The final piece of the puzzle fell into place for NeurogesX earlier this week when the FDA granted approval for its pain patch, Qutenza, to treat postherpetic neuralgia (PHN). The company and its investors’ attention will now turn to commercialisation, a process that throws up a whole new set of challenges for the company.
With approval also in place in Europe and its marketing partner for the region, Astellas Pharma, already preparing for launch, all eyes will be on initial sales figures as they start to roll in next year. The company is still mulling over finding a partner in the US, but comments made on a conference call this week suggest this is unlikely to happen in the near future. News that could materialise soon is a fund raising. Although NeurogesX has enough money in the bank to launch the product in the first quarter of next year, further funds will be required at some point, and with the share price at a two-year high the time looks ripe for a share sale.
Shares in the company touched $8.80 this week and have largely held their ground since, giving the company a market value of $155m.
The company ended the third-quarter with $57m, enough for the time being, but not enough to last until revenues start moving to the bottom line. On the conference call following FDA approval management said they were “focused on ways to enhance the balance sheet”; whether this will be achieved via an equity offer or other means remains to be seen.
Funding could come via any upfront fee from a US marketing deal, however, comments from Anthony DiTonno, chief executive, suggest this is unlikely to happen at the moment. He said because the doctors who would prescribe Qutenza are highly concentrated it is proving difficult to carve the market up, so at this point NeurogesX is preparing to go it alone.
Qutenza contains synthetic capsaicin, the substance in chili peppers that gives them their heat, which is applied as a patch directly onto the skin at the site of pain. Having applied the patch for 30 to 60 minutes, patients in clinical trials experienced pain relief for 12 to 18 weeks, offering an advantage over daily, systemically-acting pills and their related side-effects, and a non-narcotic treatment option.
Despite clear advantages, the launch will not be without its hurdles. Prior to application a topical anaesthetic is used to dim a slight burning sensation whilst the patch is on the skin, and patients have to be in a doctors office for two hours for the administration process, which incurs a cost that has to be managed.
On the call Mr DiTonno said that the company would be heavily focusing on physician education next year, as part of a strategy to achieve a “quality rather than quantity” launch.
This suggests that sales could take a bit of time to gather steam, whilst doctors and patients grow accustomed to the product and this procedure.
Some analysts' sales forecasts suggest that Qutenza is going to streak from the blocks, but this might not be the case. The launch of Lidoderm could be informative here, although it should be remembered that the Endo pain patch is daily and a different proposition to Qutenza. The product did not get off to a swift start, launched in 1999, sales that year totalled $6m, and took five years to breach the $100m mark. The product is very successful now, sales last year totalled $765m.
Currently, analysts see Qutenza sales of around $18m next year, according to consensus data from EvaluatePharma, although individual numbers differ fairly widely. For example, Wedbush Morgan has pencilled in $11m whilst Roth Capital has estimated $30m, which looks ambitious.
Further crucial information is needed to make more accurate forecasts; the price of the product for a start. As the launch goes on analysts will be interested to learn of any off-label use; although Lidoderm is only approved in PHN it is widely used to treat other causes of pain.
Analysts have pencilled in Qutenza sales of $208m by 2014, plus royalties of $40m, figures that will no doubt shift over the coming months. These forecasts value the product at $271m, according to EvaluatePharma’sNPV Analyzer, well above the company’s market value and suggesting that not everybody is expecting sales of this stature, at least not in the short term.
Managing these expectations is vital for NeurogesX now, as it prepares to receive the real market’s views, those of doctors, patients and payers, of its product.