re: SPPI
(This is from a blog posted by Justin Hall. My question to the board is does this line of argument have any validity at all? Is the FDA concerned at all about pricing issues?)
Justin M. Hall is an entrepreneur, investor and author. Hall serves as owner and founder of HiRx, LLC located in Indianapolis, Indiana. He is the author of "The Option Investors Desk Reference©" (2008). Hall invests in areas of innovative growth, such as (1) late-stage drug, device... More
SeekingAlpha A NECESSARY COMPROMISE Fusilev®
A practicing physician dropped me an email yesterday regarding Fusilev. Based on what is known from last Friday’s announcement, it appears that SPPI could be required to conduct a non-inferiority trial to determine which drug is more effective. That is odd especially since the drug was approved for osteosarcoma in 2008 as well as a CMS reimbursement under the colorectal cancer setting during the leucovorin shortage of 2008.
There have been several phase 3 trials already conducted comparing both Fusilev and leucovorin. The most recent indicated that Fusilev or levoleucovorin has a superior risk profile compared to racemic [generic] leucovorin, which has been used since 1952. In that phase 3 trial, however, no overall survival benefit was observed.
Some have correctly pointed out that Fusilev costs quite a bit more than the generic version. The lack of an overall survival advantage coupled with a higher cost – only applicable to colorectal cancer – likely generated the CRL and a request by regulators to meet.
Admittedly, I didn't expect the CRL. I did believe Fusilev was highly likely to be approved. However, I always anticipate that the worst can and often does happen when we least expect. I purchased put options to hedge my long positions and repeatedly suggested that all investors do the same. In ANY and EVERY environment where money is at risk, investors should ALWAYS make it a practice to hedge ALL long (or short) positions. Unfortunately, some have learned this the hard way. I’ve been there, and it's a very tough lesson to learn. Despite the setback, you can and will get through it. Do not give up and/or do something irrational. Pick yourself up and press forward, but never forget the loss – if a loss has actually been realized. I am not advocating that anyone sell their long positions in SPPI. I don’t view that the game is close to being over.
Let’s move forward. So, the FDA kicks out a CRL, indicating that Fusilev failed to demonstrate non-inferiority to generic leucovorin. The FDA is interested in meeting with the company and by the way the CRL won’t affect SPPI’s orphan status for Fusilev under the osteosarcoma indication (a good thing). In fact, SPPI did not specifically state that another trial was absolutely necessary. To me, that's telling. If nothing else, it's not the norm.
IF cost is the underlying issue here, another solution outside of conducting another trial exists – cut the cost of Fusilev.
Right now, the market appears to be focused on an expensive trial and is pricing that into shares and then some. But Fusilev is not just another new drug to regulators. The FDA should be very familiar with it. They just approved it last year.
While regulators do know and obviously believe that Fusilve is both safe and effective, the Federal Government (especially right now) is not willing to pay a premium price for the drug. That is, unless it can be shown in a non-inferiority (NI) or head-to-head trial with leucovorin to provide colorectal cancer patients with an overall survival benefit.
SPPI knows a NI trial will cost more than the average phase 3 trial as it will require a much larger patient group. SPPI has no interest in spending a great deal of money to conduct another trial. As I stated above, the FDA has no interest in paying up for Fusilev.
However, the FDA is willing to meet with SPPI and maybe discuss another way forward, one that is not limited to another option that might help SPPI get Fusilev approved sooner than later.
If cost is the issue here, then SPPI must be willing negotiate – a compromise is needed. While nothing in this environment is certain, I do think it is possible that the FDA could still approve Fusilev without requiring another expensive and unnecessary trial. If SPPI is able and willing to negotiate the cost [down], then the FDA might be able to find a way to approve it.
This is exactly where the doctor, supra, and I both agreed.
Under this scenario, the FDA, SPPI and shareholders would win. My hope is that both the FDA and SPPI are willing to give a little to get it done. Fingers crossed, but I’m still hanging on to my puts.
Bladerunner
