Event - Partnership a prelude to regulators' judgement for Optimer

Analysis

With a US regulatory decision due at the end of May and now a European license with Astellas Pharma in the bag for antibiotic fidaxomicin, things are pulling together nicely for Optimer Pharmaceuticals. The California group is on the cusp of getting to market a treatment that has been shown to prevent recurrence of the hospital-acquired superbug Clostridium difficile more effectively than vancomycin, considered standard of care, setting the stage for it to take market share.

First, though, fidaxomicin must meet the approval of FDA’s staff and expert advisers - a panel hearing has been set for April 5 - who will likely be asked where the oral therapy fits in with existing treatments. The regulators’ judgement will be key for fidaxomicin’s commercial prospects; Optimer is hoping for a first-line designation among those most at-risk of recurrence to guarantee widest adoption. Anything less will mean a tough battle awaits in a market increasingly favouring generic versions of vancomycin.

Product Fidaxomicin
Company Optimer Pharmaceuticals
Market cap $484m
Product NPV $854m
% of market cap 177%
Event type FDA Advisory Committee
Indication Clostridium difficile infection
Date April 5, 2011

Trouble infection

C. difficileis a naturally occurring intestinal bacteria present in most children and a small percentage of adults. Infections usually occur when other gut flora have been killed by broad-spectrum antibiotics. Without other bacteria to balance them, C. difficile populations explode and release toxins that result in diarrhoea, fever and inflammation of the colon.

Vancocin, ViroPharma’s oral formulation of the venerable vancomycin, and metronidazole, known also as Flagyl, are the only products approved to treat C. difficile. Both have lost patent protection, although 18 months after an FDA advisory committee backed draft guidelines on establishing bioequivalence for generic Vancocin, copycat pills have yet to reach the market (ViroPharma can finally look forward after losing Vancocin battle, August 5, 2009).

The entrance of generic versions of oral Vancocin remains uncertain but most analysts covering ViroPharma are expecting generics to launch this year and quickly erode branded annual sales in excess of $250m. Meanwhile, hospitals are increasingly using a "slurry" of generic intravenous vancomycin consumed orally to combat the illness more cheaply.

As metronidazole and Vancocin have shown themselves equally effective, metronidazole is often favoured because of its low cost at $2-3 per day; oral Vancocin costs roughly $150 per day. On the downside, both products are associated with hard-to-treat recurrences.

Showing promise

Enter fidaxomicin, previously regarded as one of the most valuable unpartnered drugs (Partnering opportunities abound in oncology, CNS and infectious diseases, October 21, 2010). Phase III trials demonstrated a significantly lower recurrence rate and higher global cure rate – clinical cure with no recurrences - than Vancocin, with a non-inferior clinical cure rate (Optimer and investors playing the waiting game, February 15, 2010).

This, Optimer executives contend, should position them to earn fidaxomicin a label as first-line treatment for those at highest risk for recurrence – the elderly and immunocompromised, patients who have had prior infections, those on other antibiotic treatments or with kidney impairments. These patients represent 70% of those who develop C. difficileinfections.

They also argue that twice-a-day dosing and minimal disruption to gut flora makes fidaxomicin a better first choice therapy.

Astellas listening

The argument was persuasive to Astellas. For $68m upfront the Japanese partner licensed the anti-infective for Europe – where a marketing authorisation applications has been submitted – the Middle East, Africa and the Commonwealth of Independent States.The deal includes an additional $156m in milestones and escalating royalties between high teens and low 20s.

Optimer chief executive Pedro Lichtinger hailed the Japanese company’s marketing muscle in Europe and highlighted its portfolio of infectious medicines products, an area where Astellas might be looking for more success. Its best-selling antibiotic is Vibativ, which it licensed worldwide from Theravance at a time when the skin-infection treatment was forecast to launch in 2007 and sell $133m by 2010. Instead, after problems were revealed at clinical trial sites and side-effect worries, it launched in 2009 and is forecast to achieve $55m in sales this year, growing to $185m by 2016, according to EvaluatePharma’sconsensus.

Astellas also has antifungal agent Funguard/Mycamine, forecast to sell $307m in 2016. Analysts following Optimer have pencilled in US sales of $271m by 2016 for fidaxomicin.

The deal, announced Monday, was received positively by investors, who pushed Optimer shares up a modest 5% to $12.38 on the news. Given that the net present value of Optimer’s lead product and biggest growth driver is nearly twice its current market capitalisation, it seems investors will need positive regulatory news before significantly bidding the price up.

Going it alone

As for the US, Mr Lichtinger reiterated the company’s plans to market alone, estimating that a sales force of 60 to 125 reps might be sufficient for a hospital-specific product. He estimated a team may be ready within six to nine weeks.

At $250,000 a year for a sales representative, it will not be a cheap endeavour. With the $68m from Astellas added to the $59m cash the company had available as of September 30, 2010, adding a full roster of sales representatives would burn off one-third of its available cash.

Asked about the company’s cash runway, finance director John Prunty said launches of hospital-oriented pharmaceutical products usually go cash-positive in their third year, giving Optimer sufficient revenue to fund the launch.

Of course, the drug’s promise will be best achieved with a generous label and an acceptance that its premium price is worth it. A narrower-than-expected label could disrupt those plans, particularly given the ever tightening pricing pressures in hospitals. Should the regulatory journey take longer than expected or yield an unsatisfactory result, seeking a US partner might seem a better idea.

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