Event - Labopharm awaiting second FDA decision on depression pill

Labopharm will hear by February 11 whether its reformulated depression pill Trazodone OD has finally satisfied US regulators, having been turned down last year due to manufacturing problems (Labopharm complete response letter not the end of the world, July 21, 2009). Over the last couple of months shares in the Canadian company have fully recovered from the shock of the first rebuff, suggesting increasing confidence in approval this time round.

Should this not be granted investors are likely to lose a lot of confidence in the company, as its first marketed product, Ryzolt, is struggling, casting a shadow over Labopharm’s drug reformulation business model. With a promised partner for Trazodone OD remaining elusive and successfully commercialising the product potentially an even bigger challenge than winning approval, good news needs to keep flowing if that share price climb is to continue.

Product Trazodone OD
Company Labopharm
Market cap $153m
Product NPV $112m
% of Mkt Cap 73%
Event Summary PDUFA date
Decision Feb-11

Is the reformulation worth it?

Trazodone was created using Labopharm’s Contramid platform technology, which meters the release of drugs once in the body.

The base molecule has been available generically since 1986, and the company is going to have to work very hard to convince payers and doctors that its reformulation carries real benefits over the cheap trazodone currently available.

Labopharm will have its phase III data to present, and a couple of articles published by peer-reviewed journals. One such article, authored by Dr Stephen Stahl, adjunct professor of psychiatry at the University of California and who has also worked as a consultant to Labopharm, concluded that the controlled release formulation has the potential to improve the tolerability of high doses of the drug, and possibly avoid the sedation seen in some patients who take the immediate release form.

Creating demand

Because trazodone works on a number of pathways, high doses are needed to take advantage of its spectrum of activity, but it is this that causes side effects. Controlled-release trazodone is designed to maintain plasma concentrations of the drug at levels high enough to inhibit serotonin re-uptake, providing antidepressant effects, whilst simultaneously blocking 5HT2A and 5-HT2C receptors. Blocking these receptors is thought to avoid side effects such as sexual dysfunction, weight gain and development or exacerbation of anxiety often seen with other antidepressant drugs.

This was all explained in a press release issued by Labopharm last November, highlighting the paper written by Dr Stahl. His conclusion, which is likely to be echoed in any marketing campaign, was that controlled release trazodone should allow adequately high doses to be given to achieve antidepressant action, but avoiding sedation.

"As an antidepressant, the new trazodone formulation should be as effective as selective serotonin reuptake inhibitors (SSRIs) and serotonin norepinephrine reuptake inhibitors (SNRIs), yet as a serotonin antagonist reuptake inhibitor (SARI), have a low incidence of anxiety, insomnia and sexual dysfunction," he added.

A key question is whether the clinical data generated by Labopharm so far can back up this pitch. Not everyone is convinced that sufficient evidence is available that will convince payers to switch patients from cheap generics. Analysts at TD Newcrest wrote recently that they see a significant risk that payers may characterise the product as a convenience-based drug, which would suppress market uptake.

They believe end-user sales would have to reach $100m before Labopharm could hope to generate significant profit to get excited about, and believe that creating that level of demand will be challenging.

Marketing a key

What could make a difference here is a strong marketing partner, and the company said last November that talks were at a very advanced stage. Clearly, a deal with a big player in depression would be taken very positively, however, it is doubtful if any would be interested.

Reformulated products are not exactly the territory of big pharma; the challenges of approval, reimbursement and commercialisation of non-novel compounds often act as a deterrent. And herein lies the inherent risk with Labopharm overall: the business is based on reformulation technology, technology that in these days of comparative effectiveness is becoming increasingly hard to justify.

The company’s tramadol OD is a case in point. The generically available pain drug, reformulated as controlled release and partnered with Purdue in the US where it is being sold as Ryzolt, has got off to a very sluggish start. Partly this is due to a generic challenge to the reformulation technology by Par Pharmaceuticals, but some analysts have taken out any value for US sales in their Labopharm models. Reimbursement has also been a struggle to negotiate in some European countries.

Add to this cash concerns – the company is paying a lot in legal fees in the US over the Par fight and has had to instigate a cost cutting drive – and the company’s need to sign a good deal in the near future for Trazadone OD is clear, never a good bargaining position.

FDA approval will be an important achievement, but the real challenge lies further ahead.

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