ISTA Pharmaceuticals (ISTA) faces a new FDA decision with a PDUFA date of October 16 for their new eye-drop solution XiDay. New approvals (or rejections) can cause significant price swings in stocks of the underlying company – especially with micro-cap pharmaceutical firms. With that, I’d like to examine XiDay and its potential impact on ISTA’s bottom line and, therefore, ISTA’s share price.
What is XiDay?
XiDay is a once-daily version of ISTA’s currently marketed XiBrom. XiDay/XiBrom is an eye-drop solution of bromfenac used for the treatment of ocular inflammation and pain following cataract surgery. Bromfenac is an NSAID (non-steroidal anti-inflammatory drug) that was once marketed for systemic capsule administration until it was pulled by the FDA due to liver failure. It was later found that when applying the drug locally, say into the eye, all the benefits of an NSAID were realized without the pesky liver failure problem. ISTA started selling XiBrom after acquiring marketing rights from Senju Pharmaceuticals Inc. in 2002. XiBrom’s patent expired in January of 2009 and, although no generic competitors exist, ISTA will be looking for additional years of market exclusivity with the approval of XiDay. XiBrom is a 0.09% solution of bromfenac that is administered twice daily whereas XiDay is a 0.18% solution to be administered once daily – it’s really that simple.
Revenue Impact of XiDay
Unfortunately, while XiDay’s similarity to XiBrom makes it as close to a sure-thing approval as I can tell, it also minimizes the potential revenue impact of XiDay. Since XiDay is a once-daily version of a twice-daily eye-drop solution, improvements in convenience and patient compliance seem marginal at best. It would therefore be unlikely that ISTA, without some sort of marketing magic, would be able to charge any sort of premium for XiDay over current XiBrom prices. In addition, overall volume of the two therapies are likely to match that of XiBrom itself, as most of XiDay’s market share will come at the cost of XiBrom’s share. So, it appears that from a revenue standpoint we aren’t looking at a significant increase. However, this approval will likely guarantee three additional years of market exclusivity for XiDay/XiBrom products. Ista currently faces no generic competition, but this approval would allow Ista to avoid any surprises from generic competitors until October of 2013.
XiBrom/XiDay and ISTA’s Outlook
While XiDay may not be an adrenaline shot to ISTA’s revenues, there still are many reasons to be excited about its approval heading towards the October PDUFA date. According to ISTA’s first quarter report, XiBrom’s total sales were $20.3 million – an increase of 29% over the same quarter the year prior. Assuming similar growth into the rest of the year, total sales for the XiBrom/XiDay family should reach somewhere between $95 and $105 million for all of 2010. Assuming similar growth in revenue over the potential market exclusivity period, revenues appear to be in the $130 million range for 2011, $170 million for 2012, and $220 million for 2013. While XiBrom is far and away the leading therapy in ISTA’s product line, the company stated in March of this year that total sales are expected in the $147 to $165 million range. Those sales figures aren’t too shabby for a company boasting a market cap of approximately $85 million. That puts the companies current price/sales ratio somewhere around 0.5 for the year – the pharmaceutical industry average (ttm) is at 4.68.
ISTA’s pipeline currently consists of four additional potential products. Bromfenac for dry eye – another potential market exclusivity play – enters phase III trials this year. Ecabet sodium, also for dry eye, has finished phase II trials and phase III trials are currently being designed. It should be noted that the dry eye market currently stands at approximately $500 million in the U.S. so it is unlikely either of the two aforementioned treatments will be blockbusters. T-Pred (tobramycin and prednisolone acetate) for treatment of inflammatory ocular conditions where risk of bacterial infection exists, appears to also be entering phase III in the near future. Finally, bepotastine nasal spray for the treatment of allergic rhinitis – a $2.2 billion market – is in pre-clinical development.
Analyst coverage is also good. Of the three analysts covering, two rank the stock a ‘buy’ while one calls it a ‘strong buy’. The three analysts put a a price target on ISTA of $6.50, a premium of 142% over the current share price of $2.69.
While it is unlikely XiDay will add much to bottom-line growth for ISTA pharmaceuticals, it does offer protection to growth already exhibited in its XiBrom product. In addition, I don’t expect the market as a whole to be as keen on the fact that XiDay is so similar to XiBrom. A lot of the market seems to believe that any binary event is a good binary event for biotechs. XiDay’s potential approval may simply cause a whole lot more people to take a look at ISTA; and with numbers that hard to ignore is likely to get a nice run-up regardless.
Disclosure: Long ISTA