NPS Pharmaceuticals (NPSP) shares traded down 14% on Wednesday, despite reporting strong third quarter results and raising guidance for 2013. The weakness appears to stem primarily from investors trying to forecast the outlook for Gattex off a small, heterogeneous user base. We believe that while sales progress with its short-bowel syndrome treatment Gattex is gradual, the treatment has gotten past the most significant hurdles for sustainable growth – payer approval and reimbursement.
NPSP develops treatments for rare diseases, including short bowel syndrome (SBS) and hyperparathyroidism. Short-bowel syndrome is a disorder clinically defined by malabsorption, diarrhea, steatorrhea, fluid and electrolyte disturbances, and malnutrition. Short-bowel syndrome can occur as a result of disease (such as Crohn’s), injury or chronic bowel problems. NPSP’s key product Gattex/Revestive, focuses on patients with SBS who require parenteral (IV) nutrition. The target market in the U.S. is estimated at 10,000-20,000.
Gattex is administered intravenously, and as with any new biologic, there are several administrative hurdles that need to be met for a prescription to be converted into actual therapy. The company notes that it takes 90-120 days for most prescriptions to be approved for payment, meaning a lag between when prescriptions are written and when therapy is delivered. This lag creates additional forecasting uncertainty (particularly in the early launch stage) because changes in a patient’s condition during the approval period may make a patient ineligible for Gattex therapy until their health status changes. In the third quarter, approximately 235 patients were on Gattex, with a total of 1,452 prescriptions written. These numbers are in-line with the company’s previous expectations, but we believe that the relatively small numbers make it difficult to forecast near-term trends with real precision.
Separately, the company submitted its Biologic License Application to the U.S. Food and Drug Administration (FDA) in October 2013. Natpara (recombinant human parathyroid hormone 1-84, rhPTH(1-84)) is the first bioengineered replica of human parathyroid hormone developed for hypoparathyroidism, a rare, complex endocrine disorder in which the body produces insufficient parathyroid hormone.
Revenues in the third quarter include sales for Gattex, which was launched in the first quarter of 2013, and royalty revenues. Sales of Gattex were $11.0 million for the third quarter of 2013, compared to $4.8 million in the second quarter. The company raised its 2013 sales expectations for Gattex from a range of $25-$30 million to a range of $28-32 million.
Royalty revenues were $28.1 million for the third quarter of 2013 compared to $27.0 million in the year earlier period. NPS earns royalties on: Amgen’s sales of Sensipar/Mimpara (cinacalcet HCl); Kyowa Hakko Kirin’s sales of REGPARA (cinacalcet HCl); and Janssen Pharmaceuticals’ sales of NUCYNTA(tapentadol) and NUCYNTA ER (tapentadol extended-release tablets).
NPS reported a net loss of $1.1 million or $0.01 per diluted share for the third quarter of 2013 compared to a net loss of $3.3 million or $0.04 per diluted share for the same period of the prior year. At the end of the quarter, NPS had $178 million in cash and investments which management believes is adequate to support the commercialization of Gattex and Natpara.