Pain Therapeutics Ends Year Flush, “Slightly Ahead” Of Alpharma

Abuse-deterrent pain drug market big enough for all, analyst tells “The Pink Sheet” DAILY.

With a second-quarter NDA filing for its abuse-deterrent gel capsule Remoxy (oxycodone) on track to reap another $15 million from King Pharmaceuticals, Pain Therapeutics ended 2007 with a strong bottom line - $205 million, debt free.

"The cash proposition is something that people overlook," Russell McAllister, analyst with Merriman Curhan Ford told "The Pink Sheet" DAILY. "Most of their competitors are starved for resources."

Fourth-quarter earnings fell somewhat below consensus estimates, Pain Therapeutics reported Feb. 7, with revenues of $14.1 million and earnings per share of 2 cents, compared with $14.8 million and 4 cents expected by Wall Street.

Remoxy hit statistical significance last month in a Phase III trial that tested the oxycodone product in patients with moderate-to-severe pain associated with osteoarthritis of the knee or hip (¹ (Also see "Remoxy NDA Set For Q2 Following Positive Phase III Results" - Pink Sheet, 7 Dec, 2007.)).

San Mateo, Calif.-based Pain licensed Remoxy from Durect, of Cupertino, Calif., and sub-licensed marketing rights to King.

"Behind Remoxy, they've got a couple of other, similar pain products in development with King, putting popular opioids in the same vehicle," McAllister said. "The bar is extremely low. If they get Remoxy through, obviously the vehicle works and is safe."

Other opioids lack the perceived cloud of potential patent problems hanging over Purdue Pharma, of Stamford, Conn., which sells oxycodone as Oxycontin . That risk is much overplayed, McAllister said.

Coming up fast in the same space is Bridgewater, N.J.-based Alpharma's ALO-01, which pairs an extended-release opioid with a sequestered core of naltrexone, an opioid antagonist. The company is expected to file for FDA approval in the first half of this year. (² (Also see "Alpharma Plans NDA Filing For Abuse-Deterrent Opioid In 2008" - Pink Sheet, 30 Nov, 2007.)).

"I would say Pain Therapeutics is slightly ahead," McAllister said. "Frankly, it probably doesn't matter much, one way or the other."

Getting exact numbers isn't easy, since Purdue is privately held, but the oxycodone market amounts to at least $1 billion.

"If somebody like Pain Therapeutics only gets 10 or 20 percent of the market, that's a huge number for a company valued where it is," McAllister said. The company's market cap is about $397 million.

"They have clean royalties with no sales expenses," he said. "They can just sit back and collect those monies if they want to, instead of continuing to invest in the pipeline, though I would not expect them to do that."

At the early stage, Pain has the radiolabeled monoclonal antibody Re-188, for metastatic melanoma, an indication strewn with late-stage failures that include Princeton, N.J.-based Medarex's CTLA-4 inhibitor ipilimumab, partnered with Bristol-Myers Squibb, of New York. The companies plan to file the BLA anyway, hoping FDA will be persuaded by the totality of data. (³ (Also see "Medarex/Bristol Plan To File Ipilimumab For Metastatic Melanoma Despite Phase II Failure" - Pink Sheet, 11 Dec, 2007.)).

A "very limited pool of data" backs Re-188, McAllister said. "In fact, it's virtually nonexistent," though research in mice appears promising.

Like one of Medarex's missed-endpoint trials, Pain's Phase III with Remoxy was conducted under a special protocol assessment - a consideration that McAllister called "huge" when evaluating the bid for an abuse-deterrent pain drug.

That push has included Pain's Oxytrex , a combination of oxycodone and naltrexone, "stalled in Phase III pending some sort of intellectual breakthrough with the FDA" concerning how to run the trials, McAllister said (⁴ ).

Enrolling enough patients and keeping them on the drug long enough to measure addiction risk has proved challenging, he noted. "It's also unethical. How do you run a trial intending to get people hooked, and how do you measure whether or not they're hooked? The company and the FDA together haven't been able to figure it out."

With Remoxy, "all they're going for is a chronic-pain label with some abuse resistant properties," McAllister said. "It doesn't seem like they're making an explicit claim about reducing abuse, which is extraordinarily difficult to demonstrate. If you're enthusiastic enough, you can figure out how to circumvent any of these [delivery methods]."

Burlingame, Calif.-based Poetic Genetics licensed its gene-integration technology for hemophilia last year to Pain, which plans to invest as much as $15 million this year in advancing that technology along with the melanoma drug. (⁵ (Also see "Pain Therapeutics Sees Potential Hemophilia Cure Entering Clinic In 2008" - Pink Sheet, 23 Mar, 2007.)).

"I would call them interesting and under-appreciated," McAllister said of the two candidates.

-- Randall Osborne ([email protected])