Nupathe Pharma: Potentially A Triple In Stock Price On FDA Approval

| About: Teva Pharmaceutical (TEVA)

In 2011, 35 new drugs were approved -- among the highest number of approvals in the past decade. So far in 2012, over 100 new drugs have been approved, surpassing 2011's total by nearly triple.

Many of the drugs represent important advances for patients, including: two new treatments for hepatitis C; a drug for late-stage prostate cancer; the first new drug for Hodgkin's lymphoma in 30 years; and the first new drug for lupus in 50 years.

The number of new drugs approved in 2013 could surpass 2012 as the FDA has been easing regulatory requirements as evident from the number of drugs approved so far this year, notwithstanding President Obama's directive to the FDA in 2011, asking the agency to approve more drugs.

Sarepta Therapeutics (SRPT) recently announced that it received positive Phase IIb clinical data for its Duchenne muscular dystrophy (DMD) drug eteplirsen. The stock exploded from a prior day's closing price of $14.99 to an intra-day high the next trading session of $45.00, representing nearly a 200% upward move. While the market for this drug is very limited, its benefit towards society is potentially a massive one. DMD is one of the rarest forms of the disease and the cruelest -- which only affects children. A breakthrough for this disease would be society-altering.

Nupathe (PATH) is a company that has a drug I feel will be one of the first products approved in 2013. The company's lead product Zecuity, is designed to treat Migraine headaches in a way that is both novel, and potentially more effective than the current treatments on the global market

Zecuity has a New Drug Application (NDA) filed with the FDA, with an expected PDUFA date of January 17th, 2013. The drug is designed to treat Migraine headaches via a transdermal patch.

Zecuity actively delivers sumatriptan, the most widely prescribed migraine medication. In clinical trials involving more than 10,000 applications, Zecuity offered patients fast onset and sustained relief of debilitating migraine symptoms including headache pain and migraine-related nausea (MRN). It utilizes SmartRelief, the company's proprietary transdermal delivery technology that rapidly transports medication through the skin using a process called iontophoresis.

Zecuity is designed to overcome significant limitations of current migraine treatments that are related to route of administration and peak plasma levels. Zecuity tightly controls the delivery of sumatriptan, never reaching plasma levels that are commonly associated with triptan sensations. A "Triptan Sensation" is a feeling of tightness or constriction around the neck and chest, usually lasting about one hour. As a result of NuPathe's delivery system and based on the company's clinical trial experience, it believes that Zecuity will offer a low incidence of triptan sensations.

The market potential for Zecuity is large:

The US and European markets for anti-migraine drugs are projected to exceed $3.2 billion and $734 million, respectively, by 2015. There are a large number of drugs, both preventive and abortive, available in the US and European markets. But, the number of those using these medicines is not as many as those suffering from this temporarily disabling condition. The reason I believe this is because of a lack of patients' compliance due to the side-effects of orally ingested drugs, which can cause gastrinal issues along with other types of headaches caused by some treatments. Because Zecuity delivers sumatriptan transdermally, it will likely be an attractive treatment option for migraine sufferers who might otherwise delay or avoid taking medication due to MRN.

For some minor migraines, pain relievers such as ibuprofen or acetaminophen may be enough, including well-known over the counter (OTC) drugs such as Advil and Tylenol. Other products specifically labeled for this indication like Excedrin Migraine also may ease moderate migraine pain but aren't effective alone for severe migraines. The other issue is if taken too often or for long periods of time, these medications can lead to ulcers, gastrointestinal bleeding, and rebound headaches.

For many people with migraine attacks, triptans are the most popular. They can relieve the pain, nausea, and sensitivity to light and sound that are associated with migraines. Here is where NuPathe comes into play as the company's patch actively delivers sumatriptan, a triptan which is the most widely prescribed migraine medication. Typical side effects of triptans include nausea, dizziness, and muscle weakness. Of course, these are the side effects that NuPathe feels will be greatly reduced or removed by using its transdermal patch, which gives direct absorption -- bypassing the digestive track.

Other medications containing narcotics, particularly codeine, are sometimes used to treat migraine headache pain. These are habit-forming and are usually used only as a last resort.

People with two or more debilitating attacks per month may turn to preventive medication versus being reactive and waiting for a migraine to hit. Preventive medications can reduce the frequency, severity, and length of migraines while increasing the effectiveness of symptom-relieving medicines used during migraine attacks. In most cases, preventive medications don't eliminate headaches completely, and some cause serious side effects. If you have had good results from preventive medicine and have been migraine-free for six months to a year, your doctor may recommend tapering off the medication to see if your migraines return without it.

I think this is an opportunity for NuPathe as the preventive market has medications involved that are not specifically designed for migraines. These include cardiovascular drugs such as beta blockers. Commonly used to treat high blood pressure and artery disease, beta blockers can reduce the frequency and severity of migraines.

Certain antidepressants are good at helping to prevent some types of headaches, including migraines. Tricyclic antidepressants may reduce migraine headaches by affecting the level of serotonin and other brain chemicals. However, amitriptyline is the only one proven to be effective for migraine headaches and may be taken while not experiencing the depression symptom.

A study performed by the Department of Neuroscience at a college in Norway attempted to figure out the monetary costs associated with headaches in Europe. Included in the study were variables such as the cost of medication, hospitalization, and work absenteeism. In the end, the breakdown of the total costs specifically for the migraine form of headaches was €111 billion per year for the countries included in Europe. Needless to say, the migraine market is massive, and Nupathe's patch has a great opportunity to not only help treat millions of migraine sufferers, but could potentially bring the company 100's of millions in revenue -- if approved.

In July, 2012, Armando Anido took over as the new CEO of NuPathe, replacing the former CEO and founder of Nupathe Jane Hollingsworth, who resigned her executive post and seat on the board of directors. I strongly believe Ms. Hollingsworth was running the company poorly, especially after Zercurity received a complete response letter (CRL) from the FDA on its first attempt to gain approval.

In the CRL, the agency acknowledged that NuPathe established the efficacy of the migraine patch in the overall migraine population. The CRL primarily contained chemistry, manufacturing and safety questions.

In my research of the company when I first wrote about it months ago, I talked to several people who indicated to me that the main issue was the quality of the manufacturing process -- safety issues in the actual manufacturing process. The patch works as demonstrated in having good efficacy. Now, it's just a matter of assuring better quality control in manufacturing.

I believe Mr. Andio will do a better job with these issues, and get Zercurity approved this time around.

Mr. Anido has more than 30 years of executive, operational, and commercial leadership experience in the biopharmaceutical industry. His history includes filling a seat on the board of directors at Adolor, until it was sold to Cubist (CBST) in December 2011. At Auxilium Pharmaceuticals (NASDAQ:AUXL), he was the president and CEO from 2005 to 2011. During this time, sales grew from $42 million in 2005 to more than $260 million in 2011 while increasing the market cap of the company's stock from $200 million to more than $900 million.

What I feel is the most important aspect of Mr. Andio's experience is that earlier in his career, he was Vice President of central nervous system marketing with GlaxoWellcome. Glaxo Wellcome was a multinational pharmaceutical company headquartered in Londen, UK. It later merged with SmithKline Beecham to form the prominent GlaxoSmithKline (GSK). In his time spent with GlaxoWellcome, Mr. Anido was responsible for commercialization of the migraine, epilepsy, and depression businesses division in the U.S. for the company, and grew the migraine business to nearly $1 billion in revenue.

One of Mr. Andio's first acts as CEO of NuPathe was to secure proper financing for the company. In doing this, he is taking yet another positive step in assuring that Zecuity gains FDA approval this go-around. No matter how promising the potential of developmental is, without money, the company has no chance as success.

It's been my experience in the market over time that betting on the jockey is more important than betting on the horse. Regardless how good the horse is, it won't win without a top notch jockey to steer it to victory. I strongly feel Mr. Andio is the right jockey for Nupathe, and will eventually lead the company into the winner's circle.

NuPathe has a great shot at seeing a triple in its stock price, if the FDA approves Zecuity in January 2013. With a current market cap of under $50M along with the large size of the migraine market, if NuPathe was able to grab 10% of the US market share ( a rather small percentage), its revenue could easily exceed $170M. Based on this potential, its market cap could easily see a speculative price of $500M moving forward. Obviously, with new financing the company's market cap would be based on 29.5 M shares instead of the current figure of 14.74M Therefore NuPathe's top spec value would be around $14 a share.

My estimate considers a "best case scenario" and it's not likely that if Zecuity gains approval, the stock price would actually be $14 -- more like $8.50 to $9.50 in my opinion.

My price target opinions:

$5 to $6 a share by January 17th, 2013.

$8.50 to $9.50 upon approval of Zecuity.

$1 to $2 if Zecuity receives a CRL.

Disclosure: I am long PATH. 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.

Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.