FDA decision trade with double approval potential Print E-mail
By Patrick Crutcher   
Wednesday, 18 August 2010 19:46

As we told our subscribers Wednesday morning, the Super Bowl of FDA decisions is coming in October, so we thought it was important to try and highlight some of the companies with the best risk-reward profiles going into October, like ALXA and AVNR.

Today we highlighted Alkermes, Inc.(NASDAQ: ALKS) and the stock rose to near 52-week highs before some profit taking at the end of the day. We believe this is definitely a low-risk and good-reward play that is well positioned going into October.

ALKS is in a unique position for a company of their size, since they have a potential double approval coming in October. They have a review panel for the sNDA for Vivitrol coming on September 16th, with a PDUFA date for Vivitrol on October 12th and another PDUFA date for Bydureon on October 22nd, both of which rely on Alkermes’ proprietary Medisorb® technology.

We should note that Bydureon is a potential blockbuster drug that utilizes ALKS’s technology and is partnered with Eli Lilly (NASDAQ:LLY) and Amylin Inc.(NASDAQ: AMLN).  Bydureon is a once-weekly formulation of exenatide, the active ingredient in Byetta® (exenatide) injection, which was approved in the U.S. in June 2005 and is used in approximately 60 countries worldwide to improve glycemic control in adults with type 2 diabetes. Byetta® has had sales of roughly $700M. Bydureon has demonstrated superior blood sugar control compared to sitagliptin, pioglitazone and insulin glargine, common diabetes medications with combined 2008 sales exceeding $8 billion. They face increasing competition from Novo Nordisk’s diabetes drug, Victoza. Ideally, this improved version could help spur more sales.

Investors should note that this is a resubmission, so approval could be more likely than “first-time” applicant drugs, since the companies have had time to fix any underlying issues. No new trials were required for Bydureon, as the FDA had issues related to finalization of the product labeling with accompanying Risk Evaluation and Mitigation Strategy (REMS) and clarification of existing manufacturing processes. Additionally, ALKS has an 8% royalty off the first 40 million units of Bydureon sold each year and 5.5% after that. This could mean some serious cash for ALKS for not much work after approval.

ALKS is also trying to expand the Vivitrol with their sNDA for VIVITROL® (naltrexone for extended-release injectable suspension) for opioid dependence, which was designated for priority review by the U.S. Food and Drug Administration (FDA). A priority review seems fitting from the FDA given the huge problems opoid dependence has presented in recent years.

Approval in this indication would certainly expand the market potential and give ALKS more incentive in promoting Vivitrol. Lazard analyst Terence Flynn projects a $300 million market opportunity for Vivitrol in opioid dependence. Sales of Vivitrol in alcohol dependence have been slow to say the least, with sales totaled $20.2 million in the fiscal year ended March 31, 2010. Their pivotal trial in opioid dependence showed data with high statistical significance with 90% of patients treated with Vivitrol had opioid-free urine samples after 24 weeks compared to 35% of patients treated with placebo injections. Additionally, treatment with Vivitrol led to more patients completing treatment and a significantly reduction in patient-measured cravings for opioids.

They have a strong balance sheet ( $90M in cash and $400M+ in assets) for which they could live-off of for several years and a good revenue stream, but are still fighting to be cash-flow positive. They had quarterly revenues of $42.3 million, driven by strong manufacturing and royalty revenues from RISPERDAL® CONSTA®.  Remember, they still have a developing pipeline with several Phase 2 and Phase 1 drugs in addiction, mental health, diabetes, pain, and rheumatoid arthritis. They have already already pushed 2 drugs through the FDA, Vivitrol and RISPERDAL® CONSTA®. This company has serious growth potential with approval of either of these drugs. 

Disclosure: No Positions

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