Event - Nalmefene Is Biotie's Big Moment

November 05, 2010 Event - Nalmefene is Biotie's big moment

Jonathan Gardner

Biotie Therapies is approaching a classic make-or-break moment. Pivotal data due before the year end on its lead compound, alcohol dependence therapy nalmefene, holds the potential to pave the way for much-needed financing or much hand-wringing.

The Finland company needs a cash injection by the middle of next year, and with the remainder of its pipeline mid-stage at best, it falls to nalmefene to allow this to happen without too much pain for investors. Shares in Biotie have lost almost a third of their value this year suggesting limited confidence in success, but analysts believe a negative readout would mean further substantial falls - analysts at NomuraCode reckon a drop of more than 70% is possible; unequivocally strong results are going to be required to re-inject optimism.

Product Nalmefene

Company Biotie Therapies Lundbeck

Market Cap $82m $3.46bn

Product NPV n/a $68m

NPV % of market cap n/a 2%

Event Phase III data

Clinical Trial IDs NCT00811720 (ESense 1); NCT00812461 (ESense 2); NCT00811941 (Sense)

Date by end of 2010

Milestones

Nalmefene is partnered with Lundbeck, so Biotie’s investors will not be the only ones watching for this data although in the grand scheme of things the drug is a lot of less important for the Danish partner.

Still, Lundbeck has invested fairly heavily in the development of the drug – three large pivotal trials are under way, recruiting around 1,800 patients.

Two identical six month trials called Esense 1 and 2, each recruiting 600 patients, are measuring efficacy. The primary endpoints are the change in the number of heavy drinking days and total alcohol consumption over 24 weeks. Another slightly larger trial called Sense which focuses on safety and tolerability is also under way.

Data from this trial and one of the Esense trials are anticipated before year end. A filing with European regulators is expected in the second half of next year.

Under the Lundbeck deal milestones of up to €72m ($101m) are available to Biotie on filing and approval, and ultimately royalties on sales which analysts believe are around 15%.

Biotie ended June with just €12m in cash and has made it clear that by the end of the June next year, it will need to have found additional funds. Therefore a milestone payment from Lundbeck would come in very handy, although the company is also looking at licensing deals as another source of income.

Remove pressure

Management has said all options are on the table with regards to fundraising, which indicates tapping the equity markets is not out of the question. A standby equity agreement is already in place with Yorkville Advisors, giving access to up to €20m if required, which the company will use to keep ticking over should other sources of income fail to materialise. The company could well be hoping to use any significant jump in the share price to sell a big chunk of new shares to raise a larger amount. The real desire, however, is to raise non-dilutive funds through licensing deals.

Biotie is working on two phase II pipeline projects, a PDE4 inhibitor called ronomilast and a VAP-1 antibody, BT- 1023. Partnering deals are being explored for these assets; earlier this year Roche passed on an option to fully license BT-1023, which is being developed in rheumatoid arthritis.

As such, positive data on nalmefene would remove a lot of pressure from this process.

Debatable value

Nalmafene is an opioid receptor antagonist, thought to work by reducing the pleasure felt from addiction. Exactly how big a product it represents is debatable.

Analysts at Deutsche Bank believe that because the market for pharmaceutical treatments for alcoholism is very underdeveloped, the product could struggle to generate significant sales. This theory is certainly supported by Alkermes’ experience with Vivitrol, which was approved to treat alcohol dependence in 2006 but failed to generate substantial interest – annual sales have been flat at around $20m.

However, although these products are both opioid antagonists they not directly comparable; nalmefene will be used to moderate heavy drinking rather than promote abstinence, like Vivitrol. More importantly, Vivitrol is injected and has a black box warning on its label for liver toxicity, while nalmefene is a tablet, taken when a patient has a desire to drink.

Whether this means nalmefene will slot more easily into programmes for alcoholics remains to be seen, but opinions of the value of the drug differ widely. Analysts at Edison Investment Research estimate peak sales of $567m whereas NomuraCode is more conservative, with peak European sales of €210m. Analysts at Jefferies, who follow Lundbeck, have only pencilled in peak sales of $55m while Deutsche Bank is forecasting only $38m by 2015. Credit Suisse is slightly more optimistic, forecasting sales of $96m by 2015.

Whatever the final market value, positive data leading to a filing and approval – and all important milestone payments – are needed. Popping the champagne corks might be an inappropriate term here, but Biotie will justifiably be celebrating if strong data emerges.