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On February 28, 2011, Nile Therapeutics (OTC:NLTX) announced it will seek development of cenderitide (formerly CD-NP) in a new indication, seeking to treat patients with acutely decompensated heart failure (ADHF) on an outpatient basis for up to 90 days after discharge from the hospital. Nile plans to file a new Investigational New Drug (IND) application for this “post-acute” indication within the next few weeks. We remind investors that management met with the U.S. FDA on the future development plans for cenderitide in ADHF earlier this year. Following that meeting, management believes that cenderitide could qualify for FDA “Fast Track” status development status. We expect an application in this regard here before the end of the second quarter 2011.
Medtronic To Fund Phase I Study
In a separate announcement this morning, Nile also noted that it has teamed up with medical device maker, Medtronic (NYSE:MDT), for a phase 1 pharmacokinetic (pk) / pharmacodynamic (pd) study testing cenderitide delivered through Medtronic’s MiniMed Paradigm Insulin Pump. In the planned clinical trial, cenderitide will be delivered to heart failure patients for up to 24 hours through continuous subcutaneous infusion following discharge from the hospital. We expect this program will enroll in the area of 40-50 patients, looking to determine what subcutaneous dose of this new formulation of cenderitide will match plasma levels that management previously determined to be safe and effective in the company’s phase 2a program under continuous 72-hour infusion. Financial terms were not disclosed, but we estimate this program, along with some manufacturing work, will cost roughly $2 million. We expect this study will get under way in the second quarter 2011 and offer data early next year.
If the phase 1 pk / pd study is successful, we expect Nile to seek a development partner, which may or may not be Medtronic, for a phase 2a double-blind, placebo-controlled, dose-ranging study to start during the second quarter of 2012. We would expect this program to include endpoints in cardiac remodeling, renal function, re-hospitalization, and mortality. Previous data with cenderitide is supportive of the potential here. Cenderitide was designed to provide cardiac unloading while maintaining renal function. Nile believes that the continuous and extended infusion of cenderitide through a subcutaneous pump will provide patients with sustained symptomatic relief in the outpatient setting that could contribute to a reduction in post-acute hospitalizations and persistent improvement in outcomes.
We remind investors that in November 2010, the company released encouraging data from a phase 2a (n=77) trial testing cenderitide in an “acute” (in-hospital) 72-hour continuous infusion. The data show favorable effects on renal function compared to placebo, and favorable trends in several biomarkers correlated with kidney function, including creatinine and cystatin-c. A full analysis from this trial will be available shortly, and may be presented at the American College of Cardiology meeting in April 2011.
Potential Blockbuster Indication
We believe this new “post-acute” indication could be a blockbuster opportunity for cenderitide. In the U.S., approximately 5.5 million people (~2% of the population) suffer from heart failure (NYSE:HF). The incidence is even higher for patients above the age of 65, where approximately 6% to 10% of the population is at risk. There are an estimated 650,000 new cases diagnosed annually. Treatment of heart failure generates annual costs of approximately $35 billion, of which approximately $3 billion is spent on drugs and $19 billion is spent in the acute hospital setting. HF patients frequently suffer acute episodes of decompensated heart failure (ADHF), which require hospitalization. Each year, HF is responsible for over 1.2 million hospitalizations. For Americans over the age of 65, ADHF is the most frequent cause of hospital admission, and the incidence has doubled in the past 15 years. The average length of hospital stay is 4.3 days. Subsequent to a discharge for ADHF, the average time to re-admission is 3 months and mortality is high. In fact, 50% of patients discharged with a primary or secondary code of ADHF will require re-hospitalization during the following 9 months. Mortality at 1-year is over 10%.
Nile and Medtronic are looking at the potential to administer cenderitide continuously for 90-day using Medtronic’s MiniMed Paradigm pump currently used for continuous infusion of insulin. If Nile can capture only 10% of these patients, at a cost of $5,000 per treatment, sales would be $600 million. We think the opportunity exists to charge even more for this therapy given the high burden and unmet medical need.
The potential to use cenderitide in a post-acute indication is very exciting in our view. There are currently no approved heart failure drugs targeting cardio-renal improvement in an outpatient setting. Management will seek a development partner for this indication following the phase 1 pk / pd data. The logical partner here would be Medtronic, keeping cenderitide and the MiniMed Paradigm together. However, other potential partners could be interested, and the ideal situation for Nile shareholders would be a bidding war.
Talks Continue For Hospital Indication
Management is also continuing discussions with potential partners on the acute setting for cenderitide. Talks include the potential for Ex-U.S. rights to cenderitide as well. The next steps for an acute indication would be to initiate a double-blind, placebo controlled phase 2b study. We expect this trial to test two doses of cenderitide and enroll roughly 300-400 patients, with endpoints to include relief of symptomatic dyspnea, as well as analysis of biomarkers for kidney function and ischemia, as well as safety assessments including risk of hypotension, renal function, cardiovascular events, and mortality. The cost of this trial could run upwards to $20 million, so Nile clearly needs a partner here.
A Wide Open Market
The rise and fall of Natrecor (nesiritide) sent physicians back almost a decade in treating ADHF. Natrecor was headed towards blockbuster sales before the “Dear Doctor” letter ended its run. Nitroglycerin and furosemide returned as the standards of care despite significant limitations. In our view, the market for an effective product is wide open. The objectives are simple, increase cardiac output while offloading fluid and preserving renal function. An effective product with the target profile listed below is sure to offer blockbuster potential.

(Click to enlarge)

Based on preclinical, phase 1, and phase 2a data, cenderitide looks to possess all the characteristics of an ideal drug for ADHF.

Recommendation

We remain optimistic on Nile Therapeutics and the potential for cenderitide. We are excited to see the company team up with Medtronic to explore a potential new indication for the drug. We have previously stated that with positive phase 2b data in hand, Nile is worth an estimated $80 to $100 million. This is how we arrive at our $2 price target. However, Nile now has potentially two chances to generate this data, one in the acute (in hospital indication) and another in the post-acute (out-patient) setting. The post-acute indication has the potential to receive U.S. FDA “Fast Track” development status. With a current market capitalization of only $20 million, Nile Therapeutics looks bafflingly under-valued.

Based on our financial model, Nile exited 2010 with an estimated $3.1 million in cash. We think this is enough cash to fund operations into the fourth quarter 2011. We remind investors that Medtronic is paying for the planned phase 1 pk / pd study in the post-acute indication. We do not expect Nile to conduct any additional studies in the acute indication without a development partner. Management has reported being in discussion with several interested parties around cenderitide. We remind investors that Nile met with the U.S. FDA earlier this year, and plans to provide additional information around these discussions and full data from the recently completed phase 2a program shortly. Partners are most likely waiting to see this data and hear how the meeting with the FDA went.

Accordingly, we expect management to strike a deal later this year, and would be buyers of the stock ahead of this major upside potential. We view Nile has a high risk/high reward speculative play, where at $0.52 the stock is trading like a call option. Our target is $2/share.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Nile Teams With Medtronic for Post-Acute Heart Failure