Alexza Poised For Run-Up Into December U.S., EU Approval Decisions

Sep. 5.12 | About: Alexza Pharmaceuticals, (ALXA)

Alexza Pharmaceuticals (NASDAQ:ALXA) is developing lead product candidate ADASUVE (Staccato loxapine) (formerly AZ-004) as an inhaled version of the approved anti-psychotic drug loxapine. The Staccato system is designed to vaporize drugs into an aerosol for a rapid onset of action that is similar to intravenous (IV) administration with much better ease of use.

Pending catalysts for Alexza include a PDUFA decision goal date of 12/21/12 under a six-month Class 2 review for a New Drug Application (NDA) resubmission in response to a second Complete Response Letter (CRL) issued by the FDA earlier this year in May (the first CRL was issued in October 2010). In addition, the Company expects to receive a CHMP (Europe) Day 210 approval opinion in December and has partnered with Grupo Ferrer in Europe with ongoing partnership discussions for other regions including the United States.

In December 2011, the ADASUVE NDA was reviewed by an FDA advisory panel which voted 9/8/1 (yes/no/abstain) to recommend approval for use as a single dose in 24 hours when used with FDA approved REMS for treatment of agitation in patients with schizophrenia or bipolar mania. The following is a breakdown of other issues discussed and voted upon at the meeting:

- Does the committee conclude that ADASUVE (loxapine) inhalation powder has been shown to be effective as a treatment for agitation in patients with schizophrenia or bipolar mania? 17/1/0 (yes/no/abstain) vote

- Does the committee conclude that ADASUVE (loxapine) inhalation powder has been shown to be acceptably safe for use as a treatment for agitation in patients with schizophrenia or bipolar mania:

a. When used in conjunction with the REMS proposed by the sponsor? 1/17/0 (yes/no/abstain) vote

b. When used in conjunction with the REMS proposed by the FDA? 5/12/1 (yes/no/abstain) vote

- Does the committee conclude that ADASUVE (loxapine) inhalation powder would be acceptably safe for use as a single dose in 24 hours as a treatment for agitation in patients with schizophrenia or bipolar mania when used in conjunction with the REMS proposed by FDA? 11/5/2 (yes/no/abstain) vote

In June, Alexza conducted a 10-for-1 reverse split of common stock in order to maintain the $1/share minimum price for a NASDAQ stock market listing. As a result, Alexza now has approximately 12 million shares of common stock outstanding as of 7/27/12. The Company ended 2Q12 with $18.5M in cash and equivalents plus an additional $7.8M in restricted cash which is sufficient to fund planned operations into 4Q12.

In July, Alexza announced a new committed equity financing facility with Azimuth Opportunity which replaced s similar agreement that expired in June. The $20M financing facility is expected to provide adequate capital beyond the FDA and EU approval decisions expected in December along with the potential for additional sources of non-dilutive funding from partnership agreement(s) outside of Europe.

ADASUVE is designed for the rapid, inhaled treatment of agitation which is currently treated via intramuscular injection with drugs such as ZYPREXA and ABILIFY. The product is formulated for delivery deep into the lungs, resulting in rapid absorption into the bloodstream and a quick onset of action (i.e. within 10 minutes). In addition, no additives are included in the formulation and Alexza has identified 200 compounds that can potentially be delivered by the Staccato system, which is an uncomplicated device that is activated simply by breathing through the device which triggers a heat reaction to deliver the drug.

The Company has included data from over 1,600 patients in the NDA filing, including subsets for respiratory disease (e.g. asthma and COPD) along with heart rhythm (QT interval) safety studies. The major safety issue centers around patients with respiratory conditions and that is the focus of the Company's proposed product labeling and Risk Evaluation and Mitigation Strategy (REMS) to exclude these patients from treatment since the product otherwise has a clean safety profile in the target patient population as a single dose administered within a 24-hour period.

Other issues cited in the most recent CRL in May included manufacturing deficiencies and no new clinical or safety issues were identified by FDA at the time, allowing Alexza to quickly resubmit the NDA by late June, which was subsequently accepted by FDA for a six-month review. In addition, EMA pre-approval inspections resulted in four recommendations that the Company addressed and received an EU Certificate of GMP Compliance of a Manufacturer about two weeks ago.

Shares of Alexza are poised for a run-up ($5-6 target) going into the US and EU approval decisions expected in December given the importance of the regulatory approval decisions (i.e. the Company has no other marketed products or late-stage pipeline drug candidates in development, the Company's very low share count following the reverse split, the relatively low share price under $5 (making the stock popular with biotech catalyst traders) and resolution of manufacturing deficiencies (at least for EU purposes) as one of the main outstanding issues.

The major risk factors for Alexza include a larger dilutive financing aside from the known $20M financing facility with Azimuth and delays in expected regulatory decisions since the Company is operating on a tight timeline relative to its available cash and ability to raise substantial amounts of capital prior to US and/or EU approval decisions. Ahead of the decisions, a US partnership would be a major positive catalyst if deal terms are favorable including upfront and/or milestone-based cash payments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.