Buying Map Pharmaceuticals Ahead Of FDA Decision

| About: MAP Pharmaceuticals, (MAPP)

In the research for my most recent piece on Biotech Buyouts I uncovered a list of attractive smaller bio/pharma companies that were developing compelling new drugs. After my initial pick Seattle Genetics (NASDAQ:SGEN), my next stock purchase is Map Pharmaceuticals (NASDAQ:MAPP). The company is awaiting a March 26, 2012, decision by the FDA for its recent NDA submission. The company's hopes hinge on its inhaled reformulation of migraine drug DHE, which the company has branded Levadex. From its press release dated May 26, 2011:

MAP Pharmaceuticals, Inc. today announced that it has submitted a New Drug Application (NDA) to the United States Food and Drug Administration (FDA) for LEVADEX® orally inhaled migraine drug for the potential acute treatment of migraine in adults. According to the National Headache Foundation, approximately 30 million people in the United States suffer from migraine, a debilitating neurological disorder. Common symptoms of migraine include recurrent headaches, nausea, phonophobia (sensitivity to sound) and photophobia (sensitivity to light).

Completed 3 Phases of Clinical Trials Successfully

The clinical trials demonstrated impressive results and as I read it very little adverse effect or controversy.

From the company's website:

LEVADEX met all four primary endpoints in the efficacy portion of our Phase 3 clinical trial, showing statistically significant improvement in pain relief, freedom from phonophobia (sensitivity to sound), freedom from photophobia (sensitivity to light) and freedom from nausea as reported two hours after dosing. Additional endpoints showed that LEVADEX provided rapid and sustained pain relief for up to 48 hours after dosing. LEVADEX was well tolerated, with the most common adverse event reported being medication aftertaste at 6%, with 2% of patients receiving placebo also reporting medication aftertaste. The next most common adverse event was nausea at 5%, compared with 2% for placebo. There were no mean decreases in lung function, as measured by spirometry, between the LEVADEX and placebo groups. There were no drug-related serious adverse events reported in the trial

Migraine Affects Millions of People and is Debilitating

Migraine is large-scale problem affecting millions of people worldwide. It affects roughly 12% of the population in the United States and according to Map's 10-K, closer to 15% of people in Europe. Migraine is defined as a moderate to severe headache and often associated with symptoms including nausea and vomiting, photophobia, phonophobia, and visual disturbances. Migraines can significantly impact a person's quality of life.

From the Company's 10-K:

Most migraines last between four and 24 hours, but some last as long as three days. According to published studies, the median frequency of attack is 1.5 times per month, although approximately 25% of migraine sufferers experience one or more attacks every week.

Migraine is listed in the top 20 causes of disabling conditions and in the top four neurologic disabling conditions by the World Health Organization (WHO). Related disability from migraine is substantial, with over 90% of sufferers experiencing functional impairment with their migraine that can disrupt every aspect of day to day life, including work, school, family and social relationships.

Levadex Works Faster and Longer than Current Treatments

The current first-line therapy for migraines is a group of drugs called triptans. Triptans have significant shortcomings. Onset of action can be slow and inconsistent and for many migraine sufferers the effects are not long lasting. Users have reported the onset of another attack within 24 hours of taking the drugs. These drugs are also not always effective as approximately 30%-40% of patients do not find relief from the first triptan prescribed and people who do not respond have little in the way of alternatives. Triptans also have some unpleasant side effects like tightness or pressure in the chest and tingling.

The Market is Large

Due to the large number of sufferers, the migraine market presents a significant opportunity Map and Levadex. The company quantifies the market in its 10K:

In 2008, according to market data, approximately 29 million prescriptions were written for the treatment of migraine in the United States. Approximately 12 million of those prescriptions were written for acute migraine specific drugs. The majority of acute migraine specific drug prescriptions written were in the triptan class. In 2010, the triptan market in the United States totaled approximately $1.6 billion in revenues. The triptan with the largest market share is sumatriptan with 2010 prescriptions of approximately 6.1 million in the United States.

DHE is a Proven Treatment

Levadex is a reformulation of DHE, a therapy for migraine that has been used safely for more than 50 years. While DHE is considered a superior option to triptans by many specialists it was previously only available in nasal or intravenous form limiting the instances where it could be used effectively. Intravenous requires proper medical supervision making it difficult to administer in a timely fashion and in nasal formulation absorption rates lead to inconsistent dosing and a longer wait for effectiveness.

Levadex Orally Inhaled Reformulation Expands Market for DHE

Delivering drugs in orally inhaled formulations has the potential to accelerating effectiveness because the lungs absorb drugs very quickly into the blood stream.

The company's observations on the benefits of Levadex recorded during Phase 3 clinical trials:

Based on our Phase 3 FREEDOM-301 clinical trial, we believe that LEVADEX may provide patients with the following benefits when compared to existing migraine therapies:

Rapid onset: In our Phase 3 clinical trial, LEVADEX provided significant pain relief at 30 minutes after dosing and pain relief in as early as 10 minutes for patients with severe migraine pain.
Long-lasting: In our Phase 3 clinical trial, LEVADEX provided long-lasting pain relief with low incidence of recurrence, and provided sustained pain relief through 48 hours.
Efficacy at any time after the start of migraine: Additional analyses indicated the potential of LEVADEX to effectively treat at any time during the migraine including within one hour, and after eight hours from the start of migraine.
Broadly efficacious: Based on historical DHE use, LEVADEX may provide a higher response rate and has the potential to treat patients who have not previously responded to other therapies, such as triptans. We also believe that LEVADEX has the potential to treat a broad spectrum of migraine, including migraine subpopulations that are often difficult to treat, such as menstrual migraine, morning migraine, migraine with allodynia, migraine associated with severe pain and migraine with nausea and vomiting.
Low incidence of side effects: In our Phase 3 clinical trial, LEVADEX was well tolerated, with the most common adverse event reported being medication aftertaste at 6% compared with 2% for placebo. The next most common adverse event was nausea at 5%, compared with 2% for placebo. Symptoms or sensitivities typically associated with commonly used triptan migraine treatments, such as chest discomfort or chest pain, were rare and comparable to placebo.
Convenient and consistent delivery: LEVADEX is non-injectable and designed to be easy to use, which may result in increased patient comfort and compliance. The clinical trial was performed in the home, without clinical supervision and with minimal training. In a previous trial, dose-to-dose variability was comparable to solid oral dosage forms.

Allergan (NYSE:AGN) is an Impressive Partner

Allergan is a $27 billion company with 10,000 employees. The fact that Map was able to attract a large and successful partner like Allergan provides even greater confidence that Levadex is a valuable property and will be marketed aggressively and effectively. Allergan already has a strong presence in the migraine market with Botox.

From January 2011 press release announcing partnership:

Under the terms of the collaboration, following potential FDA approval of LEVADEX™, Allergan and MAP Pharmaceuticals will co-promote LEVADEX™ to neurologists and pain specialists in the United States. Specifically, Allergan will leverage its existing U.S. sales force dedicated to headache specialists using BOTOX® for Chronic Migraine, which will be complemented by MAP Pharmaceuticals' field sales force targeting neurologists and pain specialists. MAP Pharmaceuticals will retain all rights to commercialize LEVADEX™ outside the United States, as well as to primary care physicians within the United States.

Shares of Mapp do not Currently Reflect Potential

According to Map's filings and investor presentation (pdf), there were $1.6 billion in triptan prescriptions written in 2010 and roughly 29 million migraine prescriptions issued. Levadex has the potential to be a first-line therapy, at roughly $40/dose, 25% market share would equate to roughly $400 million in revenue . Allergan trades at roughly 5x revenue and the industry average is over 3.5x revenue. If MAPP can achieve revenue of close to $200 million on its share of revenue, its market cap at a market benchmark 4x revenue, would be approximately $800 million or close to $30/share, more than 100% higher than today's quote of $14. Given the drug's performance in trials, the presence of a top level partner in AGN and the significant market opportunity I believe MAPP presents an outstanding risk/reward profile at today's prices.

Disclosure: I am long MAPP, SGEN.

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