Northera works; Will FDA take another look? The company has now generated clinical results for Northera in roughly 650 NOH patients, and based on the 306b study and the prior 301 and 302 trials, Northera has demonstrated a clear efficacy signal and good safety. So much so that an FDA Advisory Panel recommended the drug for approval in February. However, the FDA ended up going against the Panel and rejecting Northera based solely on the 301 and 302 trials, as efficacy was only demonstrated for a couple of days, and the data on patient “falls” were not well-characterized. Because FDA has stated previously that the 306b study would not be adequate for approval, the company remains in search of a path forward. A question following the 306b supportive results is: Will the FDA reconsider its decision? Management noted on its conference call reviewing the 306b data that it is planning to meet with the FDA to discuss the new results. We see 4 possible outcomes: 1) FDA does accept the new 306b data and approves Northera on a conditional basis (the company will be required to run further confirmatory trials) for NOH, an Orphan indication; 2) the FDA requests a new Phase III trial for Northera that does not require clinical benefit to be demonstrated, just a surrogate endpoint like standing blood pressure (this is similar to the trials that supported midodrine’s approval, which is a drug used to treat NOH); 3) the FDA requests a new trial that enables approval if Northera confirms its short-term benefit in NOH patients (OHQ item #1 – dizziness); and 4) FDA requests an out of reach trial (long-term benefits of Northera must be demonstrated) and Chelsea likely drops the program. Assuming scenarios 1, 2, or 3 play out, we believe shares of CHTP will trade up on the news.
Long-term benefit in NOH difficult, if not impossible, to prove. We note that there are no approved therapies for NOH based on a demonstration of clinical benefit, and the Northera study results are likely to be as close as anyone comes. The FDA itself acknowledged at the FDA Panel meeting in February, that trials for this indication and in this patient population were highly difficult to conduct. Therefore, the agency could show some leniency if it believes that Northera does help patients, particularly those with no other options. At the Panel meeting, which we attended earlier this year, several patients spoke during the public comment session of the meeting noting that the drug has helped them live significantly better lives. The FDA Panel recommendation for approval may carry some weight as the agency evaluates the new data from 306b and determines how the company can proceed. As a result, it’s up to the FDA to decide whether or not patients will gain access to the drug. We think that the new 306b data again confirms that the drug is efficacious, and importantly, is safe. Only so many resources will go into this drug, and the outcome of the FDA meeting will dictate if CHTP will continue to invest in the product, close down the program, or sell out to a larger company focused on developing CNS-based treatments.
Worth holding for FDA feedback on 306b study results. For now, with the stock getting brutally hammered Wednesday, it’s probably worth holding the shares, if one still owns them, to see what FDA allows the company to do. With a market cap of ~$80M and the assumption that the company will have to spend its remaining cash to run another Phase III trial, the stock decision is whether Northera is worth more than $80M if it becomes an approved product. We think the answer is yes, hence, at its current price, we would hold on to the stock as a call option. Even if one assumes that Northera can only do $50M in peak sales, a 4x multiple on peak sales (after approval) values the company at $200M.
Northera 306b Phase III results summary. Results from the 306b trial showed that treatment with Northera provided clinically meaningful and statistically significant improvements compared to placebo in dizziness/lightheadedness at week 1 (1.0 unit change; p=0.018), the primary endpoint. In addition, a statistically significant greater number of patients treated with Northera experienced 2, 3 or 4 unit improvements at week 1 compared to baseline (all p-values<0.05), relative to patients on placebo. Study results also demonstrated a statistically significant increase in standing systolic blood pressure (SBP) at week 1 (p=0.032), a key secondary endpoint of the study. At time points beyond week 1, dizziness/lightheadedness and standing blood pressure favored Northera-treated patients, however the results were not statistically significant. Treatment with Northera also resulted in a reduction in the rate of patient falls over the course of the study, although these results were also not statistically significant. Patients receiving Northera experienced a rate of falls/patient/week of 0.4 vs. 2.0 for placebo, an 80% reduction. Importantly, preliminary safety data show Northera was well tolerated at all dosages tested. Adverse events occurring in at least 5% of Northera patients with at least a 1% difference in incidence between arms were headache (Northera=13.5% vs. placebo=7.3%), an event of dizziness (10.1% v. 4.9%), nausea (7.9% v. 2.4%) and hypertension (7.9% v. 1.2%). Adverse events were mild to moderate and consistent with previous studies.