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Wednesday, 07/14/2010 4:10:23 PM

Wednesday, July 14, 2010 4:10:23 PM

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ALXA-Alexza Offers Pipeline Update




Alexza Pharmaceuticals Inc.Transcept Pharmaceuticals, Inc.
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ALXA 2.94

Jason Napodano, CFA, On Wednesday July 14, 2010, 3:59 pm
Management Selects AZ-007 to Move Forward

On July 12, 2010, Alexza Pharmaceuticals (NasdaqGM: ALXA - News) announced, after completing its technology and portfolio review during the first half of 2010, that is has selected AZ-007 as the next candidate to move forward in clinical trials. Alexza is developing AZ-007 (Staccato zaleplon) for the treatment of insomnia in patients who have difficulty falling asleep, including those patients who awake in the middle of the night and have difficulty falling back asleep.

Zaleplon is a non-benzodiazepine hypnotic currently approved to treat insomnia marketed under the brand name Sonata. It is widely available as a generic. The product has a pharmacokinetic half-life of about one hour and is generally well tolerated in patients. Alexza has combined the technology attributes of the Staccato system with zaleplon in order to develop a product candidate with a specific profile for middle of the night (MOTN) insomnia.

Phase I Demonstrates Potential

In a Phase 1 clinical trial, AZ-007 delivered an IV-like pharmacokinetic (pk) profile with a median time to peak plasma concentration for the drug of 1.6 minutes. Pharmacodynamics (pd), measured as sedation assessed on a 100 mm visual analog scale, showed onset of effect as early as 2 minutes after dosing with AZ-007.

AZ-007 was dose-proportional across the four dosage strengths studied in this clinical trial, and was generally safe and well tolerated in this volunteer population. These are highly encouraging results. The pk/pd profile of AZ-007 looks superior to any approved insomnia drug we have seen, and is ideal for a MOTN indication.

A Significant Opportunity

We estimate that nearly 70 million American adults (30% prevalence rate) are affected by some form of insomnia or sleep disorder. This can be characterized as difficulty falling asleep, waking frequently during the night and not being able to return to sleep, waking up not feeling refreshed, or a combination of all three.

Approximately a third of insomnia patients report nocturnal awakenings with difficulty returning to sleep. In greater than 75% of these patients, there is no observed difficulty in falling asleep. Thus, existing medications that offer only sleep onset claims do little to solve the problem. Research shows that 35% of the general population reports awakening at least 3 nights per week. We see a significant void in the insomnia market for that 35% of the adult population that suffer from nocturnal awakenings.

In fact, according to the Stanford Sleep Epidemiology Research Center, only around 11% of these patients seek physician consultation about their insomnia. Perhaps this is due to the lack of effective treatment options. Ambien and generic zolpidem are approved for sleep onset only, and are recommended for use only when the patient can devote 7 to 8 hours to sleep. The current Ambien label precludes MOTN dosing.

Both Lunesta and Ambien CR are approved for sleep onset and maintenance. The drugs are designed to put you to sleep and keep you asleep all night long. However, data shows that over half the patients that take Lunesta and Ambien CR still report nocturnal awakenings.

The ideal pharmaceutical product to address this unmet medical need would be an oral pro re nata (as needed) dosing of a rapidly effective molecule with a short half-life that can be taken with little to no next-day residual effects as soon as 3 to 4 hours later. Chronic patients typically suffer from nocturnal awakenings 3 to 4 times a week.

With AZ-007, we expect to see a rapid and predictable onset of therapeutic action resulting from Staccato administration, and a short-lived duration of action resulting from the pharmacological half-life of zaleplon. The proposed PRN dosing for AZ-007 eliminates necessary dosing of Ambien CR or Lunesta each night, and eliminates potentially dangerous dosing of Ambien or generic zolpidem in the middle of the night.

It’s an attractive opportunity in our view, and one that is currently wide open. There are no prescription products on the market with an approved MOTN dosing. Transcept Pharma (NasdaqGM: TSPT - News) is in the process of satisfying an FDA complete response letter on Intermezzo. Intermezzo is a sublingual, rapid-acting dose of zolpidem, which we project will be on the market by the second half of 2011.

This market is clearly large enough to support both products. AZ-007 could compete effectively with Intermezzo for market share in this $500+ million category.

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