US approval only the beginning for Labopharm’s Oleptro

Having secured FDA approval for its drug, Trazadone OD, now known as Oleptro, an even bigger task now faces Labopharm: making the drug a commercial success. While shares in the group may have risen by 5% in early morning trading to C$2.87, keeping the stock up, which is already 31% higher this year, will depend on the group’s commercialisation strategy.

Today, in a press release Labopharm said it was actively exploring several alternatives for launching the drug in the US. The options currently on the table include out-licensing, while retaining the rights to some form of co-promotions, through to a full co-promotion arrangement with Labopharm sharing sales and cost of sales with a partner. But rather worryingly for investors the group refused to commit to a timetable for when these talks might be concluded and instead offered the vague time frame of “in the near term”.

As previously pointed out by EP Vantage, without a partner with at least some marketing muscle Labopharm, which has $26m in cash and $26m in debt on the balance sheet, could struggle to actually get the product on pharmacy shelves and doctors’ prescription pads, primarily due to the drug’s heritage (Event - Labopharm awaiting second FDA decision on depression pill, February 1, 2010).

Oleptro is made up of a well known depression drug, trazodone, that has been off patent for several years. What differentiates the product is Labopharm’s proprietary Contramid technology, that allows once-daily dosing and avoids the side affects of generic trazodone, which include weight gain, sexual dysfunction and sedation.

The hard part

While these are all positives, the benefits of the drug that the group is loudly proclaiming may not be enough to persuade doctors to switch patients from cheaper generics, including trazodone. The group’s only real hope is finding someone with the kind of marketing budget to sell theses positives.

Bigger pharma groups have historically steered clear of reformulation products due to the problems with reimbursement and commercialisation, problems that Labopharm’s other reformulated drug, Ryzolt, is currently facing.

So while today’s approval is a short-term positive for the group the hard part is yet to come and if a partner fails to materialise, or is a disappointment, the shares will fall.  

Product Oleptro (Trazodone OD)
Company Labopharm
Market cap $149m
Product NPV $112m
% of Mkt Cap 75%
Event Summary PDUFA decision
Decision Feb-03

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