Elite Pharmaceuticals Inc (ELTP)

[WeeZuhl]

Will ELTP Generic Naltrexone Generate Bariatric Revenue?

Short answer: maybe, but not any time soon. However, the branded drug Contrave and its path to FDA approval has multiple points of relevancy to Elite and to this message board in particular.

Contrave is an obesity drug that was approved by the FDA in late 2014. Similar to Elite’s abuse-deterrent opioids, it combines two drugs (bupropion and naltrexone) that are well-known to the FDA and have long-established safety profiles as individual drugs. One of those components, naltrexone, is also manufactured by Elite as a generic version of Revia for use in treatment of opioid and alcohol addiction. Elite already has a nice pipeline of generic obesity drugs, including phentermine and phendimetrazine. But given the FDA approval of Contrave, should ELTP generic naltrexone also be considered a bariatric drug? And what is the likelihood it will generate revenue as part of a generic substitution version of Contrave?

First, Contrave has yet to generate revenue as an obesity drug. If it proves safe and effective, doctors will prescribe it, and it might make money. But maybe not, and here’s why: Orexygn is heavily subsidizing its use in order to tally up the number of sripts written and to acquire market share. The U.S. marketing partner is Takeda, and the sales rep was in my office this week to hawk their “Scale Down” program. When the patient signs up, they get a free wireless scale which tracks their weight and sends personalized text messages to the patient. There is a pharmacy savings card so that cost for the medication is $45/month for insured patients and $60/month for patients without prescription coverage. Currently, there is no time limit on these prices. A pharmacist friend of mine confirmed that his cost for #120 tablets is $191.70, which would correspond to a retail cash price of approximately $300/month.

So Orexigen/Takeda appear to be subsidizing the cost of Contrave by providing a 75% discount. One might also consider the cost of the free scale as an additional subsidy, but I suspect Orexigen/Takeda will be collecting those weights in order to compile data and publish a post-marketing study of weight-loss results. So let’s hypothetically say that their data is beautiful and the drug is well-tolerated and becomes a blockbuster. The subsidies end, and the price goes up to $300/month. Now doctors and patients will be seeking a cheaper generic alternative, and Elite’s generic naltrexone will start to generate obesity revenue, right? Well, no, maybe not. Each Contrave tablet contains 9mg naltrexone and 90mg bupropion in a time-release formulation. Over the first 4 weeks, the regimen is tapered up to the maintenance dose of two tabs twice daily for a total daily dose of 36mg naltrexone and 360mg bupropion. The closest generic regimen would be a half-tab naltrexone 50mg twice daily and 1.5 tabs bupropion 100mg twice daily. According to goodrx.com, the retail cost of the 30 tabs naltrexone is $120, and the cost of the 90 tabs of bupropion is $100/month. So the off-label generic regimen, which is not time-released and does not have an exactly matching dose of either drug, is only about 25% cheaper at $220/month vs. $300/month for the branded, on-label, time-released drug. It’s not at all clear that doctors and patients would choose the cheaper generic in those circumstances, although insurance companies may be more likely to cover it because it is generic.

In my opinion, the most compelling part of the Contrave story is the recent conduct of Orexigen management. Contrave was first submitted to FDA for approval in March 2010, and the application was based on multiple clinical trials that evaluated more than 4500 patients. A complete response letter was received in January 2011, in which the FDA expressed concern about the cardiovascular safety of long-term use in overweight subjects. In September 2011, the company announced they had come to terms with the FDA on a cardiovascular outcomes trial (CVOT) for Contrave which contained an intriguing promise: the FDA stated that "if the interim analysis meets the specified criteria to exclude an unacceptable increased cardiovascular (CV) risk, the drug could be approved." Essentially, the FDA was saying that if the early data looks okay, then they would approve the drug before the study was completed.

The application was resubmitted in December 2013, and true to their word, was approved by the FDA in September 2014. But a funny thing happened earlier this month. As it turns out, the CVOT interim data was not just okay, it was awesome. It showed a 41% reduction in CV events, independent of the weight loss. Catch that? No matter the amount of weight loss, Contrave decreased CV events by almost half compared with placebo, making it the most effective heart drug in the history of the world. Even though anyone with a rudimentary knowledge of science or statistics would know that those results would not likely hold up once the rest of the data was collected, Orexigen just couldn’t wait. Even though only a half a handful of people should have been privy to the data, management proceeded to tell lots of people, including a patent application. Larry Huston at Forbes.com has been all over this story, and his series of posts are worth the read. In brief:

Forbes.com

The disclosure of the data unleashed a firestorm of criticism directed at Orexigen but also a dramatic 40% increase in the company’s stock, adding about $400 million to Orexigen’s market capitalization…

Contrave was one of the first drugs to gain FDA approval with the help of data obtained from the interim analysis of an ongoing trial. This is a novel and highly innovative process that many had hoped would help give new drugs a more speedy approval without a substantial increase in risk…

As a result of this disclosure the FDA decided that it could no longer rely solely on Light to provide a reliable assessment of the cardiovascular effect of Contrave. It said that Orexigen would have to also perform an entirely new trial to satisfy the requirement that it study the cardiovascular effects of Contrave….

Disclosing the result, through the medium of a patent filing and an SEC disclosure, is a deeply cynical and manipulative action, they believe. “This is the most egregious ethical violation I’ve ever seen” in clinical trial conduct, said one source….

The Orexigen action now puts a big question mark on the fate of the highly promising plan to use data from interim analyses to bring drugs to market earlier… “Orexigen threw the entire industry under the bus,” said one source. “They may lose the ability to get early approval of drugs.”

Orexigen ticked off the FDA, ticked off their partner Tekeda, as well as the entire pharmaceutical industry, all of whom would like the opportunity to have their drugs approved based on interim data. However, there is one group that is happy:





Why is this story relevant to Elite? It might cost some months to get advice from the FDA and acquire additional data before filing an application, but it could save years. And this is no game. There are complex rules of regulation and oversight that require great expertise and delicate handling. Elite management is not trying to get one drug approved while burning all the bridges as they go- they are trying to bring to market a family of drugs while forging beneficial relationships with multiple potential suppliers, marketers, and manufacturing licensees. I trust Nasrat Hakim and the incredible team he has assembled. I don’t expect a text message every time he communicates with the FDA or gets interim study data or talks to a potential partner. I know great things are happening, that’s why I own the stock.


“No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.”
? Warren Buffett