FDA panel something to cry over for River Plate as ISTA celebrates

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While ISTA Pharmaceuticals was wiping away tears of joy at the unanimous recommendation for approval from an FDA advisory committee for Bepreve, its drug for itchy eyes caused by allergy, the same panel caused privately held River Plate Biotechnology to shed a few bitter tears of disappointment after it failed to win a positive opinion for its dry eye drug, Rejena.

Despite the largely expected thumbs up from the committee for ISTA (Event - FDA advisory committee will help ISTA see the future more clearly, June 13, 2009), the positive recommendation added to the already impressive gains the stock has achieved over the last few weeks, with shares rising 11% after the verdict was announced on Friday to $4.69. This means that ISTA’s stock has now risen more than six-fold since the start of the year.

Low impact

There was, however, little change in the shares of Swiss group Alcon, which has signed a licensing deal with River Plate to sell Rejena. The impact on Alcon is not thought to be significant, although a positive ruling could have eventually given the group access to a drug for the 5 million dry eye sufferers in the US.

In what looked like rather heavy criticism of River Plate’s application, one committee member described the first study submitted by the group as invalid and the second as flawed. The overall conclusion of the committee was that the trials were not adequate to prove that Rejena was effective, pretty much quashing any hopes of the drug getting approval without more clinical trials.

Further upside

In contrast Bepreve is now widely expected to pass its next test, a September 12 PDUFA date with flying colours. If this does happen it will be a major boost to the company, as the drug is the second most valuable in the pipeline and set to add $80m to the company coffers by 2014. 

If it is approved many are predicting a launch in January, which will give the drug plenty of time to take advantage of the beginning of the spring allergy season. The drug should also prove an effective competitor to Alcon’s current market leading product Patanol, given its rapid onset of action, protective effects on the eye and low side effect profile.

While shares in ISTA have been one of the best performers among the small cap biotech stocks and some investors might be tempted to sell, as there is likely to be little news between here and September, there could be more medium term upside to come as the group looks to gain approval for its once-daily formulation of it best selling drug Xibrom, a treatment of ocular pain and inflammation associated with cataract surgery. The sNDA is expected to be filed in the second half of the year and the drug could be on the market by the end of next year, as could another big growth driver, T-Pred, an ocular inflammation product.

Another reason to hang onto the shares could be that with all its potential new, marketed leading products the group, whose market cap is still only $156m, far outstripping its total NPV of $550m, might become an attractive bid target. Alcon, which is now effectively down a new product offering and a market leader in eyecare would be an obvious choice, but as to whether the group will be making acquisitons until its stake sale with Novartis is sorted out is debatable.

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