Omapro adcom surprise sends ChemGenex shares tumbling

For a second time in two months, FDA action has hammered ChemGenex Pharmaceuticals’ share price. Yesterday it was an FDA advisory committee that rather than voting on the safety and efficacy of the company’s lead drug, the chronic myeloid leukaemia (CML) treatment Omapro, asked the agency to review the diagnostic tests that identify patients suitable for the drug (Omapro's steady march snowed by FDA doubts, February 9, 2010).

ChemGenex shares slumped 36% today after the oncology adcom 7-1 vote yesterday. In a conference call, executives in the Australian company complained that the adcom was not asked to vote on Omapro’s safety and efficacy profile. Rather, the question put to the expert panel was whether the FDA should review and correlate the tests used to identify CML patients with the Bcr-Abl T315I mutation alongside clinical trial results before Omapro can be approved.

Share price steadies

The damage could have been worse. ChemGenex opened at 28 cents, down 59% on the Monday close, and rallied to a close of 44 cents. Notably, the company conference call occurred at 11am Sydney time and the stock climbed from 32 cents to 40 cents in the hour following its start, representing half of its intraday gain.

In the investor conference call, Greg Collier, ChemGenex’s chief executive, said it was not clear how long the review would take, but said he did not expect the delay to be significant and believed it would continue in parallel with discussions on drug approval. Company executives are meeting with FDA officials on April 9 to discuss the validation procedure and they may have a clearer idea then, he said.

Collier added that he did not believe new trials would be necessary and that the FDA wanted to know if the tests were validated and reproducible. The company has stored tissue samples from trial subjects to assist in the validation process.

Swift run to approval slows

A first-in-class cetaxine, Omapro (omacetaxine mepesuccinate) targets those CML patients with the T315I mutation, which makes them resistant to tyrosine kinase inhibitors such as the first-line treatment Gleevec and the second-line therapies Sprycel and Tasigna. Oncologists have no further treatment options with this patient population, which may number around 2,000 in the US and Europe.

Omapro had received priority review from the FDA and appeared to be headed to a swift approval. Indeed, it was filed in September and accepted in November, and had been scheduled for a February 10 adcom and a March 8 PDUFA (Event- ChemGenex's Omapro awaiting panel scrutiny, January 15, 2010). However, snowstorms in Washington delayed that adcom and in addition some pointed questions in the adcom briefing material resulted in a stock dive.

EvaluatePharma has just a single sales estimate of $95m in 2010 and $96m in 2011, from RBS Morgans for Omapro, giving it a net present value of $81m, or 46% of ChemGenex’s market capitalisation as of Monday.

ChemGenex had A$18.7m ($17.2m) in cash at the end of 2009. Most of that cash comes from a deal to license the drug to Hospira in Europe, where it expects an agency review by Q4 2010, along with the Middle East and parts of Africa, for A$17.5m upfront.

Whilst the company said it does not expect a significant wait, it may not be able to wait very long. As it has made the decision to commercialise the drug itself in the US, it clearly needs to preserve as much cash as possible to achieve that. European approval undoubtedly will bring about an additional milestone, and although the company points out that European and US regulators move independently of each other, the EMA will be fully aware of the FDA's stance and issues arising. As such, the company could do without any more regulatory surprises along the way.

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