Ampio's leadership aggressively focused on significant licensing opportunities and getting trials completed Print E-mail
By M.E.Garza   
Wednesday, 14 September 2011 02:31
FDA CalendarThe low-float shares of Ampio Pharmaceuticals, Inc. (NASDAQ:AMPE) have continued their steady uptrend despite these volatile markets. Much of that appreciation may be due to the investment community's growing awareness of the small firm's impressive pipeline and strategy.

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Last week, the Colorado based firm which specializes on new uses for previously approved drugs and new molecular entities announced a license and development agreement which provides Daewoong Pharmaceuticals Co. Ltd. the exclusive rights to market Zertane™ in South Korea.

Zertane™ is being developed as a treatment of premature ejaculation and as a combination drug, utilizing Zertane™ and another erectile dysfunction drug (PDE5 inhibitors and others), to simultaneously treat premature ejaculation and erectile dysfunction.  The agreement provides Ampio with multi million dollar upfront, regulatory and sales related milestone payments, and a royalty stream equal to 25% of net sales less Ampio’s transfer price. In addition, Daewoong’s has made substantial financial commitments to mount an aggressive sales and marketing campaign for Zertane™ and will also fund a full Phase III clinical trial for Ampio’s follow on combination PE/ED drug.

While we continue to anticipate that Ampio will be releasing new information regarding all seven of its products, we took time to reach out to Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals for some clarification on the announcement and the firm's plans going forward.

What is your business strategy for Zertane™?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: As our CEO articulated in our recent press release, we feel that in order to optimize Zertane™ sales around the world, we would be better served with multiple partners, instead of one global partner. It has become clear to us that these regional or country specific partners, now in discussion with us, have a clearer understanding of the cultural aspects and regulatory hurdles in regards to the treatment of sexual dysfunctions in their markets than the large global companies.  Moreover, in most cases these partners are very aggressive competitors and outsell the majors in their markets. We have been contacted by dozens of this type of companies.

What is your early expectation from these partners?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: In order to be able to sell Zertane™, we need to be approved by local regulatory agencies. Their regulatory paths are mostly similar but always have unique hurdles, country by country. Our partners typically have strong relationships with these regulatory bodies and will really help us get that approval.  Multiple approvals in numerous countries allow us to accumulate the clinical data that will boost our ability to gain approvals in even highly regulated countries, such as the USA. So initially we will focus on countries or regions where the process is easier and quicker and in whom our local partners will assume the major responsibility of obtaining these approvals.

Will you have to conduct more studies on Zertane™?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: Certainly, but not right now. We have already conducted two Phase Two Trials, and two Phase Three Trials, all in Europe. Overall, there were over 700 patients treated with no serious adverse events, and statistically significant demonstration of efficacy. We think this will be sufficient for certain markets, like South Korea. Other markets may require an additional study but we would expect these to be much smaller than our Phase Three Trials.

Are you concerned that since Zertane™ originates from an already approved drug that there will be some “generic” intrusions into your markets?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals:  There could be some, but Ampio will have one of only two legally approved drugs that can be used for premature ejaculation. Priligy™, by J&J, is the other drug and is already approved in about 20 countries. However, it is quite expensive and carries a “black box” warning (suicide risk). In contrast, Zertane™ is safe, and effective, our manufacturing costs allow a lower price and our patent protection is strong. Once approved in any market, we welcome head to head market competition with Priligy™. Clearly, the market is large enough for both drugs and since we plan on pricing the drug within the reach of the general public, generic versions will lose much of their appeal. Remember, we ran our trials with a dosage and formulation that are not commercially available elsewhere.

What are your early projections?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: Our legal counsel will not allow us to make revenue projections but we believe the PE market will become substantially larger that the ED market, perhaps two to six times larger. Our potential partners around the world share this belief

How did you determine the “up front money?”

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: Our upfront fees will be modest because our goal is to create a revenue stream that creates positive cash flow for many years to come. Each of our early partners will need to absorb the costs for a significant marketing campaign for Zertane™ and large clinical trial and regulatory expenses for the combination product. Daewong, our South Korean partner, will not have a significant regulatory expense for Zertane™, but they have agreed to launch an FDA type trial on the PE/ED combination drug. It is also our intent to build an effective marketing and distribution pipeline committed not only to our sexual dysfunction portfolio of drugs, but also for some of our other discoveries as well.

How can you do all this and maintain such a low overhead?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: Dr. Bar-Or, because of his reputation and skill, has been provided many resources which Ampio has been able to leverage. Unlike many other drug companies, our strategy does not require us to build a research facility, a manufacturing plant, or a sales and marketing force. Our manufacturing is outsourced, our R&D is provided by Dr. Bar-Or’s scientific and clinical group, our existing portfolio of drugs and new molecular entities is extensive and our marketing will be performed by a select group of distributors.  We are focused on creating shareholder value, good price /earnings ratios, and managing dilution, so when we can offset trial and regulatory expenses with non dilutive funds, we will. We want a good royalty stream that delivers significant profits over decades.

When will you target the big emerging countries like India and China?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals:  We are working on that now. These countries present a different kind of challenge. Patent protection does not carry as much weight in those countries but close relationships with regulatory agencies and marketing pathways does. Therefore, it is the size and reputation or your partner, and not the strength of your patents or law firm that matter.

When will you approach the FDA with Zertane™?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals:  As soon as the FDA has a clear definition of PE, we will make our approach. Until then, we are focused on markets that have defined PE and J&J has lead the way as to which countries those are.

Your last 10 Q suggested you have enough capital to last until sometime around the 4th quarter 2012. Can you really build Ampio without raising additional capital?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: Our goal is not to save our way to salvation. We have many trials currently underway; some that are relatively late stage. We could turn any one of those “situations” into a non-dilutive equity contribution. However, if our management and Board believe that our shareholders will benefit from pursuing later stage developments through Phase III FDA trials, then we will raise money to do just that. We will prepare for the possibility of this type of financing need by issuing a shelf registration shortly, but that does not guarantee a raise. We will evaluate our financial options when the data from several near term clinical trials are available.

Mike, you seem more involved than just as a Board member, true?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals: I am the lead investor in Ampio and have recently been asked by the CEO, supported by the Board, to serve until the end of this year as executive chairman, which affords me some operational responsibilities.  Since I was responsible for repositioning the company, and bringing in the new management team, I have a lot of history with Dr. Bar-Or. My newly assigned responsibility is to direct the capital formation strategy and represent the company to investors and public forums. Our CEO sought this active involvement on my part in order to allow him to aggressively focus on our significant licensing opportunities and getting our trials completed. Since licensing Zertane™ is happening all over the world and the clinical trials of OptinaTM and AmpionTM are nearing completion, Don and Dr. Knobelman, our new Chief Business Officer, are launching a vigorous travel schedule to explore international manufacturing and distribution opportunities.  I have agreed to fill in and do my part.  But everyone should know that our entire Board is active, dedicated and impressively skilled and very devoted to assuring the company success. Someday we will all transition to a more conventional format. Until then, everybody is expected to contribute, and we do.

What will follow Zertane™?

Michael Macaluso, Founder and Chairman of Ampio Pharmaceuticals:   In sexual dysfunction, it is the PE/ED combination drug. Our partner in South Korea will be conducting the first human trial in an FDA type format. If you are referring to other trials, we currently have numerous trials running with other products, a number of which are expected to be completed by year end, some by mid October.

Post-Interview Commentary:

As reported previously,
while the FDA has not classified premature ejaculation as a disease, there has been some action from pharmaceutical companies on the matter. Johnson & Johnson (NYSE:JNJ) did receive approval for use of one of its SSRI/Antidepressants (Priligy™) as a treatment for PE, but there are unwanted side effects and Zertane™ appears to be a safer alternative.

In addition, we like Ampio's strategy of finding new medical indications for previously approved drugs. This important strategy to accelerate development and improve success rates takes much of the risk off investors in the company as previously approved drugs have completed numerous safety tests and have established extensive human safety records. Ampio is looking for their clinical trials to begin sooner, and to providing evidence that these drugs work while reducing the risk of failure due to adverse human safety events.

The company is using the clear paths for regulatory approval in the U.S. (as a §505(b)(2) New Drug Application submission) and in the EU (under the “hybrid abridged” procedure) to their benefit. Given the small number of shares available, the potential for explosive growth in the company’s valuation continues to draw our attention.


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