Acquisition Of Civitas Therapeutics Opens New Investment Avenue

Includes: ACOR, CYNA
by: Michael Hagan


Acorda Therapeutics purchase of Civitas Therapeutics means investors can now participate for the first time in a unique and significant Parkinson's Therapy poised to move into phase III trials.

The Civitas CVT-301, an L-Dopa inhaler and Cynapsus' APL130277, a tongue strip delivering apomorphine will compete with each other in the future as 2 rescue therapies for Parkinson's "off periods."

It is believed that the size of this future market is large, perhaps as much as $500 million, but further research will be required to develop both size and composition.

Civitas Therapeutics announced on August 27, 2014 that it had filed a registration statement with the Securities and Exchange Commission associated with a proposed initial public offering of its common stock. The symbol was to be CVTS. However yesterday, Acorda Therapeutics (NASDAQ:ACOR) acquired Civitas, thus apparently ending the planned IPO. This event will represent a potentially significant opportunity for investors with an interest in biopharmaceuticals. The investment opportunity is driven by the need for a safe and effective treatment option related to Parkinson's "OFF" periods and the paucity of corresponding treatment options now on the market. Civitas is focused on moving into a Phase 3 clinical trial for its CVT-301, a formulation of L-dopa to be delivered using its proprietary technology through an inhaler.

Parkinson's Disease (PD) is a disorder of the central nervous system. It is not yet curable. Unfortunately, it is progressive. It is characterized by a reduction of the chemical dopamine which functions as a neurotransmitter and helps regulate movement and other functions of the brain. In the United States, there are about 1,000,000 people thought to have PD, with 50,000 to 60,000 new cases diagnosed each year. Worldwide there are an estimated 10,000,000 persons with the disease. The majority of cases are first diagnosed with individuals who are over 50 years of age. With the aging of populations in the developed countries, these numbers are likely to experience increases for the foreseeable future.

Much Parkinson's research today is focused on controlling motor symptoms such as tremors of the hands, feet, arms or legs or the rigidity, shuffling of feet while walking and slowness of movement. Levodopa (L-Dopa) is often described as the "gold standard" for treating these movement disorders. Levodopa had been found to have the ability to pass through the blood-brain barrier to be converted to dopamine in the brain. As an amino acid, dopamine cannot easily pass this barrier. L-dopa, then solved this dilemma. When it was first made available in the late '60s, it appeared to have an almost miraculous effect on patient symptoms. Today, it continues to be the preferred approach to treating this disease.

Then why are "OFF" periods such an issue with so many Parkinson's patients? Some background is necessary. Overtime, the effectiveness of a specific dosage of L-dopa is reduced and an enhanced dosage is then required. Later, the dosage may be increased further and perhaps taken more frequently. There is probably a buffer amount of dopamine remaining in the brain that is lessened as time goes on. The effect is that a larger and larger proportion of the dopamine used by the brain is the dopamine put there through the Levodopa ingested in the gut. This condition leads to increases in the lows and highs of the medication cycle. The lows result in "OFF" periods, the highs in dyskinesia. During "OFF" periods, the symptoms (often severe) return. The dyskinesia results in sudden, involuntary physical movements such as a waving of one or the other arms.

Taking yet another pill when in an "OFF" state is not an effective immediate treatment for someone experiencing that state. Particularly when the patient is at work or on a golf course or at a social gathering, there is a real need for a quick and effective way to overcome these difficult symptoms. A pill may take 30 to 45 minutes. In fact, it may not be efficiently absorbed at all into the system since it may be competing with protein that is also being absorbed. CVT-301 is a rescue therapy. It targets "OFF" periods by delivering L-dopa through a media that by-passes the digestive track and enters the bloodstream directly by way of the lungs.

Dr. J. Eric Ahlskog, M.D. of the Mayo Clinic has written a couple of very comprehensive books on Parkinson's Disease: The Parkinson's Disease Treatment Book (subtitled Partnering With Your Doctor to Get the Most from Your Medications) (2005) and Parkinson's Disease Treatment Guidelines for Physicians (2009). Dr. Ahlskog addresses the "wearing-off problem" by suggesting the following treatment order…

1. Optimize the dosage of Levodopa, "adjusting each dose so that the peak response is neither excessive (resulting in dyskinesias), nor insufficient (resulting in poor parkinsonism control)." Then, "adjust the interval between doses to match the response duration; this may entail adding extra doses to provide continuous coverage."

2. In terms of the second step, Dr. Ahlskog discusses a couple of different practices. One would be to go to a sustained release formulation (he rarely takes this step due to it adding only about an hour to the response and because its effect is less predictable). The other approach, which he favors, is to add a Sinemet (levodopa) CR (control release) at bedtime only.

3. In the 3rd step in his hierarchy, Dr. Ahlskog discusses the use of a variety of dopamine agonists.This class of drug basically tricks receptors in the brain to simulate the effect of actually receiving dopamine.

There are other possibilities, though they come with major drawbacks. One is "liquid Sinemet" and the other is Apomorphine, a powerful dopamine agonist. The former is quite effective but requires the patient crushing, diluting and mixing a solid pill into a liquid and then carrying the liquid from place to place in case it is needed. Of course, this procedure can be awkward. The Apomorphine, on the other hand must be injected and follows a difficult and complex procedure.

Now, if we fast-forward a few years, we will have at least 2 new products on the market-one will be the Civitas Therapeutics levodopa inhaler now under the Acorda Therapeutics banner, the other Cynapsus Therapeutics (OTCQX:CYNAF) tongue strip for introducing Apomorphine. Each will have overcome major obstacles that currently restrict their use as "rescue therapies." In the case of the Civitas product, the levodopa enters the blood stream more directly via the lungs. It thereby avoids the less certain absorption through the gut, competing there with protein already in the gut for uptake into the circulatory system. In addition, an inhaler is very easy to use and very familiar to most patients. Likewise the Cynapsus product has overcome one of its critical obstacles and now (future tense) comes also with a much simplified delivery system. Unfortunately, like other agonists, it still retains a fairly long list of potential side effects and exclusions. Examples include paranoia and hallucinations as well as dyskinesia and the rapid onset of drowsiness. Dr. Ahlskog points out that persons with very low blood pressure (orthostatic hypotension) or sulfite sensitivity should avoid this medication.

So, as between these 2 investment opportunities-Cynapsus Therapeutics and Acorda's Civitas Therapeutics product, each focusing on the problem of Parkinson's "off periods," which product presents the best case? I have commented critically in the past on Seeking Alpha articles associated with Cynapsus. This is because I do not believe sufficient attention has been given to the competitive environment within which APL130277, the Cynapsus Product is likely to be launched. In particular, as an investor, I would want to understand the implications of competing therapies currently in the market as well as those that are in clinical research that have a reasonable chance of reaching the market. Even if I expect the company technology to be "taken out" by a larger company prior to marketing, surely that larger company would conduct due diligence that encompasses a deep review of competing therapies. I feel sure Acorda Therapeutics did such a review before buying Civitas for $525 million dollars cash.

Yet, even a review of competing therapies may be too narrow a scope. A review of products targeting off periods may by-pass other current research that seeks to prevent, slow down, cure or even reverse damage associated with this disease. A major breakthrough in any of these areas could render symptom control therapies like those of Cynapsus and Civitas obsolete.We need to factor those possibilities into our investment decisions when sizing and pricing those investments.

I am hoping to explore some of these considerations in a subsequent article.While I have been critical of some of the analysis, I have also acquired a small position in Cynapsus as I believe it will have a market when APL130277 is launched, but I believe the actual size of that market is highly speculative and constitutes the major risk associated with my investment. I would also expect to acquire shares in Acorda, depending on price just as I had hoped to buy Civitas before yesterday's announcement was made. For the time being my strategy will be to hold my Cynapsus position, perhaps adding to it, but I would expect to deploy a heavier investment now in Acorda given my confidence in the Civitas Inhaler. Both companies have a valid claim on a piece of this future market as each is on track to overcome major technical obstacles associated with product delivery.

Disclosure: The author is long CYNAF.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Noted in article. Will likely invest in Acorda and hold position in Cynapsus.

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