FDA PDUFA date decision takes the heat out of NeurogesX shares.


Having already secured European approval for its novel Qutenza pain patch, NeurogesX was hoping to go for the double late next week with the US approval of the chilli pepper-based drug to treat post-herpetic neuralgia (PHN), a painful condition which often follows shingles. Unfortunately, yesterday the FDA burst this bubble with the announcement that it had moved the group’s August 16 PDUFA date to November 16 to allow it to evaluate a last minute study submitted last month.

Today, in early trading shares in the California-based company were 8% lower at $7.29. The share price fall is unsurprising, given that the drug is the most valuable one in NeurogesX’s pipeline, worth $249m, a sum that is higher than the group’s previous market cap of $139m. However, the fall looks a little harsh given the delay is only three months.

Major amendment

This setback had its origins in May, when the group was informed by the FDA that the pre-anaesthetic cream of 4% lidocaine, that is used to counter the burning sensation of the capsaicin patch, was not an approved over-the-counter anaesthetic and further studies would be required with an approved numbing agent to determine similar tolerability.

At the time it looked as if NeurogesX had dodged a delay bullet when the FDA agreed to its proposed study using an approved combination of 2.5% lidocaine and 2.5% prilocaine, and also with a surprisingly low number of only 24 trialists. The results of this small substitute trial read out on July 24 and showed that all patients were able to wear the patch for the requisite 60 minutes.

While it may have been a little optimistic to believe that the ever cautious regulator - which is also notorious for delays to PDUFA dates due to resourcing - would have had the time to evaluate this new data, shares in the company had been rising on the hope that Qutenza would win approval next week.

Instead, the study extension has been classified as a major NDA amendment. Submitting a major amendment within three months of a PDUFA date means that the regulator can automatically add a three-month extension to a review.

Certain advantages

Investors may obviously be punishing NeurogesX for the delay, but they should take heart in the fact that the drug is likely to get approval when it comes back before the regulator in November. Analysts had been forecasting combined sales and royalties of $248m by 2014 and if the delay is only three months then these should not change too much.

Qutenza contains synthetic capsaicin which is applied as a patch directly onto the skin at the site of pain, in patients with PHN. In previous clinical studies patients who applied the patch for 30 to 60 minutes experienced pain relief for 12 to 18 weeks, offering an advantage over daily, systemically-acting pills and their related side effects.

As a patch Qutenza avoids many of the problems associated with oral pain medication, which act systemically and can cause dependency and be abused. These advantages may be something that the FDA, which is tightening up on the prescription criteria for opioid-based pain killers, may appreciate, as it gives physicians non-narcotic treatment options.

Previous good form

Qutenza is already approved in Europe, which could provide some reassurance about its chances on the opposite side of the pond.

Thanks to this approval NeurogesX should also be able to weather the delay, as in July Astellas Pharma took up the option to license the drug in Europe and select parts of the world outside the US. Astellas paid NeurogesX $42m upfront, and promised a further $97m for sales based milestones, and payments for the liquid formulation of the drug, as well as double digit royalties on sales. The Japanese group also secured the option to license NeurogesX’s follow-on patch for $7m.

With the group confidently predicting that the launch of the product will happen by the middle of next year and the remaining $19m of cash on the balance sheet almost certain to get them to that point, braver investors might want to take a punt on weakness in the share price now to enjoy next year’s upside. The only thing that might burst this new bubble is the FDA asking for larger anaesthetic trials.

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