Caught in crossfire, Depomed seeks to soothe Serada concerns

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The FDA’s surprise attack on Xenoport's restless legs syndrome candidate Horizant caused some collateral damage in the neuropathic pain space. Depomed shares lost 20% of their value yesterday as investors rushed away from Serada, its gabapentin-based drug in trials for post-herpetic neuralgia (PHN) and postmenopausal hot flashes, because of concerns about cancer safety signals.

While Depomed executives were quick to stress that Horizant, formerly known as Solzira, was a different formulation from Serada, the FDA’s rather sudden raising of the development of pancreatic acinar cell tumours in rats for Horizant augured rather poorly for new gabapentin-based products. Although gabapentin has been used since 1993 for epilepsy, the decision to reject Horizant suggests that the FDA’s risk-benefit scale is tweaked rather differently when bringing the product forward in pain (XenoPort reels from Horizant rebuff, suspends pain research, February 18, 2010).

Seeking differentiation

Executives from the two companies could not have taken different tacks. The FDA rejected Horizant’s new drug application on Wednesday, and on Thursday XenoPort executives announced they were delaying all work on Horizant, also known as gabapentin enacarbil, in neuropathic pain indications including PHN and diabetic neuropathy.

In a conference call today, however, Depomed executives said they plan to submit a new drug application this quarter in PHN and saw no reason why Serada, also known as DM-1796, would be rejected on the same safety grounds because, as they will not file the drug as a new chemical entity, they are able to use existing gabapentin safety data in their submission. Xenoport was required to do its own carcinogenicity study on rats in its submission to the FDA.

Those calming words did not appear to invoke new faith in the product. Depomed shares slid from $2.50 to $2.40 in the first hour of trading today and show little signs of recovery so far.

Safety concerns

Gabapentin's cancer signal is well-known and in fact is detailed in the Neurontin product information pack. However, epilepsy can be a disabling condition with pronounced effect on quality of life and is hard to control without side effects, so it may have been subject to a higher risk threshold in this indication.

If the risk-benefit profile has changed, the FDA probably needs to also take action for Neurontin and generic gabapentin, according to Depomed executives.

The company was also quick to note that Serada may address unmet medical needs and quality of life issues in the PHN and post-menopausal indications. In PHN Lyrica is currently the gold standard treatment, yet gabapentin has a superior side effect profile, particularly important in the elderly patients that typify the PHN population, and in post-menopausal hot flashes the chief remedy is hormone therapy, which has cancer and cardiovascular signals in humans.

The two companies are taking similar approaches to reformulating gabapentin for new indications. Depomed has created a "gastric retentive" formulation to allow for once-daily dosing. XenoPort manufactured a prodrug that also aims to improve bioavailability in the digestive tract. The big difference: Horizant was filed as a new derivative while Serada is intended as a standard NDA plus proprietary delivery.

Vital

For Depomed, it is a product worth fighting for. In November 2008 the company licensed North American rights to Serada in neuropathic pain indications to Solvay Pharmaceuticals, now part of Abbott Laboratories, for $25m upfront, $370m in development and commercial milestones and 14-20% royalties. It has licensed Serada in post-menopausal hot flashes to PharmaNova.

EvalutePharma’s NPV Analyzer puts a net present value of $858m on Serada for Depomed, more than 6 times Depomed’s current market capitalisation of $130m. That is also more than four times the combined NPV of Depomed’s two marketed drugs, Glumetza and ProQuin XR.

The drug has taken some knocks to forecasts, however, as phase III trials in both of its planned indications have come up short, forcing delays in its submissions to the FDA (Depomed blames placebo effect for plunge from glory, October 13, 2009).

The delays are reflected in its share price, which has tumbled from a three-year high of $6.36 on October 9, 2009, after disappointing phase III trial results in the hot flash indication were announced.

The FDA’s Horizant decision has cast a shadow over the use of gabapentin in pain-related indications this week, and investors seem to have responded by running toward the sunshine. Depomed’s executives have tried to clear away some of those clouds, but it appears only a positive decision for Serada will satisfy the market.

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