Optimer Pharmaceuticals (OPTR) - after unanimous FDA endorsement, is Optimer's drug approval in sight?

San Diego-based Optimer Pharmaceuticals (OPTR) will be handed the final call by the US drug regulator on the approval of fidaxomicin (DEFICID), a novel, macrocyclic antibiotic indicated for treatment of Clostridium difficile infection.  Published in the New England Journal of Medicine (N Engl J Med. 2011 Feb 3;364(5):422-31.), Optimer's late stage top-line clinical trial results demonstrate that fidaxomicin not only showed similar effectiveness (i.e. noninferiority) compared to the standard treatment, vancomycin, with respect to the clinical resolution of acute diarrheal disease due to C. difficile infection, it also achieved more sustained or durable resolution of the disease (i.e. global cure) – video.  

Vancomycin, approved by the FDA for C. difficile in 1986 under the brand name Vancocin, is one of two standard C. difficile treatments.  The other is an unapproved use of metronidazole, sold by Pfizer Inc. (PFE) as Flagyl and available in generic form.  ViroPharma bought Vancocin from Eli Lilly & Co. (LLY) in 2004.  Fidaxomicin would be San Diego-based Optimer’s initial product and the first drug cleared in more than 25 years for C. difficile, which can cause severe diarrhea and attack the lining of the colon.

George Farmer, an analyst at Canaccord Adams Inc. in New York, forecast sales of fidaxomicin to potentially reach $250 million by 2016.  Farmer also indicated in his notes to investors that the FDA appears “highly predisposed” to approve the drug and recommended Optimer as a buy. 

Clinical trial

A total of 2 phase III trials were conducted.  The first trial (published in NEJM) consists of a multicenter, double-blind, randomized, parallel-group study, involving 629 patients with C. difficile infection.  The primary endpoint was *clinical cure and the secondary endpoints were recurrence of C. difficile infection and **global cure.  

* Resolution of symptoms and no need for further therapy for C. difficile infection as of the second day after the need of the course of therapy

** Cure with no recurrence

Patients were randomized to receive study medication orally for 10 days.  One arm received 200 mg fidaxomicin every 12 hours (n = 302); the other arm received 125 mg every 6 hours (n = 327).  The results are summarized as follows:

• Clinical cure rates following fidaxomicin and vancomycin treatments were 92.1 and 89.8%, respectively (p = 0.05; not statistically significant).
• Recurrence rates following the respective drug treatments were 13.3 and 24.0% - 45% relative reduction (fidaxomicin vs. vancomycin; p = 0.004).
• Global cure rates were 77.7% and 67.1% (fidaxomicin vs. vancomycin; p = 0.006).

In the second phase III trial, Optimer collected additional positive data showing a clinically meaningful reduction in recurrence rates and higher global cure rates following fidaxomicin treatment compared to Vancocin in both the hyper-virulent BI/NAP1/027 and the non-BI strain type subgroups.  Clinical cure rates for fidaxomicin and Vancocin were similar in these two strain type subgroups.

About fidaxomicin

Fidaxomicin is a new antibiotic with a novel mechanism of action being developed for the treatment of C. difficile infection or CDI, the most common hospital acquired, diarrhea.  Fidaxomicin acts by inhibiting RNA polymerase, a bacterial enzyme, which results in the death of specific bacteria such as C. difficile.  Optimer believes that Fidaxomicin offers advantages over current treatments due to its demonstrated activity against C. difficile, low rates of recurrence, evidence of low C. difficile resistance, minimal systemic exposure, limited disruption of normally occurring gastrointestinal bacteria (i.e. narrow antimicrobial spectrum), and convenient dosing regimen.  In contrast, the two current standard C. difficile treatments, metronidazole and vancomycin, are both broad-spectrum antibiotics that disrupt the intestine’s normal protective bacteria, leaving patients vulnerable to relapse. 

Source

FDA panel meeting results

Last month (Apr. 5, 2011), during the FDA advisory panel meeting, the panel members unanimously agreed that fidaxomicin is safe and effective for curing C. difficile infection in a 13-0 vote.  The panel later divided equally (6-6) on whether the drug works better than standard treatments in preventing relapses.  One abstaining member later asked to be recorded as a “no” vote.  Importantly, an opinion that recurrence data lacked clinical significance wouldn’t prevent the drug from being approved, Edward Cox, director of the FDA’s Office of Antimicrobial Products, told reporters after the meeting.  

History of drug approval with 100% panel support

Out of the 27 NDAs receiving advisory panel review during 2010-2011, only ONE company (Valeant; drug candidate: ezogabine) was issued a complete response letter by the FDA despite unanimous panel recommendation for approval (13-0).  While the agency does not have to adhere to the panel’s recommendation, it usually does.  Of note, companies that were recommended against by the advisory panel were all unsuccessful in winning FDA’s approval later on, while companies that were recommended for were not all successful in winning FDA’s approval.   

Trading map

Even though it’s not 100%, odds are pretty good that Optimer’s fidaxomicin, given its unanimous panel backing as well as the need for a new antibiotic specifically treating C. dificile infection, will be cleared.  I am willing to believe that the odds of approval are as high as 90-95%.  With this in mind, buying call options NOW before the PDUFA on May 30 should be a safe move based on the Hike-n-Slide strategy, which takes advantage of the pre-PDUFA hype (the ‘Hike’).  

June $15 and $17.5 calls were trading at $0.55 and $0.15, respectively, with high open interest (10808 and 1650) as of May 11, 2011.  Considering that OPTR touched $13.88 on advisory meeting result alone, the pre-PDUFA price should easily surpass that level and may even reach $15, market condition permitting.  On approval, OPTR should run to a target range of $16-18.  With this projected momentum, both calls mentioned above seem to be priced relatively low still and definitely have room for a nice run-up ahead of the May 30 PDUFA.  Today OPTR gained as much as 1.2% on a -130 Dow Jones day before flattening by at end of the day, signaling the strength behind the stock.  This should give us a nice ‘Hike’ in the next 2 weeks!