Event - Theratechnologies hopes adcom will stimulate growth in more than one way

Theratechnologies is joining the ranks of companies whose fate depends on a binary decision by US regulators. Egrifta, its growth hormone factor analogue to treat HIV associated lipodystrophy, will face the judgement of an FDA advisory committee later this month.

Redistributing the body fat of HIV patients on antiretroviral therapy may seem to be a small thing, but the Canadian company reckons the increase of abdominal fat on some patients leads to decreased compliance with the antiretroviral regimen. By triggering growth hormone production in a specific way, Egrifta has been shown to reduce visceral adipose tissue while preserving subcutaneous fat in the places where it has been lost as part of the disorder.

Product Egrifta
Company Theratechnologies
Market cap $280m
Product NPV $228m
% market cap 82%
Event type FDA advisory committee
Date May 27, 2010

Unclear cause

It is not completely clear whether it is the HIV virus or the antiretroviral treatments that cause HIV associated lipodystrophy. What is clear from research is that the condition is marked by fat redistribution, blood dyslipidaemia, insulin resistance and vascular inflammation.

The body composition changes include an accumulation of visceral adipose tissue around the organs of the abdomen and a loss of subcutaneous fat tissue in the face, limbs and buttocks. Given that blood dyslipidaemia and vascular inflammation are recognised heart disease risk factors whilst abdominal fat and insulin resistance are recognised as diabetes risk factors, physicians and patients are keen to combat the condition.

Enter Egrifta, known generically as tesamorelin acetate. Egrifta is a once-daily injection of a stabilised analogue of a hormone that stimulates the growth hormone receptors in the pituitary gland. Results of a Theratechnologies-sponsored phase III trial published in March in the Journal of Acquired Immune Deficiency Syndrome found a statistically significant reduction in visceral adipose tissue, an improvement in belly appearance distress and physician rating of belly profile, and an increase in insulin-like growth factor-1.

The day after it announced initial topline 52-week results of the phase III trial in October 2008, Theratechnologies licensed US rights to the drug to Merck KGaA for $22m upfront, an equity investment of $8m, and $185m in milestones and royalties (Merck KGaA finds value in Theratechnologies, October 29, 2008).

Market questions

Egrifta is targeting an admittedly small but sick market. Theratechnologies estimates that 285,000 patients had developed HIV-associated lipodystrophy in 2008, which could increase to 380,000 by 2012, creating a potential market size of $811m to $1.3bn.

Analysts have been less generous than that, estimating US sales for Merck KGaA at $24m in 2016, according to an EvaluatePharma consensus estimate. A single Canaccord estimate, however, puts global royalties for Theratechnologies at $20m in the same year, making the Canaccord estimate look rather generous even if a large European partner can be found or, as would seem logical, the current deal with Merck be extended to a global partnership.

This enthusiastic royalty estimate also gives Egrifta a net present value of $228m, representing 82% of Theratechnologies’ market capitalisation, a chunky value for a small company with no other products in the clinic and only an additional indication in growth hormone disorders planned for Egrifta.

Standing by their support of the company Canaccord analysts rate the chances of success at the FDA Endocrinologic and Metabolic Drugs Advisory Committee very high. Investors seem to agree, with share prices trending higher since late November with the approach of a first scheduled adcom on February 24 and a PDUFA date on March 29. Because of an administrative delay, these were delayed to the current adcom on May 27 and the PDUFA date of July 27.

Future growth

Analysts have pencilled in share price targets ranging from C$5 to C$6.75 and on Tuesday Theratechnologies' stock closed at C$4.89. This indicates the stock has further to rise, should Egrifta convince regulators.

If approved, Egrifta will have a first-to-market advantage in AIDS-related lipodystrophy. Amgen tested recombinant leptin for the indication, but given leptin’s as-yet unfulfilled promise in metabolic disorders it would seem to be an unlikely competitor anytime soon.

While this is a small market, it is one that Egrifta will have largely to itself for a condition that is still not well-understood. As such, it makes it a valuable niche drug, if it does get an FDA thumbs up. 

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