Written by: Ankit Desai (Twitter: @ankitdesai6)
Catalyst Pharmaceutical Partners (NASDAQ: CPRX) is a
specialty biopharmaceutical company focused on the development of drugs targeting diseases and disorders of the
central nervous system (CNS), with a focus on the treatment of addiction,
infantile spasms, epilepsy and other CNS indications.
Catalyst is developing
vigabatrin (CPP-109) for the treatment of addiction to cocaine, methamphetamine
and other addictive substances. Catalyst is also developing a more potent
vigabatrin analogue (designated CPP-115 by Catalyst) for the treatment of
cocaine addiction, infantile spasms and epilepsy, as well as other addiction
and CNS indications.
CPP-109 or Vigabatrin
Vigabantrin is an irreversible inhibitor of gamma-aminobutyric
acid transaminase (GABA-T), the enzyme responsible for the metabolism of the inhibitory
neurotransmitter GABA. This action results in increased levels of GABA in the
central nervous system. This increase in amount of GABA typically has relaxing,
anti-anxiety, and anti-convulsive effects. By giving this drug to a cocaine-addict
or methamphetamine addict, it prevents them from having withdrawal symptoms and
eventually allows them to become free from drug addiction.
Vigabatrin is currently being marketed as Sabril by Lundbeck
Pharmaceutical in the US, Canada and EU. Sabril is indicated as adjunctive
therapy for adult patients with refractory complex partial seizures (CPS) who
have inadequately responded to several alternative treatments and for whom the
potential benefits outweigh the risk of vision loss. I understand the Sabril has a black box warning for irreversible vision loss. You have to keep in mind the risk vs benefit when we are talking about drug addiction patients. The vision loss may be from the dose accumulation which there is not a lot of conclusive results. This will be the focus when they are running a Phase III trial in large population. Since now we are only focusing on Phase IIb trial, I feel this will not be a major hurdle in stock price appreciation.
Catalyst Pharmaceutical is
trying to get an initial indication for treating cocaine addiction with
expanded indication for methamphetamine later. The patent for CPP-109 is
protected until 2018 via “method of use” patent. But, the Waxman Hatch
provisions would likely extend protection for five years following its
introduction, which might extend protection to 2019 or 2020
Market Potential
According to the National Institute on Drug Abuse Illicit
drug use in America has been increasing. In 2010, an estimated 22.6 million
Americans aged 12 or older—or 8.9 percent of the population—had used an illicit
drug or abused a psychotherapeutic medication. This is up from 8.3 percent in
2002. The increase mostly reflects a recent rise in the use of marijuana, psychotherapeutics
and cocaine. The treatment for substance abuse in the United States is likely
to increase by 2.5x in the aging population by the year 2020.
Currently, there is a FDA approved medication for opioid
addiction called Suboxone (buprenorphine/suboxone) which has annual sales of
more than $1B. By doing a simple inference calculation assuming that there will
be 1.36M cocaine abuse in coming years will give you an estimate of $600M potential revenue for CPP-109. Since there is not cocaine addiction drug in market, this will
prove a tremendous advantage to Catalyst Pharmaceutical
Clinical Trials
CPRX has completed a Phase II trial (not pivotal trial) that
was published in American Journal of Psychiatry in 2009 in which primary
endpoint (abstinence during last 3 weeks of treatment phase) was met with p
value <0.05.
Limitations of this Phase II clinical trial were: study was
done in Mexico; the patients were required to visit the treatment center twice
a week to give urine and at that time were given their daily dose under
observation. For the other five days of the week, they self-administered the drug.
See below for the summary of this trial.
These Mexican studies led to a phase II trial in the US
(2006-2009) which was similar in design to the phase II Mexican trial. This trial failed to
produce a positive topline result which was mainly due to trial design rather
than lack of activity of the drug.
The primary endpoint was being abstinent in weeks 11 and 12
of the 12 week study. This was determined by patient self-reporting and also
measuring levels of benzoylecgonine, the major metabolite of cocaine, in urine
samples. Treatment adherence was evaluated through pill counts and patient
self-reporting.
The study failed to meet its primary endpoint. In a post hoc
analysis which looked at urine samples, it was found that 48% of the 61 CPP-109
patients that stayed in the trial were not compliant with their medication.
This lack of compliance had a profound negative influence on the trial outcome.
The main reason why I think the study failed is because Mexican trial included
patient who were prisoners and were required to follow-up with the clinician
twice a week. In the US trial, patients were recruited by academic medical
centers through radio and TV ads and who were paid for their participation. In addition,
US patients were generally unobserved taking their medicine and were less
motivated overall to take their medication.
CPP-109 Phase IIb Pivotal Trial
Catalyst Pharmaceutical is now conducting the pivotal phase
IIb trial of CPP-109 in which 200 patients will be enrolled. This time the
trial is only enrolling truly motivated patients who have a strong incentive to
quit. In this trial, patients will receive no payment for participating in the
trial. The endpoint of the study is abstinence at 8-9 weeks with patients then
being followed through 24 weeks in total.
In addition, this trial is also co-sponsored by National Institute
of Drug Abuse (NIDA) and Department of Veteran Affairs. The company had a PR on
July 12, 2012 “Catalyst Pharmaceutical Partners, Inc. (Nasdaq:CPRX) today
announced that it expects to report top-line results from its CPP-109
(vigabatrin) Phase II(b) trial around the end of September 2012 versus the
previous guidance of early in the first quarter of 2013.”
On September 26, 2012 Catalyst Pharmaceutical announced that
it has been advised by the Department of Veterans Affairs Cooperative Studies
Program (VACSP) (also a co-sponsorer) that the availability of top-line results
from Catalyst's CPP-109 (vigabatrin) Phase II(b) trial for cocaine addiction to
be delayed until November 2012. VACSP now expects to provide the top-line
results to the Company during the first half of November 2012.
With this press release, the stock price which closed at
$1.81 on 09/25 opened at $1.44 (~15% down from its close). After carefully
looking at their financials and the pivotal clinical trial design, I think the
selling is overdone here. On August 28, 2012 Catalyst Pharmaceutical already
raised $6M in registered direct offering for each share at $1.50. This $1.50
price makes a really good support for this company in short term. In addition,
CPRX also released a PR on August 30th announcing the closing of $6M registered
direct offering. As you can see, the risk of dilution is very very low. Since
we are only 1.5 months away from its top-line pivotal trial results, I believe
we will see a potential upside to the stock to at least $1.90-2.00.
The company
has market cap of approximately $51M.
Since this is a low float company, the hedge fund managers and traders can
manipulate it very easily. The company currently has $13.0M in cash so the risk for offering and/or dilution is not
there.
In my personal opinion, the company will see an appreciation
in price once we are middle of October which will give it an exact 1 month
period. I am planning on taking a Long position in this company at $1.35-$1.40
area if it goes there.
Price Target: $2.00 (This is a very conservative price target)
Once again, before you invest please read the disclaimer.
This is analysis is my own opinion.
Disclosure: Long $CPRX
References:
National Institute of Health. National Institute on Drug
Abuse (NIDA). Drug Facts: Nationwide Trends. August 2012. http://www.drugabuse.gov/publications/drugfacts/nationwide-trends
Catalyst Pharmaceutical Partners – Investor Relations
Sabril (Vigabatrin) Product Package Insert. http://www.lundbeck.com/upload/us/files/pdf/Products/Sabril_PI-CPS_US_EN.pdf
Google Finance
Bloomberg
Reuters
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