Event - Depomed leaving pain behind with PHN therapy

Analysis

The outlook for Depomed’s post-herpetic neuralgia (PHN) treatment is looking brighter than it did 11 months ago (Caught in crossfire, Depomed seeks to soothe Serada concerns, February 19, 2010). The extended-release gabapentin formulation dubbed DM-1796 is slated for a January 30 PDUFA action date, and investors and observers seem to be expecting a positive decision for the Abbott Laboratories-partnered candidate.

Shares in the California company have more than doubled since Pfizer, which markets gabapentin as the epilepsy drug Neurontin, declared it would not file a patent challenge to Depomed’s formulation (Depomed avoids gabapentin lawsuit but road ahead remains rocky, August 4, 2010). A positive decision would unlock up to $60m in milestones and add $80.3m in royalties to the company’s top line in 2016.

Product DM-1796
Company Depomed
Market cap $356m
Product NPV $331m
% of market cap 93%
Event type PDUFA date
Indication Post-herpetic neuralgia
Date January 30, 2011

Reformulation

Post-herpetic neuralgia is a sometimes-debilitating complication following an acute episode of herpes zoster, also known as shingles. The acute condition is the result of reactivation of the dormant virus that causes chicken pox, and occurs more often in older people.

An analogue of gamma-aminobutyric acid (GABA), gabapentin is believed to inhibit neurotransmission in the brain, preventing seizures in epileptics. As a pain medication, experts theorise that by inhibiting neurotransmission it also hinders the transmission of pain signals in the nervous system.

Depomed is planning to use its gabapentin formulation in at least two other pain-related indications. As Serada, it is currently in a phase III trial for post-menopausal hot flashes, and it is has also been tested in a phase II trial for peripheral diabetic neuropathy, where investigators concluded it was effective and well-tolerated.

Gabapentin already is marketed for PHN, but Depomed’s formulation is intended to release over six to eight hours in the upper gastrointestinal tract – compared to the rapid stomach absorption that occurs with standard formulations. As such, the intent is to reduce peak blood concentrations and avert side effects such as dizziness and daytime sleepiness.

In fact, $25m of the potential $60m approval milestone will be dependent on the FDA-approved language on side effects, under Depomed’s license with Abbott.

Strategy

Depomed has already carved an intellectual property niche for itself in the strategy of filing for FDA approval using standard new drug application plus proprietary delivery technology.

It already has two products on the market - long-acting formulations of the diabetes therapy metformin, called Glumetza, and urinary tract infection treatment ciproflaxicin, called ProQuin XR. Both make use of the company’s AcuForm technology, as do DM-1796 and Serada.

It is this strategy that gives the company and its investors belief that DM-1796 will avoid the trap that snared XenoPort’s restless legs syndrome therapy Horizant last February (XenoPort reels from Horizant rebuff, suspends pain research, February 18, 2010). Also a reformulation of gabapentin, Horizant ran afoul of the FDA when regulators raised concerns about the development of pancreatic acinar cell tumours in rats. The difference – Horizant was filed as a new derivative, as it was a prodrug.

From an approval standpoint, that difference meant XenoPort had to submit all-new safety data, while Depomed has been able to rely on existing gabapentin safety data.

Gabapentin's cancer signal is well-known and detailed in the Neurontin product information pack. For regulators to raise it as an issue with DM-1796, they would need to believe the risk-benefit scale is markedly different for PHN when compared to epilepsy.

With an increasingly safety-conscious FDA, this is always a possibility. But given the run-up in share prices, and just 6% of shares held in short positions, most investors appear to be betting on approval.

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