CAUTIOUS OPTIMISM FOR ADAMAS PHARMACEUTICALS GOING INTO THE ADS-5102 PDUFA DATE


Summary

  • Adamas Pharmaceuticals has an important PDUFA catalyst coming up on August 24 for its Parkinson's disease drug candidate.

  • ADS-5102 is a controlled release formulation of the generic drug amantadine that has been shown to effectively reduce levodopa-induced dyskinesia in Parkinson's patients.

  • ADS-5102 reduces sleep disturbances that are caused by the generic immediate release amantadine formulation, but unfortunately, there is no head-to-head data.

  • No FDA approved drug exists for levodopa induced dyskinesia (LID), although generic amantadine is commonly used off-label.

  • Current valuation of Adamas appears relatively attractive, although the market may continue to take a wait-and-see attitude, even if ADS-5102 is approved.

Background

Parkinson's disease (PD) affects approximately 1 million people in the United States. The most commonly used therapy is levodopa. Importantly, up to 90% of patients that remain on levodopa for 10 years end up with levodopa induced dyskinesia (LID) (Shukla 2017). LID often involves hyperkinetic movements known as chorea, dystonia, and athetosis. Currently there are no FDA approved therapies for LID, which Adamas reports affects 200,000 patients in the United States. Standard of care includes immediate release amantadine (IR Amantadine). However, the drug is used off-label, often requires administration multiple times a day, and should not be taken after 4PM because of its effects on sleep. ADS-5102 was developed to optimize drug concentrations during the day while minimizing them at night. As a result, ADS-5102 should maximize efficacy while minimizing adverse events.

Financials

The company has about $130 million in cash reserves, and is not expected to raise any more money within the next 12 months.

Upcoming PDUFA

The case for FDA approval appears fairly clear: an effective product that addresses an unmet need in a growing population with no approved treatment options. The pooled phase 3 data shows significant benefit to patients.

Pooled Phase 3 data shows an increase in ON time (i.e. time when PD symptoms are under control) by 2.4 hours, a decrease in OFF time (i.e. time when PD symptoms are not under control) by 1.0 hours, and a decrease in ON time with troublesome dyskinesia by 1.4 hours. The results cannot be understated in terms of the impact on quality of life for Parkinson Disease patients. In terms of safety data, the product has a similar side effect profile to IR amantadine, causing undesirable side effects such as visual and auditory hallucinations, peripheral edema and anticholinergic side effects. According to the press release from June 12, 2017:

“In the Phase 3 EASE LID and EASE LID 3 trials, the most common adverse events were consistent with the known amantadine safety profile, and most occurred between Weeks 2-4 of treatment. The most common adverse reactions (≥5 percent in the active group) were visual hallucinations, dry mouth, dizziness, peripheral edema, falls, constipation, nausea, anxiety, decreased appetite, livedo reticularis, insomnia, auditory hallucinations and orthostatic hypotension. The majority (84 percent) of ADS-5102 treated patients did not discontinue study drug due to adverse reactions.”

Furthermore, in its peer-reviewed publication of data from this trial, no severe adverse events were reported. The authors reported that

“Hallucinations, the most commonly observed clinically relevant AEs, were mostly mild and reversible and did not require intervention or lead to study drug discontinuation. Therefore, these events did not constitute irreversible morbidity.”

In addition, as acknowledged in an Editorial Comment in JAMA Neurology, the formulation adds a clear value in terms of reducing pill burden for patients (one pill daily vs up to 4 pills a day). The capsule formulation also allows patients to mix the beads with another food like yogurt rather than swallowing pills.

Some experts argue that Adamas should have run their trials head to head against amantadine. However, given that amantadine is not FDA approved for this indication, we believe that the FDA won’t penalize management for running a trial against placebo. Most importantly, the company has captured interesting data that illustrates the impact of switching from IR amantadine to ADS-5102: The company reports,

“patients previously treated with amantadine immediate-release who switched to open-label ADS-5102 experienced a three point, statistically significant reduction in MDS-UPDRS Part IV at Week 8 and maintained out to Week 64. These results were comparable to previous placebo-treated patients, and patients who have undergone prior deep brain stimulation treatment.”

The improvement in efficacy for the patients who switched from IR amantadine to ADS-5102 will stand out to providers when the drug is launched. The data supports the conclusion that the extended release formulation optimizes the PK curve of amantadine to optimize for efficacy.

As shown in the annotated Chart above, the stock rose to ~$30 after announcing positive phase 3 top line data in December of 2015. However, the stock price is selling at a sharp discount now heading into the PDUFA date. There is potential for significant upside in this stock. In our view, approval is likely. Efficacy does not appear to be an issue and there were no serious adverse events reported in its most recent Phase 3 trial. The most likely reason that this drug doesn’t get approved on or before the August 24, 2017 PDUFA date, being more manufacturing-related, not due to any specific information we have found, but based on a general risk for any new medicine, especially an extended-release formulation by a company that is seeking its first FDA-approval.

What will happen after approval?

There has been some concern regarding the ability of ADMS to effectively launch this product. However, we believe the hire of Richard King as the Chief Commercial Officer was an encouraging move by management. He has strong previous experience with many launches. Adamas describes his experience in the following press report,

“Prior to (being CEO at) AcelRx, he was President, Chief Operating Officer and General Manager of the biotechnology company Tercica, Inc. (later sold to the Ipsen Group), where he was instrumental in the commercial launch of Dysport® (abobotulinumtoxinA) and Increlex®(mecasermin [rDNA origin] injection). He also previously served as Executive Vice President of commercial operations at Kos Pharmaceuticals, Inc., where he oversaw the growth of Niaspan® (niacin extended-release) and the launch of Advicor ® (niacin extended-release/lovastatin).”

Although we believe that approval will have a positive impact on this stock price, we are uncertain of the extent, because the market may take a wait and see attitude. Product launch has been pushed out until 2018. We believe the company may have decided to strategically push back their launch date until 2018 with their own sales force to maximize on profits rather than having to rely on a contract sales force. The company announced on their Q2 earnings call that they are too late for the part D medicare formulary, so management could also believe that they have more time to sort out their own sales force while they are simultaneously working on payor negotiations.

In terms of pricing, management predicts it is likely to be in the range of Azilect ($7,000 to $8,000/year) to Nuplazid ($24,000/year). Given that this will be the only FDA approved treatment for this indication, we believe that management will have powerful leverage at the negotiating table with payors. However, without a head-to-head comparison with IR amantadine, some question whether the cost/benefit has been sufficiently established. If we assume a conservative price estimate of $7,000/year, market penetration of 10%, and 200,000 patients, the drug represents peak annual revenue of $140M. If ADS-5102 can penetrate over 20% of the market with a price point of over $15,000, then annual revenue will exceed $600M.

Pipeline

There is also further upside given that the company has two approved licensed assets to Allergan, and also has compelling phase 2 data for ADS-5102 in Multiple Sclerosis (MS), and ADS-4101, a promising seizure candidate with an ongoing phase 1b trial. In the phase 2 trial evaluating ADS-5102 in patients with MS, primary endpoints of safety and tolerability were found to be similar to the drug’s known profile, and the trial met its secondary endpoint of a statistically significant improvement on the timed 25-foot walk test. The data also showed benefit in functional mobility (TUG) and walking distance (2MWT). The drug is thought to block neuronal potassium channels, and increase the efficiency of axonal signal propagation.

ADS-4101 is an extended-release high strength version of lacosamide. Lacosamide, also known as Vimpat, is currently sold by UCB and approaching close to $1B in gross sales. A multi-dose phase 1b study is ongoing, and top line results are expected in the third quarter of 2017.

In the end, we believe ADS-5102 will likely be approved by the FDA and that ADMS is a relatively attractive investment opportunity currently. However, investors should be cautious heading into this binary regulatory event because the market may take a wait-and-see attitude given that even if approved, product launch is not scheduled until 2018, ADS-5102 has not been tested in a side-by-side comparison with generic amantadine, and this will be the company’s first approved drug that it is marketing itself. Furthermore, if the FDA decides to not approve the drug, the stock price could decrease by more than 25%. Despite this, we feel that there is a relatively attractive risk/reward profile currently for ADMS going into this PDUFA date.


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