In a dramatic squeaker, a regulatory panel of experts last Friday narrowly recommended that an antibiotic from Cempra, an upstart developer, should be approved for use. But the 7-to-6 vote suggested an acknowledgement of what one Wall Street analyst calls a “screaming unmet” need for new treatments that outweigh the sort of safety concerns surrounding the product.
The meeting was closely watched for two reasons: Cempra pitched solithromycin as an answer to the problem of antibiotic resistance, a huge public health issue. At the same time, the Cempra antibiotic demonstrated a “significant safety signal” and is structurally similar to Ketek, an older antibiotic that caused fatal liver injuries, according to a regulatory review, which was released last Wednesday.
Investors were rattled, given that Wall Street billed the antibiotic as a blockbuster. The stock plunged 58 percent after the US Food and Drug Administration disclosed its review. Not surprisingly, the shares are recovering following the agency panel vote. The question now, though, is whether the FDA will actually approve or bounce the antibiotic, which would be used to combat community-acquired pneumonia.
Wall Street analysts are issuing mixed forecasts, especially given attenuating circumstances. Notably, there are production problems with Wockhardt, the contract manufacturer that supplied the antibiotic for clinical trial testing. Just the same, antibiotic resistance is only expected to worsen, which some believe may give Cempra a shot in the arm. Here’s what the wags are saying:
“We predict eventual approval with no additional pre-marketing studies, but extensive post-marketing studies and label warnings,” Cowen analyst Ritu Baral wrote in an investor note, adding that the manufacturing issues could still prompt the FDA to issue a Complete Response Letter, which means the antibiotic will not be approved until more work is done to satisfy FDA concerns.
She looks for the product label to be “riddled with warnings and safety monitoring,” such as a black box warning, the most serious type, which might “relegate” solithromycin to second or third status among physicians. Baral also expects a risk mitigation strategy will be needed to educate physicians, including post-marketing surveillance, and a patient database. Despite this, she projects $2.3 billion in peak sales.
Indeed, Edward Nash, an analyst at SunTrust Robinson Humphrey, wrote in an investor note that he believes Cempra “will have a serious responsibility in continuing to characterize solithromycin’s hepatic toxicity.” He noted one panel member, who voted against an approval, “explicitly stated that he would have voted yes if Cempra had had a clear strategy in how to respond to post-marketing safety findings.”
Despite such concerns, Nash continues to project the antibiotic will be launched in time for the 2017-2018 pneumonia season, but expects both intravenous and oral formulations to be affected by the safety concerns. As a result, he projects peak penetration of 5 percent for in-hospital use and 15 percent for community use in 2025, by which time he estimates US sales will be $514 million.
Baird analyst Brian Skorney is less optimistic. He drilled down a little bit into the voting. He wrote investors that the infectious disease specialists on the panel voted 5-to-4 against approval and the two liver specialists were split. The consumer and patient reps voted yes, swinging the vote in favor of approval, “but probably not having as much influence on the FDA’s ultimate decision.
“Without a clear recommendation, we could see the decision going either way but weighing against it will be the overwhelmingly definitive 12-1 vote saying that the risk of hepatotoxicity has not been adequately characterized,” he wrote. “We expect the [panel] feedback to be weighed heavily into the approval decision and would give it 50 percent odds the FDA requires additional clinical data.”
Skorney continued,“… If the FDA approves [the antibiotic], we believe the restrictions will be so severe that it will essentially make it commercially unviable. Ketek did so poorly once its label was revised, Sanofi (SNY) eventually ceased to sell it. Over time, with a sufficient number of patients, concerns over liver toxicity could diminish, but it could just as easily get pulled off the market if one or two cases occur, which certainly seems like a good possibility in light of the FDA analysis of drug-induced liver injury.”
He forecasts peak sales of less than $250 million.
Similarly, Needham analyst Alan Carr issued a tempered view, although slightly more upbeat. He looks for peak sales to reach up to $500 million in the US and from $1 billion to $1.5 billion globally. But the safety concerns will make it harder for Cempra to distinguish solithromycin from other antibiotics and also reduce the potential for the company to become acquisition bait for a large drug maker.
Carr also criticized Cempra management for exercising “remarkably poor judgment” in its decision not to disclose material adverse events observed in a trial patients with chronic obstructive pulmonary disorder, or COPD trial. “Credibility is therefore a concern,” he concluded, “but we believe there is a floor to valuation that reflects at least modest [solithromycin] commercial success.”