Zingo Approval Makes Anesiva An Appealing Takeover Target for Endo Pharma

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Includes: ANSV, ENDP
by: Mike Havrilla

Anesiva (ANSV) surprised investors on Friday with FDA approval for pediatric use (ages 3 – 18) of Zingo, over five weeks earlier than the expected PDUFA date of September 24, 2007. Zingo is a needle-free, rapid onset (1 – 3 minutes) delivery system for lidocaine, which provides local anesthesia prior to needle stick procedures such as IV insertions or blood draws. The company will provide investors with additional details on the product launch in the coming weeks, including the potential for partnerships to expand upon their initial marketing plan, which targets select hospitals using their own focused sales force.

Zingo is expected to price around the midpoint of the company's $12 to $16 range, compared to products already on the market, including: EMLA cream which is messy to use with a long one hour onset, but cheap around $8.34 and available in generic form and Endo Pharma's (NASDAQ:ENDP) Synera patch at around $12.60 with a longer 20 to 30 minute onset of action. In April, Anesiva sent a notification to Endo stating that Zingo is not meant to be a generic form of Endo’s lidocaine patches Lidoderm and Synera. Instead, the company contends that Zingo is a ready-to-use, single-use, needle-free system that delivers sterile lidocaine powder into the epidermis of the skin and provides topical, local analgesia in one to three minutes after administration.

The company also announced during Friday's conference call that it is very close to completing enrollment of 700 patients in a Phase 3 trial evaluating Zingo in the adult population, which it expects to complete shortly and then release results quickly thereafter as the trial will not take long to complete since it is used on a one-time basis prior to needle stick procedures. Anesiva expects to complete the single Phase 3 trial by the end of the third quarter and file a sNDA to expand the use of Zingo to the adult population. Also, the company expects to file a MAA for European marketing approval once it has the adult data; as its partners prefer to have data for both children and adults before seeking approval.

The company also identified other potential out-licensing opportunities for its needle-free delivery system for drugs with huge market potential such as insulin (for diabetes), calcitonin (for osteoporosis), epoetin (for anemia), and human growth hormone (to correct deficiencies).
Also, the company plans to imminently announce additional Phase 2/3 studies for its experimental, non-opioid pain medication Adlea (formerly 4975) at doses of 15 mg, versus previous trials at 5 mg. The company recently reported encouraging results in a Phase 2 study in osteoarthritis of the knee, with pain relief sustained at 12 weeks after the initial injection.

The company believes the increased dose represents the optimal balance between increased efficacy and safety, and will study Adlea in various indications including knee replacement, hip replacement, shoulder surgery, and osteoarthritis of the knee. Adlea is a novel, long-acting (weeks-months), locally-injected formulation of capsaicin (the active, hot component of chili peppers which is currently only available OTC in pain-relief creams) which results in low exposure and absorption while avoiding the systemic side effects of existing pain treatments such as opiates and NSAIDs.

After initially trading up as high as $7 per share during pre-market action on Friday, the stock settled to close around $5.50 on over 10 times average volume, barely above the stocks all-time low of $4.92 just one day earlier during the temporary market meltdown before the Fed liquidity bailout. This price is an excellent entry point for investors to establish a position in Anesiva, with multiple upcoming catalysts including Anesiva launch, domestic/global partnerships for Anesiva, additional clinical trials for Adlea with low clinical risk based on positive Phase 2 results, and additional out-licensing opportunities for the company's innovative, needle-free drug delivery technology. I also believe that Anesiva represents an excellent takeover candidate for Endo Pharma, who has over $700 million in cash which it intends to put to use for targeted acquisitions among companies with novel pain treatments and pipeline candidates. Anesiva provides a perfect fit for Endo, providing it with an approved product in Zingo, a promising pipeline candidate in Adlea, and an innovative needle-free drug delivery system. Finally, peak sales of Zingo alone, based on analyst estimates, have the potential to exceed the company's tiny market cap of about $150 million at around $5.50 per share.

Disclosure: I own shares of Anesiva

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