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Zachary Prensky is a Managing Member of Little Bear Investments LLC. Little Bear Investments, located in the heart of Midtown Manhattan, is a merchant bank that focuses on investing in both public and private companies. Our broad range of investment products includes: short & medium term... More
  • Insomniacs Need Not Apply (2 of 2)
               Somaxon’s disappointment should not be too surprising to those who closely follow the FDA. It’s a well known fact within the pharmaceutical industry that the FDA has long applied a high degree of skepticism towards any potentially new treatment for sleep-related symptoms. Why this is isn’t entirely clear. I’ve spoken to numerous doctors, researchers and analysts on this subject. Some feel that that the Division of Neurology Products, which oversees this area, takes the approach that insomnia is an over-diagnosed illness and therefore overprescribed. Others feel as if the Division is satisfied with the few products on the market and doesn’t want to see new entrants. Lastly, some feel as if insomnia is looked down upon at the agency and not taken seriously, unlike more serious illnesses such as cancer or heart disease. Overall, most people I speak with in the industry chalk it up to a straightforward bias against the medical sleep industry.
                Whatever the reason, it’s clear FDA plays favorites. The last sleep drug approved by the FDA, Rozerum, (sponsored by Takeda Pharmaceuticals) failed to show subjective improvement for adults suffering with insomnia, although it did well with the elderly. What did the FDA do? It approved the drug anyway, and slapped the failure to show subjective sleep improvement in a one-sentence addition to the prescribing label, describing the 18-64 year old population as “younger adults… (who failed to) replicate this finding of reduced patient-reported sleep latency compared to placebo”. You now know more about Rozerum than most patients taking the medication; the FDA conveniently left out this nugget of information on the 3 page FDA approved medication guide provided to those who purchase Rozerum.
                On the other extreme of surprising FDA actions lies another insomnia treatment, Intermezzo, (zolipedem tartrate) sponsored by Transcept Pharmaceuticals (Nasdaq: TSPT). Transcept has been working on getting Intermezzo approved as a drug to be taken by insomniacs in the middle of the night upon early awakening. The efficacy data showed statistical significance as compared to the placebo, and there were no adverse effects or other safety issues to be concerned about. The data looked so good in fact, that Purdue Pharmaceuticals invested $25 million up front to secure the rights to Intermezzo, less than three months in advance of the FDA decision’s on its application for approval. Purdue, the manufacturer of both OxyContin and Ryzolt – two pain relieving compounds that are no strangers to controversy – supposedly knew a thing or two about the FDA approval process enough to plunk down a large amount money to secure the rights to Intermezzo.
                Once again, the FDA surprised everyone, when in early November it declined to approve Intermezzo. The reason? For the first time in years of ongoing communication with Transcept regarding Intermezzo, it announced that it would like to see how taking Intermezzo in the middle of the night would impact one’s ability to drive. As an aside, it also wanted to know how Transcept intended to package the drug to ensure patients don’t overdose and forget how many pills were taken should someone waken up multiple times during one night’s sleep. Why the FDA waited to disclose this new request, which it hadn’t made of other sleep aids, at this late stage in the game was left unanswered.
                This lack of predictability on how the FDA decides to proceed should be of extreme concern to all of us. Government decisions on policy are never black and white, and anyone attempting to make a business decision based upon one or more of them knows to expect the unexpected. But common sense dictates that, of all the types of decisions government makes, approving or disapproving a drug candidate should be one of the most predictable kinds. This is precisely because of the years of study, analysis and review all drug candidates get before being opined upon by the FDA. Voluminous amounts of data are collected and reported upon. Things like how effective the drug is over time, at various dosage levels, difference of effect by sex and age, among countless items, are all collected by the drug sponsoring company and reported on, both to the scientific community at large and to the FDA. If the standards of ensuring safety and efficacy were uniformly followed throughout the FDA, then both the investment community and the public at large would have little problem in predicting with a wide degree of certainty, which promising drugs would be approved and which would be relegated to the waste basket.
                Why should the lack of predictability at the FDA concern us? For two reasons. First, promising treatments are left to wither because the of the risk the FDA decides to set an artificially high hurdle to gain approval, and in the meantime the drug’s sponsor runs out of cash. A good example of this would be XERECEPT, targeting brain edema (swelling), which should be used to replace the debilitating dexamethasone in patients with brain tumors. Dexamethasone is currently taken by patients with brain tumors but has enormously harmful side effects, including in many cases leading to the death of the patient. XERECEPT showed clinically significant reductions in steroid usage amongst patients taking it, but because the patients taking the placebo couldn’t tolerate dexamethasone there was a strong placebo effect. XERECEPT’s two owners, Neurobiological Technologies (Nasdaq: NTII) and Celtic Pharmaceutics, weren’t willing to waste the millions of dollars and the year or two necessary to even get in front of the FDA and hope for approval. Rather, Neurobiological chose to wind itself down and return its existing cash to shareholders while Celtic Pharmaceutics has been mulling its options for the better part of a year. Families who have a loved one suffering from the debilitating side effects of dexamethasone shouldn’t expect to get their hands of XERECEPT anytime soon; with the cost of undertaking additional trials and related expenses potentially in the tens of millions of dollars and the privately held Celtic reportedly running low on capital, XERECEPT most likely will never see the light of day.
                The second unintended consequence of an unpredictable FDA becomes the high cost of new drugs that are approved. Again, investors know the true risks of going before the FDA, and demand exceedingly high returns to take that risk. Last week, an official from United Health Group grumbled publically in an article in the New York Times regarding the high price tag of newly approved FOLOTYN. Developed by Allos Therapeutics (Nasdaq: ALTH), FOLOTYN targets the extremely fatal t-cell lymphoma. For many patients it will shrink lymphoma tumors, although they can and do return. For a lucky few, the tumors shrink completely. Priced at $30,000 a month and expected to be dispensed for two, three or four months per patient, the health insurer compared that expected cost of treatment to entire annual cost of currently treating a t-cell lymphoma patient, currently pegged at slightly more than $80,000.
                What neither the United Health Group (NYSE: UNH) official nor the author of the article failed to mention is that over its’ 16 year history, Allos Therapeutics racked up over $350,000,000 in losses over the 17 years of its existence. If you bought stock in Allos 8 or more years ago you’d be sitting on losses approaching 50%. Even if Allos charges $30,000 a month and garners every t-cell patient in the country, it is questionable whether the profit from FOLOTYN will overtake the present value of all the funding Allos has received from inception to the present, along with an appropriate return. And that’s before you take into account the possible likelihood of either a newer drug eclipsing FOLOTYN or the eventual expiration of FOLOTYN’s patent and exclusivity period. And lastly, that fails to take into account all the hundreds of millions of dollars dropped by the industry on other failed t-cell lymphoma treatments that never made it past the FDA.
                Increasingly, investors financing new drug development are recognizing the realities of gambling on FDA approval. Valuations of early stage and medium stage biotech companies remain depressed. Even after spending the tens of millions and in some cases hundreds of millions of dollars on drug development, companies can find it hard to attract a decent enough valuation to both reward early backers and attract new capital. More and more professional investors recognize that the only way to consistently make money in the sector is by participating in deeply discounted secondary offerings of distressed or cash poor companies who use small brokerage firms like Rodman & Renchaw (Nasdaq: RODM) to peddle their deals. Existing shareholders are almost always poorer for the effort, most often companies doing such financing find themselves with valuations even lower than that at which they raised money. But even the stock placement wizards at Rodman can’t find enough takers for many deals, and good alternative treatments like XERECEPT sit on the shelves. And ultimately it’s the sick of our country who suffer the greatest as novel treatments to illnesses fail to materialize.
    The answer to all of the above is fairly straightforward : end the guessing game at FDA. When companies walk into the FDA with a new compound, the goals of proving safety and efficacy should be clearly laid out. Well trodden statistical models for proving facts should be accepted beforehand; companies and their investors shouldn’t have wonder if the goalposts are going to get moved on them at the 1 yard line. If we want to continue incentivizing people and institutions to supply capital for such risky ventures they ought to know what the parameters for success or failure are at the outset.
    I would also add two more items for consideration : First, if the data is too close to call, then absent any serious concerns over safety the scale should be tipped in the company’s favor. After all, if the facts are too close to call, then ought not the product be put on the market and let the patients and doctors who treat them decide its’ fate? If there was a treatment that could improve your health but the studies were too close to call in definitively proving its effectiveness, wouldn’t you want the final say? In the case of those families living with chronic insomnia or know a loved one with brain edema I’m pretty sure the answer would be yes.
    Secondly, if the FDA were forced to release the text of its communications with sponsoring companies, the public would be able to evaluate on its own whether or not the FDA was either playing by the rules or moving the goalposts mid-game. With so much at stake and no effective way for companies to challenge the decisions made the FDA, only by shining the light of day on how the FDA goes about its decision making process can we realistically hope to remove the capricious and arbitrary way the FDA sometimes makes its decisions..
                Medication makes up a large and growing piece of the health care pie. If we as a society want to lower the overall price tag for high quality care, then the way we go about approving medication for use needs to change in a way that reduces the uncertainty of the process. No one is saying that government shouldn’t have a very strong role in protecting society from harmful or ineffective medication but we need to be clear about what standards we hold the medical industry to. If we can accomplish this by insisting the FDA adhere to clearly defined parameters for every drug that attempts to get approved, then we can go a long way towards lowering the risk of investing in new drug development.
                At the end of the day, medicine, like any other business, responds very well to economic stimuli. If we lower the risk involved we can both cut down on the cost of funding the capital necessary to continue development of life saving medication, directly contributing to our quality of life as well as grow the employment of an industry critical to our nation’s economic well being.
                 Somaxon announced that it has requested a meeting with “senior FDA leadership” to review the reasons behind the failure to approve doxepin. One can only hope, for Somaxon’s sake, that this includes the commissioner of the FDA, Dr. Margaret Hamburg. Dr. Hamberg was herself a neuroscience researcher at Rockefeller University, and brought a no-nonsense, results oriented approach as Commissioner of the New York City Department of Health from 1991-97. She is the perfect choice to bring some much-needed adult supervision to the Department’s Division of Neurology Products. Transcept has over $80 million in the bank thanks partially to Purdue’s over-eagerness to get in the game and will undoubtedly burn a significant portion of its’ shareholders money trying to please the FDA’s. As for XERECEPT one can only hope that a large pharmaceutical company picks up the ball and takes a crack at getting it past the FDA. But don’t hold your breath.
                On a larger scale, the legislative branch needs to reexamine how effectively the FDA is going about its mission. By leveling the playing field, setting clearly defined standards as to how to go about approving medications and ensuring an adequate degree of public scrutiny along the way, we can ensure that the FDA does its job to both protect the public and shepherd an industry crucial to all of us. And lastly, as we as a nation contemplate handing over a large portion of control over the delivery of health care in this country, we should carefully consider how effective of a neutral arbiter government has been in balancing the needs of patients, the marketplace, and those who continue to innovate and improve the delivery of health care on behalf of us all.

    Disclosure: Long TSPT SOMX

    Disclosure: Long SOMX TSPT
    Tags: Biotech
    Dec 15 12:03 PM | Link | Comment!
  • Insomniacs Need Not Apply (1 of 2)
                You may not have noticed, but there was news last week Monday morning on a small biotech company that sheds some much needed light on the risks associated with effectively handing over control of the delivery of medical care in this country to the Federal government.
                Early morning December 7th,  Somaxon Pharmaceuticals (Nasdaq: SOMX) announced that, for the second time this year, the FDA has declined to approve the company’s treatment for insomnia, Silenor.
                The FDA’s decision wasn’t based upon any risk of harm to the public. Silenor is an extremely low-dose form of doxepin. Doxepin belongs to a class of anti-histamines. If you’ve ever taken Benadryl, Zyrtec or Claritin then you’ve taken an anti-histamine. In terms of both the potential for overdosing and the susceptibility to addiction, anti-histamines as a class are among the safest drugs on the market. 
                Anti-histamines were discovered by the Swiss Nobel-prize winner Daniele Bovet in 1937, with the first treatment for allergies produced in 1942. Since then, there have been numerous anti-histamines brought to market, each improving and expanding the scope of the market. Anti-histamines inhibit the action of histamine in the body by blocking the H1 or H2 receptors in our body. Allergic reactions such as itching and hay fever may occur when histamines in our body stimulate these two receptors. By blocking these receptors you can prevent many allergic reactions; the market for such medication is in the billions.
                Along the way, scientists discovered other novel usages of anti-histamines. In the late 1960s, scientists at what is now Boehringer-Mannheim synthesized doxepin, an anti-histamine that also blocked the uptake of serotonin, which meant it could act as an anti-depressant. After over 5 years of testing in Germany and Switzerland, doxepin was approved to treat depression and anxiety disorder. It has been widely prescribed and used in the United States for over 30 years.
                With the experience of treating millions of patients over the years with anti-histamines, scientists began to notice certain side effects to the drugs. One of the most common side effects was drowsiness. Certain anti-histamines showed a stronger affinity for drowsiness than others, and eventually doxepin began to be prescribed to insomniacs and others who had difficulty sleeping.
                While doctors are allowed to prescribe medication for indications other than those the drug was originally approved for, it’s not ideal. For one thing, since the original approval of the drug was based upon dosing levels ideal for its intended usage, the prescribing doctor has nothing but his or her own experience, and that of his peers, to rely on when it comes to deciding how much of a drug to prescribe to treat a different condition.
                In the case of doxepin, it was found to be therapeutically effective for the treatment of depression at dosages of 25 to 100 milligrams, with some patients needing upwards of 300 mg. Although doctors knew that doxepin was both effective at treating insomnia as well as extremely safe at very high dosage levels, no one knew exactly how much doxepin one needed to consume in order to receive its sleep-improving properties. This was exactly the question Somaxon Pharmaceuticals spent the better half of this decade pursuing.
                Somaxon completed 6 phase 2 & 3 trials totaling over 1200 patients. The results were startling. As opposed to treating depression, where dosage levels can reach 300 mg, Doxepin showed statistically significant improvement at just 3 mg. The differences in the trials between the 3mg and 6mg dosages were small, indicating that for most patients just 3 mg should do the trick. What was especially interesting was that, using the standard measurement of WASO, or wake after sleep onset, doxepin performed slightly better than Ambien, a currently marketed sleep drug commanding nearly 50% of the market. What this means is that, while Ambien works better at helping a patient fall asleep, doxepin does a better job of keeping a patient asleep for a longer time period. Ambien has a well-known addictive side-effect, among other negative traits. Anti-histamines in general and doxepin in particular have no such addictive properties, are extremely well-tolerated, and have decades of safety and other incidental usage data. At first blush, this seemed to be good news for those suffering from insomnia - a condition that afflicts millions of Americans. Approximately 14 million people are diagnosed and treated with sleep medication in general, and it’s estimated that twice that figure remain untreated. Somewhere around 2/3rds of patients who are treated say they are unhappy with their current medication.
     All this data from the 6 trials completed by Somaxon should have been welcome news to those who suffer from insomnia. Unfortunately the scientists at FDA did not see things in the same light. After reviewing the data submitted by Somaxon for over a year, in February the FDA declined to approve doxepin. Some of the things FDA wanted, such as dropping a low 1mg dosage in favor of the 3 & 6 milligram dosages, seemed reasonable. But what really shook up Somaxon was what FDA had to say about the effectiveness of Somaxon as a sleep maintenance drug.
                In its’ letter to Somaxon, the FDA recognized the statistically significant data, measured both objectively (using polysomnography) and subjectively (using patient’s own written recollection) in both adults and the elderly. However, the FDA questioned the “robustness” of the subjective data insofar as it is sustained by a patient taking the medication over time. In other words, they questioned whether, based upon patient recollection, the drug continued to work as well over time as it does after initial usage.
                This question should have seemed rather easy to answer. The statistical relevance of data from a drug trial is discerned using well-established statistical tools. In order to rule out that a drug trial’s results are not random, a ‘p value’ is calculated that takes into account both the divergence of data between the drug’s effect and that of an identical trial using a placebo. The more patients enrolled the easier, statistically speaking, to prove statistical significance as the odds that hundreds of patient received the same benefit from a new drug by chance are extremely remote. Under industry-accepted guidelines, the results must show a greater than 95% chance the results were due to a drug’s efficacy as opposed to sheer luck, in order to claim a trial was successful. The ‘p value’ for many of the endpoints in Somaxon’s trials exceeded 99%. Numerous statisticians reviewed Somaxon’s data from its trials, and all deemed the efficacy data generated, both objectively and subjectively, statistically significant. So what did the FDA mean by “lack of robustness”?
                In meeting with FDA officials, Somaxon learnt that they were concerned about the subjective data from one single night in the trial. The data on this particular night did not show efficacy, even though the same patients were judged objectively to have improved their sleep time. Such occurrences within a trial are not uncommon, especially when you are measuring subjective impressions of patients, which can by definition vary wildly at times from the reality of the patient’s condition. Since this night came towards the end of the trial period in adults, the FDA was concerned about the durability of the drug’s efficacy.
                Somaxon went back and re-analyzed the data, again employing numerous Phd’s conversant in medical statistics. The results were clear : statistically speaking, the data from the trials was proven to be significant and the drug shown to be effective in maintaining sleep. Somaxon re-filed its application for doxepin with the FDA in June. On Monday, Somaxon announced that the FDA once again denied its application to approve doxepin.
                Once again, the FDA informed Somaxon it could not approve doxepin because the data was not “robust” enough. It also added, for the first time in the many years of meeting with Somexon regarding doxepin, that it would require a Risk Evaluation and Mitigation Strategy (REMS), which would include a medication guide to be distributed along with the drug. Shareholders, who were convinced the odds of approval were high given where the stock closed out last week, reacted with predictable horror on Monday, sending the price of Somaxon shares down 60%.

    Disclosure: Long TSPT, SOMX
    Dec 15 12:01 PM | Link | 1 Comment
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