where the safety signal was found – the Pearl-2 trial found more death, unstable angina, and arrhythmia in the Hematide arm than in the Aranesp arm – casting a shadow over the compound. Not surprisingly, the non-dialysis program is shelved for now.

This was clearly a knock-back for Affymax, but not a death sentence. Consensus worldwide sales forecasts for 2016 for Hematide have dropped by nearly one-third since June, to $536m.

Affymax is expected to book $145m in co-promotion revenue in 2016, giving the compound a net present value of $262m to the drug developer, greater than its market capitalization of $182m. The rise in share value in the two weeks ended November 26 amounted to a 48% increase in market value - with shares topping out at $7.56 - suggesting that investors are nearing the same view of Affymax that the analysts now have.

The stock has been down in broader market losses and profit-taking this week. Given that Affymax was flirting with $25 a share in May, investors are clearly still harboring disappointment.

Not over ‘til it’s over

Data presented at the American Society of Nephrology meeting earlier this month revealed that patients randomized to Hematide treatment in the critical Pearl-2 trial at baseline had a higher risk profile, with greater rates of congestive heart failure, arrhythmia and diabetes. Whilst these data may not necessarily help to resurrect any plans to submit Hematide in the non-dialysis population, it may help to blunt regulators’ worries about the safety signal.

Still, cardiovascular risk certainly sets off alarm bells for any drug submission, and with an advisory committee and FDA review before it, Hematide is a long way from certain approval.

Hematide has passed a first test in that FDA staff signaled they are willing to entertain the submission. Whether the full data package will get past an advisory committee and full staff review cannot be answered for at least another year.