Critical Therapeutics Awaits FDA Decision on New Zyflo Formulation

 |  Includes: BPA, CRTX, HALO
by: Andrew Vaino

Andrew Vaino submits: Nothing really beats finding a tiny company with great potential that not too many people seem interested in. Halozyme (NASDAQ:HALO) was trading at $2.48 last August and is now over $10. Biosante (BPA) is another excellent example, and is up over 100% since I mentioned it in February.

A perceptive reader emailed me about Critical Therapeutics (NASDAQ:CRTX). It is a small company that sells Zyflo, a pill that inhibits 5-lipoxygenase inhibitor (5-LO). 5-lipooxygenase is responsible for the conversion of arachidonic acid to leukotrienes, which can cause constriction in the lungs. Other potential applications of a 5-LO inhibitor include vascular disease, stroke, and even pancreatic cancer. Zyflo is sold as a treatment for asthma. Seventeen million Americans have asthma, and this number is increasing.
CRTX logo

Now, one of the problems with Zyflo is that is has to be taken four times a day. Ideally this means every six hours, and since people generally like to sleep at least eight hours, this is a drawback. To improve on this, CRTX adjusted the formulation of Zyflo so that it can be dosed only twice a day. It used technology that was developed by Skyepharma’s Geomatrix technology.

This technology uses solid forms of the pill that erode at different rates in order to control the release of the drug over different periods of time. CRTX is also evaluating an injectable form that could be used in emergency settings. This treatment is not perfect. In a clinical trial of 5000 patients, just over 3% developed increased levels of the liver enzyme alanine transaminase. This is not ideal, but it is something that can be tested for, and monitored. Potential difficulties with liver enzymes has not derailed the sales of Lipitor.

CRTX has been selling Zyflo since Q4 of 2005 and quarter over quarter sales of Zyflo have been increasing steadily since its launch. The more convenient controlled release version should provide a boost to sales. The FDA has told CRTX that it expects to reach a decision on the controlled release form by May 31.

CRTX Chart

The stock is currently trading at less than $1.75. Approval, which I consider highly likely, should give this stock a boost. The company just released the 10-Q and, while not rock solid, it isn't in bad shape. Sales have been increasing steadily and the long release form, if approved. will improve this even more. My take is that this is a low price, low volume (avg volume is 229K) stock with a substantial near term potential.


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