Cosmo’s shares saved by no bell as FDA halts approval

The US regulator hitting your lead drug with a refusal to file is usually the signal for share price Armageddon. Thankfully for Cosmo Pharmaceuticals, today is a market holiday in Switzerland.

This stroke of luck is, however, unlikely to stop investors calling their brokers to bail them out as soon as the bell rings again tomorrow morning. With little detail on why the FDA has declined to continue its assessment of the colon precancer diagnostic drug Methylene Blue MMX, it is anyone’s guess as to how far Cosmo’s shares will fall. But the company has little else in the pipeline and few catalysts on the horizon, so it will not be pretty.

Out of the blue

What is surprising about the FDA’s announcement is that on paper Cosmo had done all the right things. The project was developed under a special protocol assessment, meaning the FDA would have had a hand in guiding the size and design of the clinical trials.

Previous clinical trials, showing Methylene Blue MMX (MB MMX, formerly called LuMeBlue) to be more effective than the current standard of care, also suggested that the product was going to sail through the approval process by its May 21 PDUFA date.

MB MMX is an extend-release formulation of methylene blue, a colouring agent used to stain the lining of the colon in order to highlight pre-cancerous lesions and polyps. In its pivotal study the diagnostic drug showed itself superior to white light endoscopy, demonstrating an improvement of almost 18% in detecting adenomas.

The waiting game

In a press statement Cosmo said the FDA had identified deficiencies with the filing that “preclude the continuation of the discussion of labelling and post-market requirements”.

For nervous investors the best-case scenario is that the delay is due to the regulator requiring more data without fresh clinical trials, or a clarification on the data it already has. Berenberg analysts believe this would only result in a 12-month delay.

Observers might be tempted to point to Alkermes’s recent exchanges with the FDA, which resulted in the group getting the regulator to reverse its refuse-to-file decision for depression drug ALKS 5461 within the space of two weeks, putting its approval back on track.  

However, if the FDA does ask for more clinical data, MB MMX’s market debut could be delayed by several years. The worse-case scenario is an outright rejection. Fortunately for Cosmo analysts see this as an unlikely outcome, as MB MMX’s active ingredient, methylene blue, is already used intravenously in emergency settings, and the MMX delayed-release technology used in the product is also employed in Cosmo’s approved treatments for ulcerative colitis, Uceris and Lialda, indicating it is safe.

Facing the future

Even with the best case outcome, Cosmo can ill afford the delay. MB MMX was forecast to be the group’s biggest growth driver, with consensus sellside forecast from EvaluatePharma putting 2024 sales at $605m for Cosmo. 

With MB MMX approval on hold those sales are distant dream and Cosmo will have to figure out what to do with an expensive and underemployed sales and marketing team at its US subsidiary Aries Pharmaceuticals, which was specially formed to sell its GI products in America.

Unless Cosmo can indeed do an Alkermes, its future will be less about drug discovery and all about cost cutting.

To contact the writer of this story email Lisa Urquhart in London at lisau@epvantage.com or follow @ByLisaU on Twitter

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