Theravance Investors Brace for Advisory Committee Vote, Acquisition Still Expected Print E-mail
By Brian Wilson, Lead Contributor   
Wednesday, 17 April 2013 03:14
The biopharmaceutical company Theravance (NASDAQ: THRX) is gunning new 52-week highs as we finally approach the FDA Advisory Committee Meeting regarding the NDA that the company submitted for the inhaled Chronic Obstructive Pulmonary Disease (COPD) and Asthma drug BREO (also known as RELVAR™ outside of the United States). We originally mentioned Theravance on March 6th, and noted the potential for the stock to run up ahead of its upcoming catalysts. THRX is up over 13% after yesterday’s rally.

Breo/Relvar is a reformulated dose of vilanterol (a long-acting β2 agonist) and fluticasone furorate (a long-acting glucocorticoid receptor agonist). Vilanterol is a new compound, although fluticasone furorate is already marketed by Theravance’s partner GlaxoSmithKline (NYSE: GSK) as a treatment for allergies.

The NDA that was submitted by Theravance in 2012 was specifically for the COPD indication, and has a PDUFA goal date of 5/12/13 under standard ten month review. The advisory committee meeting mentioned in the last article was originally scheduled to take place on March 7th, 2013; although it was postponed due to a particularly nasty snowstorm that hit the Northeastern United States and shut down major lines of transportation. The new date is April 17th 2013 (today).

The advisory committee vote is expected to be generally positive for the COPD indication, although the asthma indication (which is a heavily debated subject right now) is less certain. Theravance had initially been proceeding with a phase III trial in asthma without any guidance from the FDA regarding its validity in a potential sNDA, although feedback was given earlier in the year and the Phase III trial is now undergoing the recruitment process.

The asthma trial is estimated to enroll about 990 patients, and will have forced expiratory volume in one second (FEV1) data determining the success or failure of its primary endpoint. Secondary outcome measures will back the efficacy/safety profile of Breo in asthma patients as well. Investors should note that the large (and presumably expensive) clinical trial will be conducted by GlaxoSmithKline, which means that we should not see any meaningful spikes in Theravance’s overall expenses inside its income statements in the upcoming earnings releases. In addition, the short length of this trial (12 weeks) means that the data should be finalized by October 2013.

GlaxoSmithKline seems eager to dominate the Asthma/COPD space, which generates roughly $10.8 billion for the company every year in sales. No other big pharma comes close to GSK’s dominant position, and small pharma competitors have only managed to generate tens of millions in revenue from the sector.

Because of its close relationship with Theravance, investors generally expect GSK’s inherent ability to sell into the asthma/COPD space to help Theravance – which is now worth about $2.8 billion. Mentioned in the last article was Piper Jaffray’s speculation that GSK would buy Theravance on a positive adcom vote, which is also very possible given the situation. GSK saw enormous success with the Advair/Seretide combined inhaler, which generated sales revenues of around of $8 billion in 2012.

The Takeaway:

2013 should be an exceptional year for Theravance, assuming that all goes well. The company is expected to see a positive vote for Breo in the COPD indication later today, which may result in a FDA approval in a few weeks. Given a positive advisory committee vote, I expect THRX to rally as buyout speculation (specifically surrounding GSK) rises.

A word of warning: the FDA is notorious for issuing a CRL (rejection) even after a positive vote, so there is always risk going into an FDA decision on a company’s NDA or sNDA.

If the FDA approves Breo for the COPD indication and GSK doesn’t buy Theravance, I expect investors to retain their expectations that there will be an acquisition, with catalysts from the asthma indication on the horizon. Data from the Phase III should be in by October 2013, which implies that investors will get the vital data before the end of the year along with a sNDA submission. Under standard procedure, we would expect another adcom and another PDUFA goal date in 2014. Whether or not THRX investors will have to wait that long for an acquisition remains to be seen.

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