Avanir's Drug-Device Combo Experiencing Minor FDA Headaches

Summary

  • Avanir's drug-device combo AVP-825 recently failed to receive FDA approval.
  • We believe this setback represents only a short-term hurdle.
  • The expected approval of AVP-825 should benefit the value of Avanir as well as its acquirer, Otsuka Pharmaceutical Co.

Founded in 1988, Avanir Pharmaceuticals, Inc. (NASDAQ:AVNR) focuses on the acquisition, development, and commercialization of novel products that target central nervous system disorders. With lean operations and a steady commitment to their flagship drug, Avanir successfully received FDA approval in 2010 for NUEDEXTA, a combined dextromethorphan/quinidine treatment for pseudobulbar affect (PBA). Furthermore, Avanir has a history of engaging in lucrative partnerships, most notably negotiating a drug royalty agreement for its docosonal 10% cream with marketing partner GlaxoSmithKline Consumer Healthcare, which is sold as Abreva® in the United States and Canada as the only over-the-counter cold sore treatment approved by the FDA (expired April, 2014). Based on this recent history and a pipeline with seven leads in Phase I/II trials (including a potential game-changing alternative for Alzheimer's, Parkinson's, and autism patients in AVP-923), the company is well-poised to have a series of successful drug ventures in the coming years. Further validating this outlook, it was recently announced on December 2, 2014 that Avanir would be acquired for approximately $3.5B by Otsuka Pharmaceutical Co., Ltd. (OTCPK:OTSKY), who shares a focus on central nervous system disorders.

Prior to the acquisition announcement, with a looming November 26th PDUFA date for their drug-device combination AVP-825 (for treating acute migraines), the company announced preliminary feedback from the FDA concluding that approval of AVP-825 may be unlikely due to insufficient human factor validation data. Industry analysis varied on a spectrum, from optimism over an efficacious drug with an amendable device application, to pessimism that suggested the full FDA review could reveal additional concerns about the drug's Phase III trial. The FDA's Complete Response Letter (CRL), issued on November 26th, sided with the more optimistic outlook. After reviewing the published scientific evidence, we believe that AVP-825 has a sufficient safety and efficacy profile and that the FDA's inquiry over human factor

This article was written by

Beacon VP is a multidisciplinary team of Harvard/MIT scientists who are passionate about transforming scientific insights into actionable investment ideas.Beacon VP invests in the scientific foundation of biotech firms, with a focus on drugs and devices progressing through the FDA review process. Our philosophy is: "The business value of small to mid-cap life science companies depends on the underlying science of its drugs. We assess its safety and efficacy, then buy low and sell high".

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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: Beacon VP Investments is a team of analysts. This article was written by Jacques Guyette and Hyun Ji Noh on behalf of Beacon VP Investments.

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