Alexza Pharmaceuticals (NASDAQ:ALXA) is a relatively small-cap pharmaceutical company in the central nervous system (CNS) space which specializes in drug delivery technology.
ALXA has an FDA decision for Staccato loxapine (AZ-004) to treat agitation in schizophrenia and biopolar disorder on October 11th. Currently, there is no planned advisory panel meeting. This could be seen as a good sign for ALXA since panels are typically convened when the FDA has questions about the efficacy and safety of a clinical trial or a clinical endpoint that needs clarification.
Approval would certainly be a validation of their unique technology(Staccato) which mimics intravenous inhalation. This platform allows for consistent and reliable pure drug delivery to the lungs. There is no other device/technology that can do the same. Physicians get speed, predictability, and ease of use. A video demonstrating the technology can be found here. Alexza has completed an end-of-Phase 2 meeting with the FDA for AZ-001 (Staccato prochlorperazine) and has completed two Phase 2 studies with AZ-104 (Staccato loxapine, low-dose). Both product candidates are being developed for the acute treatment of migraine headache.They are also looking at the insomnia and breakthrough pain markets. More on the pipeline here.
Staccato loxapine (AZ-004) met both its' primary and secondary endpoints in their Phase 3 trial. First, loxapine is a proven drug for indicated for the treatment of schizophrenia. So really the FDA is only ruling on whether it believes there is an improvement using this technology. The primary efficacy assessment in the studies was the change from baseline at 2 hours post-dose using the total PEC score. In each study, change from baseline for each of the five items comprising the total PEC score (hostility, uncooperativeness, excitement, poor impulse control and tension, each scored 1-7) was determined starting at 10 minutes post-dose. They showed highly statistical significant findings at 2 hours when you compare the FDA regulatory endpoint of placebo to drug at both the 5mg & 10mg dose. They showed 10 minute onset, which is faster than injections & oral tablets in both the bipolar and schizophrenia patients. They also still have statistical significance for drug duration at 24 hours. There were no clinically significant mean changes in heart rate or BP following dosing with AZ-004.
This drug was in-licensed with Biovail. In February 2010, they formed a collaborative partnership with Biovail (NYSE:BVF) for marketing rights to AZ-004 in the U.S. & Canada. ALXA received $40 million upfront payment and $90 million additional milestones with a tiered double digit royalty based on top-line sales. ALXA is charged with clinical regulatory duties, including the NDA approval. They also in charge of manufacturing; their current facility(Mountain View,CA) can produce 7 million units/year.
Biovail is charged with everything on the commercial side. Preparing for launch, building a sales force, marketing organization, reimbursement, pricing, and medical education. ALXA received a $40 mill upfront payment and $90 million additional milestones with a tiered double digit royalty based on top-line sales (10-25%). They estimate the market potential to be between $300-500M per year.
Their management, institutions and mutual funds firmly stand behind the company. They have cash to run thru 2011 without the milestones and cash to run business through 2012 with the milestones. This includes several lines of financing that were started with $25 million in committed equity from Azimuth and $15 million working capital loan agreement with Hercules Technology Growth Capital. Their recent presentation at Jeffries(here) shoud be expected to yield an upgrade from Jeffries in time and others are expected to follow.
JPM Securities has them rated at “Market Outperform” with a $12 price target, that is a 500% increase from current levels.
DISCLOSURE: LONG ALXA
Patrick Crutcher is the managing editor of the biotech stock blog chasingthealpha.com
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