In this article, I'll present a way to invest on a drug that seems to have lots of potential but has already lost patent protection. I'll also present a way to more generically invest in a strategy that allows taking advantage of other similar situations.
The Drug - Pentoxifylline
Pentoxifylline is an old drug. It was approved by the FDA back in 1984 to treat intermittent claudication, a symptom of peripheral arterial disease leading to pain, cramping, numbness, or weakness in the arms or legs. It was approved even earlier (1972) in Europe, for the same indication.
Pentoxifylline is a synthetic methylated xanthine derivative which works as a competitive nonselective phosphodiesterase inhibitor. It helps with intermittent claudication by decreasing blood viscosity, improving erythrocyte flexibility and promoting microcirculatory flow and tissue oxygen concentration. Pentoxifylline also shows other potentially beneficial effects such as anti-inflammatory, anti-proliferative, and anti-fibrinolytic properties.
Due to Pentoxifylline being such an old drug, it has long lost patent protection. Today, it's mostly available very cheaply as a generic or as branded Trental. The drug retails for $0.10-$0.30/pill depending on geography.
Pentoxifylline is available in extended release form, since it has a short half life (0.4-0.8 hours), with its metabolites having 1-1.6 hours half lives. Typical posology is 2-3 pills/day. Given the cost and posology, a one-month Pentoxifylline supply costs $6-27, while one-year would cost $73-329.
The lack of patent protection has meant that no other indications were actively sought for Pentoxifylline for lack of financial sponsorship. However, given its many beneficial effects, as many as 630 different trials were run with it. These trials, though, were often small.
Pentoxifylline - Relevance
In spite of Pentoxifylline not having received official approval for other indications, it has seen off-label use in many indications. Those 630 trials were mostly exploratory given the drug's action, and in many of them, Pentoxifylline showed clinical benefits.
For instance, Pentoxifylline showed clinical benefits in such different use cases as:
Diabetic Kidney Disease
Diabetic kidney disease is the most frequent cause of chronic kidney disease, leading to end-stage renal disease requiring dialysis. In several smaller trials as well as in the longer and larger-scale PREDIAN trial, Pentoxifylline saw benefits in containing protein excretion through the urine as well as maintaining eGFR (estimated Glomerular Filtration Rate).
In the PREDIAN trial, the placebo arm was the current standard of care (renin-angiotensin system blockade through use of ACE or ARB drugs). The following chart shows how Pentoxifylline+standard of care did vs. placebo (standard of care) on the eGFR measure:
Post-Renal Transplant Calcineurin Inhibitor Nephrotoxicity
Renal transplantation requires the ongoing usage of immunosuppressant drugs. Two of the most common agents are CNIs (Calcineurin Inhibitors), cyclosporine and tacrolimus. Both exhibit chronic nephrotoxicity and, sometimes, also acute nephrotoxicity.
Thus, immunosuppression with these agents is a fight between having enough concentration of them to inhibit an immunologic reaction to the foreign graft (kidney) and keeping the concentration low enough to limit their toxicity on the same graft.
In this context, through its vasodilatory, anti-inflammatory and anti-fibrinolytic effects, Pentoxifylline seems to have nephroprotective effects. As is typical with Pentoxifylline, though, the trials were not large enough (and often involved only animal studies) to be conclusive about this action.
Several Dermatologic Indications
Pentoxifylline has been used in the treatment of several dermatologic conditions, including:
- Peripheral vascular diseases
- Vasculopathies and vasculitides
- Leg diseases and ulcers
- Pigmented purpuric dermatoses
- Aphthosis and Behçet's disease
- Pruritic papular eruption on an HIV/AIDS setting
- Radiation induced fibrosis and burns
- Keloids, scleroderma and morphea
- Oral sub-mucous fibrosis
- Pseudoxanthoma elasticum
- Actinic prurigo
- Ulcerating necrobiosis lipoidica
- Kasabach-Merritt syndrome, pretibial myxedema
- Stevens-Johnson syndrome and toxic epidermal necrolysis
Vascular Health In General
Pentoxifylline has shown promising results on:
- Prevention of atherosclerosis
- Prevention of cardiovascular events
- Control of stable angina
- Prevention of stroke and transient ischaemic attacks
- Treatment of acute ischaemic stroke
- Slowing of progression of vascular dementia
- Preservation of tissues after thrombolytic therapy
- Decreased inflammation and tissue damage following cardiopulmonary bypass
- Improved outcomes in congestive heart failure
- Improved diabetic control
Pentoxifylline has shown promising results in ameliorating Peyronie's disease. Peyronie's disease is a disease which can afflict a man's penis and lead to deformities which could make sex difficult.
In small trials and practices Pentoxifylline has shown to be effective, both using Pentoxifylline taken orally, and especially with Pentoxifylline taken orally plus antioxidants and Pentoxifylline injections near the plaque site. It led to significant reductions in plaque size and penis angle, as well as improved comfort.
The only current FDA-approved treatment for Peyronie's is Xiaflex. Other alternatives involve surgery. These are painfully-expensive injections into the lesion site, costing near $25,000 for a treatment course. As we saw, one year of oral Pentoxifylline would come to just ~$73-329.
The results from trials on Xiaflex and Pentoxifylline aren't really comparable due to significant differences in disease progression and other inclusion criteria. That said, it's surprising that the mean variation in percentage of penile curve angle was actually larger in one of the Pentoxifylline treatment arms.
Pentoxifylline - Summing It Up
From the above, we can clearly see that Pentoxifylline has many potential applications beyond its currently approved use. However, there's no financial incentive to trial and develop those uses because of the already widespread availability of cheap, generic Pentoxifylline.
As a result, barring some kind of public intervention, it's likely that Pentoxifylline would just fall into the heap of forgotten drugs, used off-label only by more knowledgeable practitioners.
Pentoxifylline - Reborn
Of course, where there's a will, there's a way. And, what's never missing is the desire, or will, to make money.
Since patented drugs are such money-making machines, they drive all kinds of attempts to find new drugs that both work and can be patented. This applies both to actually finding novel drugs and to finding ways to patent things which otherwise don't look patent-able, like Pentoxifylline.
Witness, for instance, Amarin Corporation's (AMRN) Vascepa. Amarin took an existing compound (Eicosapentaenoic Acid Ethyl Ester), where medical benefits were likely (JELIS trial), and it made it into a patent-able drug. Though there, what's patented (beyond the production process) is the concentration of the drug and the absence of DHA, and not the active principle itself. There's your blockbuster drug.
Now, witness something that goes a level further. Take your existing, no-longer patent-able, drug. Substitute some of the hydrogen atoms on that drug's compound for another hydrogen isotope (deuterium, adds 1 neutron to your regular hydrogen). You now have a deuterated drug.
That is, a different drug. This drug can have possibly different pharmacodynamics vs. the original compound. After all, the CH groups will be slightly stronger when the H is deuterium. So, things like half lives of the compound could come up different as well. And, since it can work differently, it can be patented.
Of course, some of the bright minds having this idea, like Protia, went out and patented a deuterated variant of every drug in sight. But that's not necessarily optimal, and the reason is simple. A deuterated drug might work slightly different, but there's no assurance that it will actually be better than the original drug. So, expensive trials would be necessary, and in the end, you'd be left with:
- A drug that might not even be meaningfully superior to the old drug.
- And, in any case, a near copy that you'd have to launch into a market filled with generics of the old drug approved for the very same indication.
So, that approach, while bright if you manage to find someone to pay you for your patents, isn't exactly optimal.
A Different, Broad Strategy
There also was a derivative approach. Enter Concert Pharmaceuticals (CNCE). What idea did Concert Pharmaceuticals have? It had the idea of taking compounds that you could no longer patent or that were patented for different purposes, produced deuterated variants of those and then - and this is a critical step - tried to approve these deuterated variants for new indications.
If successful, what would Concert Pharmaceuticals have? It would have a unique compound for a given indication, with no generics being available for that same compound and indication. Sure, a similar (non-deuterated and not patented for the same indication) compound could still be available in generic or branded form. But it would not be officially approved for the specific indication sought by Concert Pharmaceuticals.
This is not unlike Amarin's approach. EPA ethyl ester is available as a dietary supplement. But it's not approved for what Amarin is seeking approval for, when it comes to Vascepa. Thus, you can strike the fear into the prescriber's heart that if he prescribes anything but the approved version, and the thing goes wrong, the liability falls on him. The same thing would happen with these "novel" deuterated versions of old drugs for new indications.
How does this tie with Pentoxifylline?
Well, one of Concert's drugs was CTP-499. CTP-499's formula is C13H15D5N4O3. This, as you'll notice, is different from Pentoxifylline's formula (C13H18N4O3), so Concert Pharmaceuticals went "one further" in differentiating its product. But not by much: CTP-499 is a deuterated metabolite of Pentoxifylline. That is, something that Pentoxifylline is turned into within the body (the M1 metabolite). As it were, this reaction is reversible, so the presence of this particular metabolite in the body continuously produces both Pentoxifylline itself and its biologically-active metabolites (M1…M5).
So, there you have it, Concert Pharmaceuticals produced a novel drug that was close to Pentoxifylline, but by another name. And thus, patent-able for new indications, namely indications for which Pentoxifylline had already shown to be useful, but where it hadn't yet gotten official approval for.
Unfortunately, Pentoxifylline Reborn (CTP-499) Started With A Misstep
Based on the above, Concert Pharmaceuticals moved its CTP-499 drug candidate through to Phase II trials. In this case, Concert Pharmaceuticals trialed CTP-499 for treating diabetic nephropathy in addition to standard of care (RAS blockade: angiotensin converting enzyme inhibitor and/or angiotensin II receptor blocker). But then surprise struck: CTP-499 bombed, it failed its primary endpoint.
What? But hadn't Pentoxifylline already shown promising results when added to RAS blockade? Yes, it had. And recently, this was even reinforced by the PREDIAN trial results, showing a growing advantage for the Pentoxifylline treatment arm when it came to eGFR, as well as protein excretion through urine:
Source: NCBI, "Effect of Pentoxifylline on Renal Function and Urinary Albumin Excretion in Patients with Diabetic Kidney Disease: The PREDIAN Trial"
So, what went wrong? Well, several things could have gone wrong:
- The deuterated compound could have shown different effects.
- Although PCS-499 metabolizes into Pentoxifylline and the same metabolites, it does so at different concentrations of the different Pentoxifylline metabolites, vs. Pentoxifylline itself.
- Or it could all just have been a blunder. This is so because Concert Pharmaceuticals chose a strange primary endpoint (UACR - Urinary Albumin To Creatinine Ratio) where success was not as established, whereas eGFR improvement (lower decline) or lower proteinuria was better established.
- Finally, it might have simply have been a sad choice of trial duration. The phase II double-blind trial was set to last 24 weeks. That's shorter than six months. Now look to that chart up above again. The Pentoxifylline benefit (in eGFR) only becomes evident at the 12-month waypoint. The ensuing superiority was cumulative, too, only becoming statistically significant at 48 months (more than 200 weeks). The superiority was large, but it took time.
This was a sad outcome for a good idea. Still, from this episode we can gather that Concert Pharmaceuticals' overall strategy for finding successful drug candidates is likely sound.
Currently, Concert Pharmaceuticals carries a ~$235 million market cap (at $10.0). The stock has good liquidity, and Concert Pharmaceuticals has a significant cash position (~$162 million, including equity securities).
Concert Pharmaceuticals - Another Setback
A few days ago, Concert Pharmaceuticals got hit hard on news its patent on deuterated ruxolitinib had been invalidated by the U.S. Patent Office. This highlights another potential problem:
- If the deuterated copies are made on drugs that are still under patent, it's obvious that those drugs' owners - in this case, Incyte (INCY) - will tend to fight back.
- However, the overall strategy remains sound for compounds that are out of patent and hence have no owners fighting back.
Pentoxifylline Reborn, Round II - Pentoxifylline Lives On As PCS-499
Pentoxifylline's potential hasn't necessarily been lost yet, either. Concert Pharmaceuticals eventually got tired of CTP-499. When it did, it licensed it out to Processa Pharmaceuticals (OTCPK:PCSA). Processa Pharmaceuticals will now be trying to develop CTP-499 (now PCS-499) for several indications.
Processa Pharmaceuticals is starting with necrosis lipoidica, where there's no approved treatment. Processa Pharmaceuticals has received orphan drug status for this indication, and it just started enrollment and dosing in its Phase II trial.
As we've seen, Pentoxifylline has shown promise for necrosis lipoidica, along many other indications, including the indication where it failed the Concert Pharmaceuticals Phase II trial. This means Processa Pharmaceuticals also will seek to develop the compound for some of those same indications where Pentoxifylline showed promise.
The second indication Processa Pharmaceuticals will seek is, according to its website, for radiation treatment adverse effects, such as those experienced by patients undergoing cancer chemotherapy. Again, Pentoxifylline already has shown itself to be useful for some such adverse effects. Pentoxifylline is sometimes already used off-label for their treatment, but not as an officially approved therapy. Again, the strategy is simply to get a patented drug approval for something where Pentoxifylline already showed promise.
I should, however, add that, in spite of its good idea, Processa Pharmaceuticals is awfully short on cash (just $1.45 million). This means it will either have to dilute or find partners to actually advance trials on the several indications it's likely to seek.
Currently, Processa Pharmaceuticals carries a $97 million market cap (at $2.50), and the stock is very illiquid.
As a comparison, the Xiaflex owner, BioSpecifics Technologies (BSTC), carries a $490 million market cap. However, BioSpecifics also is trying to develop Xiaflex as a treatment for cellulite, with incoming Phase III results. Cellulite promises to be a much larger market than Peyronie's, and thus, the stock is likely trading on that promise and not the actual business.
It's hard to establish a timeframe for when either Processa or Concert will bear fruit both from the general strategy (Concerta) and PCS-499. However, we can say the following:
- As for PCS-499, Processa is already initiating a Phase II trial. At the same time, it plans the following (red highlight is mine):
As for Concert, this is how its product pipeline looks:
Source: Concert Pharmaceuticals Presentation. Of those drugs listed, CTP-543 was the one challenged in court.
- Concert Pharmaceuticals also expects the following schedule for potential stock-moving events during 2019:
However, I should note that the rationale for Concert isn't necessarily based on the present pipeline or set of expected events. Instead, it's based on the overall approach/strategy and the easier drug development such strategy ought to bring. It does help that Concert has significant cash resources to pursue the strategy.
In terms of investment, there are two possibilities here:
- One can invest in Concert Pharmaceuticals for the overall approach to get viable drugs which would otherwise not be patent-able. This has the benefit of Concert Pharmaceuticals starting from a point where it knows the compounds are more likely to work, due to actual off-label usage of those compounds as well as prior trials on them. Arguably, Concert Pharmaceuticals should have a higher success rate with compounds thus chosen. Even CTP-499 would have likely worked with a different trial design.
- Or one can invest in Processa Pharmaceuticals because it now owns the rights to a "patentable Pentoxifylline," with us knowing that Pentoxifylline has shown promise for many different indications. Of course, it might be difficult for Processa Pharmaceuticals to price any resulting drugs at massive premiums due to a level of knowledge that Pentoxifylline might exhibit the same benefits. That said, liability fears can work as a powerful reason to prescribe only approved drugs, if they exist for a given indication.
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Disclosure: I am/we are long CNCE. 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: I am trying to buy a tiny position on PCSA. Both positions are small, "fire and forget" speculative positions.