MAP Pharmaceuticals (NASDAQ:MAPP) is set to run higher this quarter into potential approval of the company’s lead product Levadex, a proprietary inhaled version of dihydroergotamine (DHE) for the treatment of migraine. DHE has been used for migraines for decades, and Phase III data supporting Levadex proved robust, with highly statistically significant results; approval for the drug is a high probability event with a PDUFA (FDA action) date set for April 15th. Levadex’s novel formulation of DHE provides very rapid relief to migraine sufferers, however the FDA delayed an approval decision earlier this year by issuing a Complete Response Letter (CRL) to the company, citing manufacturing questions but notably raising no issues with safety or efficacy. A rapid resubmission of the NDA by the company suggests that the manufacturing questions were relatively benign and have been appropriately addressed. Levadex’s inhaled delivery significantly differentiates this treatment in a very large market, with 36 million Americans suffering from the condition. As a result, Levadex could become a blockbuster drug, and MAP’s partner for headache specialists, Allergan (NYSE:AGN), is a seasoned commercial drug company that should be able to help drive this product to peak potential. If MAPP can break through $16.50, the stock should move to the mid $17’s, with its next resistance being a high from March 27, 2012. And fundamentally, leading analysts believe that fair value for MAPP is in the mid-$20 range. As a result, MAPP has potential to jump by 15% or more as the FDA decision in April approaches. We expect shares to run into this event, with further upside based on Levadex’s performance in the market.
Why Levadex approval is a high probability event. The FDA raised no issues regarding safety or efficacy in the 2012 CRL, and Levadex’s inhaled administration route should not be a concern for investors. In December 2012, the FDA approved Alexza Pharmaceuticals’ (NASDAQ:ALXA) Adasuve, an inhaled reformulation of loxapine approved for the acute treatment of agitation associated with schizophrenia or bipolar disorder. The Levadex clinical development program was a comprehensive program under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FFDCA) that evaluated the efficacy, safety, pharmacokinetics and pharmacodynamics of Levadex in approximately 1,000 patients across nine trials. No drug-related serious adverse events have been reported in trials, and efficacy results are telling:
In the efficacy portion of the pivotal Phase 3 FREEDOM-301 clinical trial, Levadex met all four primary endpoints, showing statistically significant improvement in pain relief (p<0.0001), freedom from phonophobia (sensitivity to sound) (p<0.0001), freedom from photophobia (sensitivity to light) (p<0.0001) and freedom from nausea (p=0.02) as reported two hours after dosing. Additional endpoints showed that Levadex provided rapid pain relief in 30 minutes and sustained pain relief for up to 48 hours after dosing. MAPP completed a 12 month open-label safety extension of the FREEDOM 301 trial, which evaluated lung function and cardiovascular parameters, during which approximately 9,500 headaches were treated and over 250 subjects completed 12 months of exposure. There were no mean decreases in lung function, as measured by spirometry, between the Levadex and placebo groups. There were no drug-related serious adverse events reported in the trial.
MAPP completed additional clinical pharmacology trials that included a pharmacokinetic (PK) trial in smokers, a pharmacodynamics (PD) trial evaluating pulmonary artery pressure using echocardiogram, a thorough QT trial, a PK trial in asthmatics, and a drug-drug interaction trial.
In regards to the CRL issues, MAPP took the following actions to resolve FDA’s concerns:
- Chemistry, Manufacturing and Controls (CMC) Issues: Responded to FDA comments on the commercial product specifications; submitted data analyses to justify and support the process controls. In addition, expanded fling with 24 month stability data
- Third Party Manufacturer Inspection Observations: Third party provided responses to observations and corrective actions have been completed.
- Inhaler Usability Info: Provided additional information on patient experience related to inhaler usability from the existing clinical data set to augment previously provided information. The clinical program evaluated Levadex in over 10,000 migraines from approximately 1000 patients
All concerns raised by the FDA appear to have been well-addressed by MAP, and the impressive efficacy, safety, and tolerability of Levadex are indicative of an FDA approval in April. While there is no absolute guarantee, manufacturing CRLs represent the lower end of the PDUFA risk spectrum. Additionally, DHE is a small molecule, not a biologic, suggesting a much greater chance of approval.
Existing therapies have major limitations, and patients acknowledge a need for more quality migraine care. There are two general categories of migraine therapies: acute and preventive. Acute therapies dominate the migraine market and are used during infrequent acute attacks, typically characterised as one to three attacks per month, and are designed to relieve the pain, nausea, phonophobia, and photophobia symptoms of migraine. The goals of acute therapy are to stop the attack quickly and consistently while preventing recurrence; to maintain the patient’s ability to function; and to limit adverse side effects. Although Triptans are the predominant class of drugs used to specifically target migraine, dihydroergotamine is another class of acute, migraine-specific therapy. The American Academy of Neurology Migraine Treatment Guidelines supports the use of DHE in the treatment of migraine.
The type of migraine treatment prescribed depends on the frequency and severity of the headache, speed of onset, and previous response to medication. In published studies, migraine sufferers often cite faster onset of pain relief and lower incidence of migraine recurrence as two key therapeutic attributes they would like from medication. Treatment typically involves patients self-medicating with over-the-counter drugs when pain is mild and attacks are infrequent. Patients with more frequent or severe migraine or those who do not respond to simple analgesics may seek medical attention with a primary care physician initially and then with a headache clinic or neurology specialist, if needed. Once a physician has diagnosed migraine, triptans are generally prescribed. If a patient does not respond to one triptan, the physician may switch to another, as the response to various triptans is unpredictable. Triptans have three major limitations:
- Slow and variable onset of action and short duration of effect: While triptans have considerably improved the treatment of migraine, the onset of pain relief with these products tends to be relatively slow and variable due to inconsistent systemic absorption via oral and nasal routes of administration. Published studies cite that recurrence of migraine, or the recurrence within 24 hours of an effectively treated migraine, is a common reason given for dissatisfaction among migraine sufferers.
- Not broadly efficacious: Approximately 30% to 40% of migraine patients do not fully respond to the first triptan prescribed. Migraine patients who do not respond to any triptan therapy have few satisfactory alternatives. Additionally, triptans have been shown to be more effective when taken early in a migraine attack; however, migraine sufferers often wait to treat or are unable to treat early and may not fully benefit from triptan therapy.
- Side effects: Triptans may produce sensations of chest tightness, chest pressure and tingling, often referred to as triptan sensations.
DHE is an acute therapy and alternative to triptans that has been used for more than 50 years to safely treat migraine. Many headache specialists consider DHE to be the standard of care in treatment of status migrainosus, which is a condition characterised by debilitating migraines that last more than 72 hours. DHE works well subcutaneously or intravenously, but patients have to be supervised within a headache centre or as hospital inpatients, severely limiting use and interest in the existing product. Levadex, on the other hand, can be taken anywhere.
Migraine sufferers will prefer Levadex’s novel formulation. Based on the Phase 3 FREEDOM-301 clinical trial, Levadex may provide patients with the following benefits when compared to existing migraine-specific therapies:
- Rapid onset: Levadex provided significant pain relief at 30 minutes after dosing and pain relief in as early as 10 minutes after dosing for patients with severe migraine pain.
- Convenient and consistent delivery: Levadex is non-injectable and designed to be easy to use, which may result in increased patient comfort and compliance. The clinical trial was performed in the home, without clinical supervision and with minimal training. In a previous trial, dose-to-dose variability was comparable to solid oral dosage forms.
- Long-lasting: Levadex provided long-lasting pain relief with low incidence of recurrence and provided sustained pain relief through 48 hours.
- Efficacy at any time after the start of migraine: Additional analyses indicated the potential of Levadex to effectively treat at any time during the migraine.
- Broadly efficacious: Based on historical DHE use in migraine, Levadex may provide a higher response rate and has the potential to treat patients who have not previously responded to other therapies such as triptans. Levadex has the potential to treat a broad spectrum of migraine, including subpopulations that are often difficult to treat.
- Low incidence of side effects: Levadex was well-tolerated, with the most common adverse event reported being medication aftertaste at 6% compared with 2% for placebo. The next most common adverse event was nausea at 5%, compared with 2% for placebo. Symptoms or sensitivities typically associated with commonly used triptan migraine treatments, such as chest discomfort or chest pain, were rare and comparable to placebo.
We discussed Levadex with Dr. Laszlo L. Mechtler, a leading migraine specialist who serves as Medical Director of the Neuro-Oncology Department and the Headache Center at DENT Neurologic Institute, with attending assignments at Millard Fillmore Hospitals and the Roswell Park Cancer Institute. He is also an Associate Professor of Neurology at the State University of New York at Buffalo. His patient focus, in addition to general neurology, is in the area of neuro-oncology and brain tumors, neuroimaging diagnostics, and headache treatment and research. Dr. Mechtler and the DENT Neurologic Institute have participated in a number of migraine studies, and he has participated as a Levadex advisory board member. Dr. Metchtler highlighted a number of issues:
- Intranasal DHE (Migranal) is not first-line treatment, and patients do not like the intranasal route. This has been demonstrated by failure of sales of intranasal triptans (Imitrex or Zomig)
- Patients normally try at least three different triptans before going to DHE
- DHE works well subcutaneously or intravenously, but patients have to be supervised within a headache centre or as hospital inpatients. Patients with severe migraine do not like to travel and hospital admission is expensive for insurers. Levadex offers a drug for use in the home setting that was not previously available.
- The adequacy of pain relief is always a subjective response; triptans do not work in 25% of patients. Levadex data shows good efficacy in a number of important areas.
- Most patients are looking for the holy grail of a migraine treatment which is fast, effective, and safe. Hence, patients are very interested and willing to try Levadex Migraine sufferers will want to try Levadex due to the high dissatisfaction rate, so uptake is not just prescriber dependent.
- Adoption of an effective migraine therapy can be very rapid and not like more conventional drugs
- Levadex will have a role in the management of chronic daily headache as well as chronic migraine
In summary, Levadex is a drug that will appeal to:
- Patients: fast, efficacious, durable response. High dissatisfaction with current treatments.
- Prescribers: new drug treatment for home use that is migraine specific and low association with chronic daily headache.
- Payers: potentially cost neutral (subject to pricing) as triptan alternative; cost saving if breaks migraine avoiding ER attendance or hospital admission for intravenous treatments.
It is very important to understand that after simple analgesics like aminacetophen and non-steroidal anti-inflammatory drugs, triptans are first-line therapy. Triptans are not efficacious for all people and for all headaches and there is a great need for alternative migraine specific first-line therapies. Levadex is highly likely to come to be viewed by prescribers as a new first-line therapy, like triptans, and hence, will have a much broader market than currently anticipated. Put another way, Levadex will lead to a lowering of the threshold for prescribing DHE and a change in the migraine treatment paradigm.
Large market, blockbuster potential. Based on data from IMS Health, in 2011 there were approximately 13 million migraine-specific prescriptions written for the acute treatment of migraine, generating approximately $1.7 billion in revenues in the U.S. The majority of the prescriptions written were in the triptan class, and the leading branded agent, Maxalt, generated approximately $450 million in revenues in the U.S. However, in 2008 when the leading migraine-specific agent, Imitrex, became generic, the total market for migraine-specific prescriptions generated approximately $2.5 billion in revenues in the U.S.
The key initial population would be the acute migraine population of approximately 4m that do not respond to triptans. Add to that other migraine subgroups, cluster headaches and a non-migraine chronic daily headache population of some 10m (non-migraine headache on 15 or more days a month), it becomes very clear that any patient with severe and/or recurrent migraine or non-migraine headache not responding to simple analgesics could potentially benefit from Levadex. There will be a rapid off-label extension of use, and this is supported by the off-label use of many different drug classes in migraine and non-migraine headache. One way to get an idea of valuation is to build a model and estimate sales of Levadex in the US, as well as EU and rest of the world, over the next five years and discount cash flows to reach a present day valuation. I use a very simple revenue calculation based on the size of the overlapping size of various migraine populations and early off-label use.
50% of revenue split with Allergan (50% of sales through neurologists and specialists. For conservatism, calculating as all.)
$1000 cost of Levadex per year treating two headaches per month
Approximately 10m Potential Early Adopters of Levadex
1% =100,000 patients at $500 per year (after split with Allergan)
=$50m revenue per year per 1% of easily addressable population
The above calculation makes the point that capturing just a fraction of the early addressable population justifies the current valuation and significantly more. A conservative doubling of the above figure for the rest of the world gives a total revenue of $100m per 1% of the addressable market. We must emphasize that Levadex is not a “me too” drug and will dramatically alter the treatment paradigm as a first-line therapy in patients because previously, it was only available as an in-hospital medication.
MAPP has a current market cap of $564m, very much higher than similar developmental companies operating in the migraine space like Nupathe (NASDAQ:PATH), which has an upcoming PDUFA on January 17 and a market cap of $50M. The PATH drug is Zecuity (sumatriptan iontophoretic patch), distinguished as the first transdermal triptan. Levadex disrupts the triptan market by potentially becoming a first-line migraine treatment rather then being a different type of triptan or mode of triptan delivery.
MAPP’s high present valuation is for a number of reasons:
- Potential migraine first-line therapy
- US/Canada Partnership with Allergan to target headache specialists, neurologists, and pain specialists. 50/50 split of neurologists and pain specialist sales as well as milestone payments
- High likelihood of rapid market penetration driven by patients and prescribers
- Large addressable market
- High likelihood of approval
- EU and rest of world partnerships and sales
- Strong financial position, with $114M cash at the end of Q3 and no debt
No capital needed, hence MAPP shares a clean trade into the next event. The primary value driver for MAPP is potential FDA approval of Levadex in April. The company ended 2012 with approximately $100 million in cash, so shares of MAPP can trade without the worry of a financing ahead of this event. As mentioned above, MAPP has partnered Levadex with Allergan, who already has a sales force in the migraine space for Botox. MAPP will be adding their own 50 person speciality sales force to work alongside the Allergan team, and upon first commercial sale of Levadex in the U.S. (expected in mid-2013), Allergan is obligated to pay the company a $50 million milestone payment. It’s likely that upon approval the company could, in fact, partner the drug outside of the U.S., and such a deal could result in additional non-dilutive capital, further strengthening MAPP’s balance sheet; post FDA approval of Levadex, MAPP may even become a take-out candidate.
MAPP stock could run into FDA decision, upside to $20 plus. Investor interest is just beginning to emerge this year as U.S. approval could occur in the next few months. Since July, the stock has traded in a range between ~$12 and $16 per share, with FDA accepting the company’s NDA resubmission for Levadex in late November. Currently, MAPP is just breaking out of the high end of its trading range given the approaching FDA decision. Analysts anticipate that Levadex could have peak sales of $1 billion, with net revenues to MAPP of about 50% of peak sales based on the company’s 50/50 split with Allergan. The current average price target for MAPP is $21 a share, however, this price objective is discounted given that FDA approval has yet to be granted, therefore once approval occurs, discount rates will be lowered and price targets on MAPP are likely to rise. In fact, some analysts already peg MAPP’s fair value at $25. The company also has a pipeline of drugs developed with its proprietary formulation technologies, including treatments for diabetes and asthma/COPD, and estimates for MAPP as a take-out top $30 a share assuming Levadex is approved. As a result, MAPP has potential to trade into the $20 range around the FDA decision on Levadex. As there have been some large post approval sell-offs of late, it’s difficult to predict price action entirely. However with 86.70% institutional ownership of the 30M float and 25% of the float short, MAPP may be able to hold onto at least some of the approval pop. In the long-term, once the PDUFA volatility has subsided, MAP is worth watching, as we believe Levadex will cause significant growth surprise.
In connection with MAPP, PropThink has taken a Long position.