FDA rejection piles on the pain for Pharmaxis
Pharmaxis closed on Thursday at 68¢, losing 45.6 per cent in intraday trading, after an independent expert advisory panel to the Food and Drug Administration (FDA) unanimously voted negatively on three areas of a review for Bronchitol, developed in Australia to treat cystic fibrosis patients with lung difficulties.
"I was surprised," said BBY healthcare and life sciences analyst Dennis Hulme. "Getting past the regulators is very challenging. It's tough and it's certainly very disappointing."
The negative review means it is likely the FDA will not approve Bronchitol for marketing in the US when it meets on March 18, analysts said.
The news came as Pharmaxis said it had signed a financing agreement with NovaQuest Pharma Opportunities Fund III, which would see NovaQuest invest up to $US40 million in Bronchitol for the European Union and US markets.
The setback was the latest in a string of disappointments to hit the sector in Australia. In mid-January, QRxPharma said it would resubmit its pain drug MoxDuo for approval by the FDA, after being knocked back by the regulator in June. Biota also stumbled at the FDA approval hurdle for anti-flu medication Relenza before eventually gaining approval from the body.
RBS Morgans healthcare and biotechnology analyst Scott Power said the review was a "disappointing result" for Pharmaxis and it was not yet known what further requirements the FDA could set out for the company. "Until we know what they need to do, the share price is going to struggle to move ahead," Mr Power said.
"If they need another trial done, it could take another 12 months or more. If they want to recap the data and restrict the label to 18 years and older, that might take less time. It's really hard to say."
Mr Hulme said it was possible Bronchitol could be approved only for adults, a move that would match the same conditions set out for the drug in Europe.
In May 2011, Pharmaxis shares crashed after European health regulators initially rejected its marketing application for Bronchitol. But the shares regained some ground after the company won an appeal.
Mr Hulme said the decision was reflective of the difficulties encountered by the biotechnology industry across the world, adding that the big pharmaceutical companies had their run of failures as well.
Analyst Graeme Shaw of fund manager Allan Gray said while stocks for companies in the biotechnology industry in Australia were often small, liquid and had a high risk of failure, there were very few large investors specialising in the biotech sector.
"We thought it was a space where there may well be opportunities that would have been overlooked."
Dr Shaw said while significant value in Pharmaxis was lost on Thursday, he said there was still value in the company given its cash reserves and sales of Bronchitol in Europe.
Frequently Asked Questions about this Article…
Pharmaxis shares dropped more than 45% (closing at 68¢) after an independent expert advisory panel to the FDA unanimously voted negatively on three areas of the review for Bronchitol. Analysts said the negative review makes it likely the FDA will not approve Bronchitol when it meets on March 18, which triggered the sharp fall in the share price.
The independent expert advisory panel to the FDA unanimously voted negatively on three areas of the Bronchitol review. The article does not detail the specific technical reasons, but the unanimous negative vote indicates significant regulator concerns and raises the prospect that the FDA may withhold approval.
Not necessarily, but the negative advisory review makes US approval less likely in the short term. Analysts noted the FDA could require additional trials (which could take 12 months or more) or accept a restricted label (for example, adults only). The company will need to learn what further requirements the FDA sets out before investors can assess the chances of approval.
The setback increases uncertainty around Bronchitol’s US prospects, which pressures the share price until regulatory requirements are clarified. However, Pharmaxis has a financing agreement with NovaQuest Pharma Opportunities Fund III that could see up to US$40 million invested in Bronchitol for EU and US markets, and the company also has sales in Europe and cash reserves that analysts say still provide some value.
Pharmaxis signed a financing agreement with NovaQuest Pharma Opportunities Fund III that would see NovaQuest invest up to US$40 million in Bronchitol for the European Union and US markets. That funding is intended to support commercialisation and regulatory activities for Bronchitol in those regions.
Yes. Analysts said it’s possible Bronchitol could be approved only for adults — which would match the conditions set in Europe — or the company could choose to recapitulate data and seek a narrower label. The article also notes that European regulators initially rejected Bronchitol in 2011 but Pharmaxis later won an appeal, showing regulatory outcomes can change.
The article highlights that biotech stocks in Australia are often small, liquid and carry a high risk of failure. Setbacks at regulators are common and can dramatically affect share prices. Analysts caution that until regulatory requirements are clear, share prices can struggle to recover, but some fund managers also see potential opportunities for investors who understand the sector’s risks.
The article mentions QRxPharma, which said it would resubmit its pain drug MoxDuo to the FDA after an earlier knockback, and Biota, which initially stumbled at the FDA approval hurdle for anti-flu medication Relenza before eventually gaining approval.
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