NuPathe: FDA CRL Doesn’t Reject NDA or Impact Potential Long-Term Value, Only Delays Launch

Posted by | September 1, 2011

The line between long-term value creation and short-term speculative trading was never as stark as it was this week on Tuesday, August 30, after life sciences partner company NuPathe (Nasdaq: PATH) announced that it received a Complete Response Letter (CRL) from the U.S. Food & Drug Administration (FDA) regarding the New Drug Application (NDA) for its migraine patch (NP101 or Zelrix).

FDA’s Response Letter
As referenced in NuPathe’s press release, a CRL is issued by the FDA’s Center for Drug Evaluation and Research when the review of an NDA is completed and questions remain, which precludes the FDA from approving the NDA at the time. In the CRL, the FDA acknowledged that NuPathe established the efficacy of the migraine patch in the overall migraine population. The CRL primarily contained chemistry, manufacturing and safety questions, which the Company believes it has, or shortly will have, sufficient data to address. The Company may conduct additional Phase I and/or non-clinical studies to address other questions. NuPathe will request an End-of-Review meeting with the Agency to discuss the CRL and the Company’s approach to resolving the outstanding issues.

The issuance of this CRL means that the Company will not launch its migraine patch in the first half of 2012, as previously announced. Instead, it will be delayed until after the FDA reviews the additional/new data, certain of which have already been submitted. In addition, this regulatory request also sets back projections for NuPathe’s revenue generation and will likely require adjustments to NuPathe’s funding requirements.

While the FDA request is disappointing, it is important to keep this development in perspective. According to a report published by the FDA in 2010 to the President of the United States and to Congress for the Prescription Drug User Fee Act, only 35 percent of NDAs and BLAs (Biologic License Applications) are approved in the first review cycle – and that number has decreased significantly over the past few years.

In NuPathe’s case, the FDA did not “reject” the NDA for Zelrix nor did its requests relate to the efficacy of Zelrix, as many bloggers and reporters stated. Instead, the FDA’s CRL only delays the product’s projected commercial launch date. In short, the FDA refined what NuPathe must do to continue to advance development and commercialization of this important and game-changing migraine therapy.

NuPathe’s Stock Price and Analyst Coverage
NuPathe shares plunged more than 50% in pre-market trading to $1.80 before partially recovering to $2.65, down 35% from Monday’s close, on volume of nearly 5.8 million shares. During the past 12 months, average daily trading volume in NuPathe shares has been 75,000 shares. On Tuesday, approximately 8,500 trades of NuPathe shares were executed. Nearly 40% of the company’s 14.6 million outstanding shares traded hands in a single day. On Wednesday, approximately 1,670,800 shares changed hands, according to Yahoo! Finance, a 607.5 percent increase over its 65-day average volume. The shares rose $.09 or 3.4 percent to $2.74.

Despite this volatility, three of the five research analysts who cover NuPathe retained their “buy” or “outperform” recommendations for PATH but lowered their price targets to an average of $12.33 from an average of $16.67. A fourth analyst downgraded NuPathe shares to “hold” from “buy”.

NuPathe (Nasdaq: PATH) Publishing Analysts are as follows:

  • Lazard Capital Markets, William Tanner, PhD, 212-632-1512 — Neutral Rating
  • Leerink Swann LLC, Joseph P. Schwartz, 617-918-4575 — Market Outperform Rating, $10 Target Price
  • Needham & Company, Elliot Wilbur, 212-705-0333 — Hold Rating
  • Stifel Nicolaus & Company, Inc., Annabel Samimy, 212-271-3823 — Buy Rating, $10 Target Price
  • Wedbush Securities Inc., Liana Moussatos, 415-263-6626 — Market Outperform Rating, $17 Target Price

Market Opportunity
NuPathe’s product candidate addresses a $2 billion segment of a U.S. market for migraine treatments estimated at $10 billion. Of the 12 million patients treated annually for migraines in the U.S., 2.4 million of them are placed on triptan therapy. Approximately 70% of these patients suffer from migraine-related nausea and vomiting that reduce or prevent the effectiveness of an oral tablet.

Safeguard has deployed $18.3 million of capital in NuPathe since September 2006 and owns 18% of its outstanding common shares.

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