The attack on opioids is intensifying once again, and the circle of companies falling victim is widening. On Aug. 1, Reuters reported that the State of Oklahoma is now making its final efforts to hold Johnson & Johnson (NYSE:JNJ) responsible. The Trump Administration has decided to restrict access to opioids by federal employees. The noose is tightening on the opioid industry.
Companies on the verge of approvals for this class of drugs are getting hit in the backlash. The latest is Nektar Therapeutics (NASDAQ:NKTR). The FDA just postponed an advisory committee meeting for NKTR-181, a mu-opioid receptor agonist designed to deter abuse by crossing the blood-brain barrier more slowly. The reason for the postponement, according to a Nektar filing, is that the FDA "…continues to consider a number of scientific and policy issues relating to this class of drugs." Not much to go on there, admittedly.
The FDA seems to be getting cold feet in response to recent developments in the opioid space, and there is little to nothing that Nektar can do about it. Worse for Nektar, the FDA also indicated that it may not be able to meet the PDUFA deadline for its decision on the drug. The stock fell 11% on the news to end July, but has since recovered somewhat.
Which other companies could be affected similarly down the line? To help answer this question, I conducted a search for Phase III trials currently ongoing for opioid drugs. I found 6 US-listed public companies with opioid drugs in late stages of development that plan on submitting a New Drug Application (NDA) in the coming months. Besides Nektar, these are AcelRx Pharmaceuticals (NASDAQ:ACRX), Trevena (NASDAQ:TRVN), Zyla Life Sciences (OTCQX:ZCOR), Cara Therapeutics (NASDAQ:CARA) and Avenue Therapeutics (NASDAQ:ATXI).
Any or all of these companies could suffer a similar pullback for similar reasons.
AcelRx is developing Zalviso. Zalviso is already approved in the European Union, but has yet to receive FDA approval for the US market. It won approval in the EU for being superior to intravenous morphine. It comes with a patient-controlled system that is designed to help patients regulate its use. Watch for any delay by AcelRx in submitting an NDA in a possible attempt to see where the FDA stands on other opioids, or perhaps a delay from the FDA’s side similar to what happened to Nektar. AcelRx's shares fell over 10% on July 26, but it is unclear if this is a result of what happened with Nektar or not. Nektar received its letter regarding postponement of the advisory committee meeting on July 23.
Trevena is working on an opioid drug called Oliceridine. Right now the drug is undergoing a safety study on healthy volunteers to make sure it does not negatively affect QT prolongation, which is the time it takes the heart to recharge between heartbeats. Data should be available by Q4 this year, with resubmission expected in 2020. Trevena already received a complete response letter from the FDA on the QT prolongation issue, but could encounter other problems. Since Oliceridine is only administered in a clinical setting and therefore less subject to abuse, it may avoid an FDA delay, though what the agency may do in this situation is a judgment call.
Egalet, which recently changed its name to Zyla Life Sciences, is developing an abuse-deterrent form of oxycodone. The company is a perennial money-loser besides, and its situation could be further exacerbated by delays for its opioid drug.
Cara Therapeutics could be seriously affected by any delays for its Korsuva k-opioid receptor agonist. Much of its value hinges on this drug that is meant to lower side effects caused by other drugs of its class. NDA submission is expected next year. Cara is just off all-time highs, and any delays in getting Korsuva to market could generate a strong and sudden down move in shares.
Finally, Avenue Therapeutics is developing IV tramadol, with submission expected by the end of the year. Tramadol is an opioid that is widely prescribed in the US, but only in oral formulations, and not intravenously. Most of Avenue’s value proposition comes from potential FDA approval for IV tramadol, but as we’ve seen with Nektar, the FDA may not want to be seen as a party to the opioid epidemic, regardless of the data.
This does not mean that these drugs have no chance for approval now. If and when these cases roll over and out of the news cycle, they may eventually be approved. At present, though, the chances for sudden delays that could catch shareholders off guard are elevated.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.