One-product companies currently on a knife edge

Analysis

The dramatic declines in the share prices of Arpida and Targanta Therapeutics last week, down 84% and 86% respectively following a negative FDA advisory committee review of their antibiotic drugs, highlights the high level of risk associated with investing in companies who have put all their resources behind the development of one product.

Whilst constraints over cash and resources often ultimately dictates a one-product strategy for many small biotech and specialty companies, in today’s financial climate this approach has become even riskier. An analysis of NPV data from EvaluatePharma reveals that for 72 companies, just one clinical stage product accounts for at least 95% of their total NPV and highlights those companies currently on a knife edge with just one filed or phase III drug and precious little cash to fall back on if trial results or regulatory reviews go awry (see table below).

At the mercy of regulators

For the following companies, just one filed product accounts for 100% of the total NPV currently being assigned to the company’s products by analysts, according to EvaluatePharma’s NPV Analyzer.

The problem for companies such as Dyax, Introgen Therapeutics and Advanced Life Sciences is that current cash reserves are almost empty, therefore a positive review of their drugs is absolutely vital to the companies’ very survival.

Companies with a single product NPV = 100% of total NPV (filtered on filed products, ranked on years of cash)
  Company Product Today's NPV ($m) Latest Cash ($m) Years of Cash Market Cap. ($m)
 1  Dyax  DX-88  770  64  0.1  172
 2  Introgen Therapeutics  Advexin  450  11  0.1  11
 3  Advanced Life Sciences  Cethromycin (ABT-773)  495  9  0.1  10
 4  Targanta Therapeutics  Oritavancin  446  59  0.4  23
 5  NeurogesX  NGX-4010  584  53  0.5  21
 6  Arpida  Iclaprim  630  59  0.7  15
 7  Somaxon Pharmaceuticals  Silenor  303  33  1.0  22
 8  TiGenix  ChondroCelect  305  46  1.1  88
 9  Cypress Bioscience  Milnacipran  470  153  4  196
 10  Pain Therapeutics  Remoxy  404  177  5  357
 11  Intercell  Ixiaro  1,415  370  >7  1,306

The 35% slump in Somaxon Pharmaceuticals’ shares on Monday with news that the FDA has delayed its review of Somaxon’s insomnia drug, Silenor, by three months is clear evidence of the potential volatility.

Whilst companies with significantly healthier cash reserves, such as Cypress Bioscience, Pain Therapeutics and Intercell are better placed to cope with a regulatory rejection as their immediate future is more secure, the impact of a negative decision is still likely to be significant.

Conversely, given the obvious difference between the potential NPV of the drugs and the respective companies’ current market capitalisation, the upside should approval be granted is significant.

Definition of pivotal data

Focusing on companies currently with just one phase III product accounting for all of their current NPV, a similar analysis highlights the following 24 companies in particularly precarious position.

The problem for many companies still seeking a commercial partner for their products the desperate need for cash suggests their bargaining power is considerably weaker and with most share prices suffering heavy losses this year, some could be prime takeover candidates.

Companies with a single product NPV = 100% of total NPV (filtered on phase III products, ranked on years of cash)
  Company Product Today's NPV ($m) Latest Cash ($m) Years of Cash Market Cap. ($m)
 1  Osiris Therapeutics  Prochymal  536  11  (0.1)  606
 2  MannKind  Technosphere Insulin System  2,307  180  0.0  335
 3  Aastrom Biosciences  Bone Repair Cells  200  22  0.1  55
 4  ARIAD Pharmaceuticals  Deforolimus (MK-8669)  953  60  0.2  95
 5  La Jolla Pharmaceutical  Riquent  367  41  0.3  38
 6  Repros Therapeutics  Proellex  483  14  0.4  133
 7  Theratechnologies  TH9507  314  32  0.7  73
 8  OXiGENE  Zybrestat  431  18  0.8  27
 9  Isotechnika  Trans-ISA247  686  29  0.8  13
 10  Vanda Pharmaceuticals  Tasimelteon (VEC-162)  293  63  0.9  17
 11  Cougar Biotechnology  CB7630  715  115  0.9  487
 12  Dendreon  Provenge  786  114  1.0  439
 13  Amsterdam Molecular Therapeutics  Glybera  346  62  1.0  83
 14  Bioniche Life Sciences  Urocidin  1,967  4  1  25
 15  NicOx  HCT 3012  862  196  1.1  644
 16  Poniard Pharmaceuticals  Picoplatin  560  75  1.5  99
 17  MolMed  TK  178  63  1.5  195
 18  Affymax  Hematide  671  141  1.5  183
 19  Protalix BioTherapeutics  prGCD  557  53  1.6  91
 20  Vertex Pharmaceuticals  VX-950  4,121  822  1.6  3,712
 21  Newron Pharmaceuticals  Safinamide  257  91  1.6  119
 22  Dynavax Technologies  Heplisav  636  64  1.7  10
 23  Biodel  VIAject  1,086  71  1.9  59
 24  Infinity Pharmaceuticals  Retaspimycin (IV)  348  94  2.2  131

 

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