Aegerion, Should You Play It Safe And Ring The Bell?

| About: Novelion Therapeutics, (NVLN)
This article is now exclusive for PRO subscribers.

The Clinical Briefing Document for the October 17,2012 Endocrinologic and Metabolic Drugs Advisory Committee has been posted on the FDA website. The committee is discussing Aegerion's (AEGR) drug, Lomitapide Mesylate. The briefing document for the meeting was released early Monday. This is more rare than a planetary alignment, in that two drugs are being discussed for the same indication in the same week by an FDA advisory panel. These advisory panel meetings follow on the heels of a meeting on Gattex, NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) drug where the FDA briefing document seemed to also favor approval (see Seeking Alpha). Lomitapide and Mepomerson, by ISIS Pharmaceuticals (ISIS), would be indicated for lowering LDL-cholesterol (LDL-C), total cholesterol (TC), apoB, and triglycerides (TG) in patients with homozygous familial hypercholesterolemia (HoFH).

The Clinical Briefing Document did not contain surprises. Efficacy of this drug is good at lowering LDL Cholesterol, which hopefully is a reasonable surrogate market for risk of adverse cardiovascular events in this population. The briefing document points out that it is difficult to determine whether this will translate to clinically significant outcomes, "Given the rarity of HoFH, it is not feasible to require the demonstration of benefit on cardiovascular outcomes for investigational products in this population specifically".

The toxicity data indicate there are hepatotoxic effects, both raising transaminase levels and increasing hepatic fat. The document discusses the association between non-alcoholic fatty liver disease and increased cardiovascular mortality.

The committee is charged with addressing several key issues, listed in another Seeking Alpha article. Likely the most important is efficacy and whether that may be associated with decreased cardiovascular morbidity and mortality and the effects on the liver which could increase mortality and morbidity risk. The committee is also charged to discuss a Risk Evaluation and Mitigation Strategy (REMS). The conclusion by the FDA is already clear, from the document and does not suggest this drug, if approved would be used for other indications;

"FDA has the authority to require a REMS if additional measures beyond the labeling are necessary to ensure the benefits of a drug outweigh the risks. In considering a risk management program for lomitapide, FDA must keep in mind that the HoFH patient population currently has limited therapeutic options. On the other hand, the risk-benefit profile of lomitapide in the larger patient population with hypercholesterolemia has not been established, and there is reason for concern should this larger patient population be exposed to lomitapide. The REMS proposed above would support appropriate use of lomitapide, allowing it to be approved for use in the targeted patient population, a patient population with life threatening illness and limited therapeutic options, while protecting the larger hypercholesterolemic patient population. We believe that this proposed REMS is needed to ensure that the benefits of lomitapide outweigh the potential risk of serious
liver injury".

Give the recent climb in Aegerion's share price, revaluation is appropriate.

From Yahoo Finance

Chart forAegerion Pharmaceuticals, Inc. (<a href=

Aegerion continued to trade higher in front of the upcoming meeting. The committee may well vote that this drug does meet an unmet need and should be approved, nevertheless, with share price appreciation, is it time to ring the bell on the stock before the vote. (1) The market is small, and with the toxicity issues, it does not seem likely this drug will be used extensively on other patient populations. (2) What is the market size? If you accept optimistic potential revenue projections (based on $300,000 per patient) anywhere from $270 million to $300 million to even $407 million, and there are only 25 million Aegerion shares outstanding, then Aegerion stock is potentially cheap. This is the company's most developed product and growth beyond this market does not seem likely, although there is speculation about use in the heterozygous patient population. It does seem very likely the drug will be approved with a REMS plan, but there are issues with liver toxicity and the benefit of lowering LDL cholesterol in these patients has not been shown. Indeed, a benefit has not even been shown for LDL apheresis (from the briefing document), which is currently done. The risk reward ratio, with the last closing price of $17.46 per share (October 15, 2012) does still favor buying Aegerion shares based on the available information. However, there is risk in that the Advisory Panel may not vote as anticipated based on significant safety issues and a lack of proven clinical significance (actual reduction cardiovascular morbidity and mortality). You might be wise and play it safe, ring the bell or pass on buying. Shorting this stock is out of the question. The Short ratio was 8.2 according to Yahoo Finance on September 28, 2012, if you are interested in evaluating the potential for a short squeeze. The available information suggests AEGR is still very much a speculative buying opportunity.

On Thursday, October 18, 2012, the committee will discuss Mepomerson by ISIS and Genzyme, a Sanofi company (NYSE:SNY), and the briefing document should be released Tuesday morning 2 days ahead of the meeting. Adam Feuerstein has written that he will be live-blogging all three meetings this week.

Disclosure: I am long NPSP. 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 may initiate a long position in AEGR or ISIS in the next 72 hours.