In December 2006 two generic versions of Oxandrin were launched. Savient is doing all it can to prevent this competition, and has been trying to stop sales of these by both claiming patent infringement and petitioning the FDA to block the approval of these drugs. Savient reported Q1 2006 sales revenue of $9.5M: sales in Q1 2007 were $6.4M. This isn’t the main value driver of this company.
With its days of unfettered access to the market numbered, Savient knew enough to seek new products. It's currently developing Puricase as a treatment for gout. Gout is an accumulation of uric acid in joints and tendons, and can be quite unpleasant. Gout occurs in about 1.4% of men and 0.6% of women (suffering from gout is one of the few things Benjamin Franklin and Bart Simpson share in common). Puricase is a PEGylated form of an enzyme called urate oxidase which metabolizes uric acid.
It is well-known that using urate oxidase is effective in reducing blood levels of uric acid. Sanofi-Aventis (SNY) sells Elitek, a recombinant urate oxidase from yeast, for the treatment of high levels of uric acid in pediatric patients receiving chemotherapy. Cancer cells grow rapidly and thus synthesize more DNA: uric acid is a by-product of DNA synthesis. In 2006 it sold less than $380M of Elitek.
In clinical studies Elitek was very effective at reducing levels of uric acid. It does have side effects: among 347 patients, 50% experienced vomiting, 46% had a fever, 26% experienced headaches, and 20% diarrhea. A drawback of Elitek is that it must be daily administered by IV infusion over 30 minutes. While Elitek is only approved for cancer patients, it has been noted (Int. J. Med. Sci., 2007, 4, 83–93) that the drug can also be used to treat gout.
Savient’s drug is an improved version of this enzyme. By attaching poly(ethylene glycol), or PEG, to the enzyme, its degradation is dramatically reduced. This gives a substantial advantage in that injection of the drug doesn’t need to be daily. In an early Phase 1 study, enzyme activity was noted for up to 21 days after injection.
Based on another clinical study (Arthritis & Rheumatism, 2007, 56, 1021–1028), dosing every two to four weeks was suggested as effective: this is a substantial advantage over daily! As well, in this Phase 1 study, incidences of adverse events were substantially lower than for the non-PEGylated version.
Current best treatment for gout flare ups are anti-inflamatory drugs. These do not treat the underlying condition, however. Both Elitek and Puricase reduce levels of uric acid to a significantly greater extent than do current gout treatments.
The last patient was enrolled in Savient’s Phase 3 study of Puricase in March 2007. Primary efficacy endpoints of the study are attainment of normal levels of plasma uric acid after 3 and 6 months. Results of this study should be released by the end of the year, and the company plans to seek regulatory approval in early 2008.
From a financial standpoint the company is in good shape, with enough money easily for two to three years. SVNT’s chart is pretty impressive over the past year: the stock has doubled from November last year to January of 2007. The stock has retreated a bit from its January high of $15.20 and trades now at just under $13.
Puricase is really just a reconstitution of an approved drug that is effective. Results on reduction of serum uric acid levels from early stage clinical trials are impressive. There is no guarantee the Phase 3 results will also be good. Given the similarities in terms of mode of action between Puricase and Elitek (an approved drug), I believe odds are good they will be, which will give a nice bump to the share price. Given that administration of Puricase is easier for patients than Elitek, there is the possibility of off-label use of the drug to treat the market served by Elitek. When the results will be released is unknowable.
SVNT’s short term chart suggests caution. The stock traded down (along with the rest of the market) Friday on three times average volume. This looks like a good stock to watch over the next week and may be a good buy if it gets down near $11-$11.50 (based on the chart, if it falls below $12.50 it may drop this far).
SVNT vs. SNY 1-yr chart: