On Tuesday, Gattex (teduglutide) received a unanimous recommendation for approval from the FDA’s Gastrointestinal Drugs Advisory Committee, suggesting that the FDA may officially approve the drug later this year. The drug is a treatment for Short Bowel Syndrome, in which patients are unable to properly absorb nutrients and often rely on parenteral nutrition and IV fluids. Amid the post-vote celebration, however, Gattex’s developer, NPS Pharmaceuticals (NASDAQ:NPSP), is trading down 2% on Wednesday. The stock is correcting in part for a 20% rally last Friday that was prompted by the FDA’s release of briefing documents ahead of the advisory committee’s decision. Those documents were indicative of a positive vote, and the stock moved up with extensive trading momentum. On Monday, the stock gapped down slightly as run-up traders took profits, and trading in NPSP was halted all day Tuesday. The vote was announced in the evening after the markets closed, and Wednesday’s downward move is little more than a corrective bounce from the pre-approval high, as the stock is still up 9% overall on the Gattex decision. In Wednesday’s press release, the company also reported that 14% of patients in an ongoing 24-month open-label study achieved independence from parenteral nutrition and IV fluids.
NPSP now awaits an approval decision from the FDA. The deadline is slated for December 30, and although Tuesday’s vote suggests an approval, nothing is certain in the world of biotech. On Wednesday morning, the company conducted a conference call discussing the committee’s decision and its marketing strategy should Gattex receive FDA approval. NPS has begun hiring employees in advance of Gattex commercialization efforts, but management was hesitant to offer guidance for a market launch; NPS will update shareholders on its next earnings call in early November. The company plans to create a registry for SBS patients, both on and off Gattex, in order to more closely monitor SBS progression, and the long-term safety and efficacy of Gattex. Manufacturing arrangements are in place, but pricing has not yet been set, either in Europe, where Gattex has been approved since September 4th, or domestically. According to the panel discussion, NPS’ proposed Risk Evaluation Management Strategy (REMS) appears to be adequate for Gattex, but the FDA will consider the panel’s commentary and determine the final strategy.
Although Gattex success still hinges on an FDA approval, management is confident in the drug’s ability to fill an unmet need in SBS treatment. NPSP guides that current capital, plus cash from a recent deal with Amgen (NYSE:AMGN), will be sufficient to launch Gattex, which would be the first approved therapy to target the underlying problem in SBS; it presents a wide-open market. The company also plans to submit its other late-stage candidate, Natpara, to the FDA as a treatment for hypoparathyroidism by the end of 2012. Multiple late-stage compounds and upcoming catalysts make NPSP attractive in the near-term, with long-term potential dependent on Gattex approval.
