Last week, the FDA had two major decisions to make regarding troubled drug maker Valeant Pharmaceuticals Intl Inc (NYSE:VRX). The first was whether or not to approve Relistor, a combined effort between Valeant and Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX). The second, the same decision for Vesneo, a glaucoma drug that Valeant has developed by way of its subsidiary Bausch + Lomb.

Here’s what happened, and what to do going forward.

DRUG: Relistor

COMPANIES: Valeant  Pharmaceuticals Intl Inc (NYSE:VRX)and Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) 

PDUFA: July 19 2016

OUTCOME: APPROVED

The drug

Relistor is an opioid induced constipation (OIC) target, a drug that basically counteracts the side effects of yet another drug. The version that Valeant was trying to get approved was an oral version of the currently available subcutaneous injection version. Opioids work by binding to opioid receptors in the central nervous system, and stimulating an analgesic response through the excitation of various neurotransmitters. However, they also bind to the comparable receptors outside of the CNS – many of which are in the gastrointestinal tract. This binding essentially paralyses the lining of the GI tract, meaning it doesn’t push stools through as it would in a normal transitory environment.

Relistor is a targeted opioid receptor inhibitor, which selectively binds to the receptors in the GI tract, without affecting those in the CNS. By binding to these receptors, it blocks the opioids from doing so, and they pass harmlessly through the system. In turn, the lining is able to perform its usual motor-promotion to get stools through effectively and relieve constipation.

As mentioned, the current version is a subcutaneous injection version. This is inconvenient, and can induce adverse events related to entry site irritation, etc. It also doesn’t really promote administration adherence. Valeant’s alternative is an oral administration version, which is far easier to administer for obvious reasons, and as such, far more convenient and easy to stick to from a dose regimen perspective.

The data

The data on which the NDA was based came from a randomized, double-blind, phase III trial that compared the oral Relistor formulation to placebo in a patient population of 201. All had chronic non-cancer pain, which is the group that the company is targeting. (Cancer related pain/constipation requires a different treatment). In a 450 mg treatment arm, the drug demonstrated statistically significant improvement in rescue-free bowel movement (RFBM) within 4 hours of administration, across a 28 day treatment period, when compared to placebo. An RFBM is when no laxatives were taken for 24 hours.

This was the primary endpoint of the trial, so it was a hit. The safety profile of the drug came in as comparable to the placebo arm, which was a bit of a bonus, as the subcutaneous version has a pretty severe adverse events profile. Chances are that the actual safety profile is more in line with the sub cut version than the trial suggested, but it didn’t do the NDA any harm.

The Market

In a recent report, analysts predicted that the global market for OIC treatments will reach $2.7 billion by 2022, with the US accounting for a little over $1.16 billion. The same report suggests that the primary contributing factor to the growth (it was a $1.9 billion market at the time the study was put together, 2014) would be the introduction of easier administration alternatives to the then current options, and lists Relistor as one of these alternatives. It’s reasonable to assume that the company will be able to achieve a relatively high level of penetration – 40-70% – and in turn, suggest that the potential peak US sales by 2022 come in at anywhere between $650 million to $1.1 billion.

The Response

Valeant gained around 5% on the announcement that the agency had approved Relistor, but the momentum was tempered somewhat as markets looked to the drug we are going to discuss next as either having a compounding or a limiting effect on the upside potential. Progenics, as expected, was the big winner of the day, gaining close to 25% on the announcement.

DRUG: Vesneo

COMPANYS: Valeant

PDUFA: July 21 2016

OUTCOME:DECLINED

The drug

This one is an eye drop designed to treat, or more specifically reduce, intraocular pressure (IOP) in patients with glaucoma. IOP is symptom of glaucoma, and while in itself it is symptomless (for the most part) it can damage the optic nerve over a period of time and eventually lead to blindness or severe vision loss. Vesneo is a liquid formulation of latanoprostene bunod, which is a nitric oxide-donating prostaglandin F2-alpha analog. We don’t really need to go into too much detail on the translation of this jargon, as it doesn’t make for light reading, but it works to decrease IOP. Scientists aren’t 100% sure why this is the case, but they believe its linked to aqueous humor outflow, or the flow of the fluid inside the eye beneath the sclara. In glaucoma patients, for some reason the aqueous humor doesn’t drain well, and the build up causes pressure. Latanoprostene bunod increases the drainage, or at least that’s the hypothesis.

The Data

The data on this one was also pretty good. It derived from a Phase III called LUNAR and another called APOLLO, which saw altogether 840 patients tested. The drug went up against an already approved treatment called Timoptic. The primary endpoint in both trials was the mean reduction in IOP at various time points over three months of treatment. In both of the studies, Valeant’s drug translated to a mean reduction in IOP of 7.5 mmHg to 9.1 mmHg between week two and week twelve, coming in as statistically superior to Timoptic in both instances. Safety data didn’t really cause any issues, outside the normal irritation, redness etc.

The Market

The estimated market for this drug, if it had picked up approval, would have depended on the labeling to a certain degree. For this reason, analyst predictions were pretty widespread across the estimates. The general consensus, however, was that the company would be able to pick up a lower threshold of $500 million, and at the high end, it could be a blockbuster ($1 billion plus) product

The outcome and response

Unfortunately for Valeant, the FDA issued a complete response letter (CRL) saying that it could not approve the drug at that time. Markets sold off on Valeant as a result, and the company pretty much returned the gains it made on the back of the Relistor approval to the market.

The reason for the CRL is not yet known, but we do know it relates to the manufacturing element of the NDA, rather than the drug itself. This is good and bad. It’s good, because it means that the drug is deemed safe and effective by the agency. It’s bad, because rectifying manufacturing deficiencies can be expensive and time consuming. The only specifics we have right now are that the problem is rooted in a Bausch + Lomb facility. Valeant is going to sit down with the agency over the coming weeks and see if it can get a quick resolution.

Earlier this year, Opko Health Inc. (NASDAQ:OPK) had the same issue with its hyperparathyroidism vitamin D deficiency drug Rayaldee, and it was solved in a matter of weeks. That may not be the case with Valeant and Vesneo, but the drug will eventually be approved in any case. Valeant is low enough and the biotech sector trending enough at this point to warrant a cautious buy for Valeant as a minor hold in a biotech portfolio. The tumult with the company appears to finally be receding and the stock looks to have finally bottomed.

It’s been a big week so far for Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and things might still get better. The company is up close to 4% early trading in the US. If there was ever a company that needed a bit of a sentiment boost, it’s Valeant this year. With the shift in sentiment could come a closing of the gap on the company’s 2015/2016 collapse, and by proxy, an opportunity to pick up some upside exposure as a Valeant holder.

Here’s a look at the two latest developments, and the one still to come, and what all three mean for the company going forward.

First, then, Brodalumab. This one’s a psoriasis treatment we’ve covered a few times during its development pathway here at Market Exclusive. It’s a novel human monoclonal antibody, and it works by binding to the interleukin-17 (IL-17) receptor and – in doing so – inhibiting inflammation. Without the binding, IL-17s (which are a type of cytokine) would activate the receptors and stimulate inflammation. This inflammation is what leads to the scaly plaques associated with the condition. The drug performed well in trials, but there were some safety concerns surrounding a possible tendency to induce suicidal thoughts in patients who took part in its phase II and pivotal trials. Suicidal thoughts is pretty common for psoriasis sufferers anyway (reports suggest its as high as a one in five occurrence), so there was always the chance that the recording of this as an AE associated with the drug was mistaken association, and that the patients in question would have had suicidal thoughts with or without administration. A weighting towards the active arm meant it warranted consideration, however, so this is what markets were looking at as being a major part of the NDA. Anyway, the application was put in front an advisory panel this week, and they voted in favor of approving Brodalumab, so long as the label reflected the suicidal concerns. That’s a win for Valeant, who won’t worry too much about the label restricting its potential target population. Analysts reckon the drug could pick up $880 million annually in peak sales on an approval.

Moving on, let’s look at Relistor. This one is a Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) drug that Valeant licensed from the former, and its an opioid-induced constipation (OIC) indication. Before this approval, the only real treatment for OIC was a regular injection, and this has obvious drawbacks. OIC is a very common condition in the US, and with opioid use growing fast, the market for an alternative to the current inconvenient SOC is large and growing. It probably won’t be able to command too high a price, but with plenty of potential suitors, there’s plenty of revenues to be had going forward. Analysts think this one can pick up somewhere in the region of $400 million in peak sales.

Finally, VESNEO. This one is a candidate developed by Valeant owned Bausch + Lomb, and it’s what’s called a nitric oxide donating prostaglandin receptor agonist. It’s an open angle glaucoma target, and it works by affecting nitric oxide levels in the eye, which is a key regulator of intra ocular pressure (IOP). IOP is a mediator in open angle glaucoma, and Valeant is hoping the FDA will give it the green light come PDUFA, which is tomorrow – July 21. Analysts put the peak sales potential for this one at anywhere between $500 million to $1 billion annually.

So to sum up, Valeant just had an agency green light for commercialization on a drug that could bring in $400 million revenues, an advisory panel approval for a circa $900 million seller, and is waiting on a PDUFA decision for a blockbuster tomorrow.

If all three go through as positive, we expect a very strong end to the week for the company, and going forward, an overarching (albeit slow) reversal in sentiment.

All eyes on PDUFA.