FDA rejection means NuPathe has a longer path to market

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NuPathe’s regulatory stumble today sets back ambitions to launch its Zelrix migraine patch in the first half of 2012. With commercialisation worries already present, the FDA’s complete response letter raises doubts over whether the Pennsylvania company will be able to bring its only clinical stage product to market at all (Event - Beyond Zelrix FDA decision lies commercialisation worries for NuPathe, August 5, 2011).

Shares plunged 34% to a record low of $2.66 in early trade today, taking NuPathe’s market capitalisation to below cash levels. Investors were not comforted by the group’s assurances that the FDA’s questions can be addressed by data the company already has or will have shortly, especially given that NuPathe acknowledged the possibility that new phase I trials may be necessary.

Questions

Zelrix is a transdermal form of the well-known migraine drug sumatriptan, the active ingredient in the former GlaxoSmithKline blockbuster Imigran, which lost patent protection in 2009. As a generic, sumatriptan is now on the market in various injectable, transmucosal and oral forms.

NuPathe reckons its patch, which uses electrical charges to surmount the compound’s inability to be passively absorbed through the skin, will be an alternative for patients suffering from nausea and vomiting. In addition, a patch is hoped to be superior in patients with poor gastric absorption without the cardiovascular events and other side effects of triptan injections.

As an established compound following the new drug application pathway, Zelrix was not subject to the advisory committee scrutiny that a new molecular entity faces, and thus some of these safety and efficacy claims have not been discussed publicly.

The company’s press release announcing the complete response letter states that the FDA recognises the efficacy of Zelrix but has outstanding questions on chemistry, manufacturing and safety; additional phase I or non-clinical trials may be required to satisfy the regulator.

Worries

With $36m cash in the bank as of June 30 and a commitment from Aspire Capital Fund for a purchase of up to $30m in shares during the next two years, NuPathe is well-positioned to complete any additional clinical work – especially given that it can put off plans to hire 100 sales representatives for its planned solo launch, a commitment of up to $30m a year.

However, there is no doubt that investors are right to be worried about the future of Zelrix. For one, any partnership interest is likely to have vanished until NuPathe has the FDA’s stamp of approval, which means all plans to commercialise the patch will have to continue under the assumption of a solo launch and hiring that expensive sales force.

For another, the FDA's stance on re-formulated or re-purposed drugs is increasingly strict – Eisai’s Aricept patch, Transcept’s Intermezzo sleeping pill, and most recently Adventrx’s Exelbine have all stumbled at the PDUFA hurdle this year.

In addition, competing in the increasingly genericised migraine space was also going to be a challenge. NuPathe’s planned launch in the first half of 2012 would have put it ahead of patent expiries for triptans Zomig and Maxalt; assuming a bare minimum of six months of delay would lose Zelrix valuable time in establishing itself before those two events.

Equity analysts had valued Zelrix at well above the company’s market capitalisation - $454m, nearly eight times the $60m value investors had put on NuPathe at Monday’s market close.

Thus today’s setback was every bit as disastrous as could be expected. NuPathe could yet come back; if approval eventually comes, but Zelrix will have lost precious time.

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