By October 3, 2013, the U.S. Food and Drug Administration (FDA) will decide whether to approve Ligand Pharmaceutical's (LGND) drug Aprela for the treatment of menopausal symptoms and the prevention of postmenopausal osteoporosis in non-hysterectomized women. This drug is being developed by Ligand in partnership with Pfizer (PFE). After reviewing Aprela's clinical trial results and relevant scientific literature, we believe Aprela will fail to receive FDA approval and, consequently, Ligand's stock will underperform in the near term.
Background
Ligand Pharmaceutical is a small biotechnology company with a focus on acquiring and developing drugs that will generate royalty revenue. Aprela, its current lead product, has been developed for the treatment of menopause.
Menopause is the cessation of menstruation. It is a biological process that occurs naturally among women but can also arise from surgical interventions that affect ovary function. The main menopausal symptoms include hot flashes, night sweats, sleep disturbances, vaginal dryness, and vulvar and vaginal atrophy. Hot flashes are the most common type of symptom associated with menopause. In addition, menopause is also a major risk factor for osteoporosis.
Hormone therapy (HT) is the only FDA-approved treatment for menopause. However, the FDA recently approved a non-hormonal therapy named Brisdelle for menopausal hot flashes. HT was considered the gold standard among treatment options until 2002 when a study published by the Women's Health Initiative suggested that HT might increase the risk of breast cancer, venous thromboembolism, and stroke. As a result, the number of women taking HT precipitously dropped.
Aprela combines conjugated estrogens (CE) with bazedoxifene (BZA), a selective estrogen receptor modulator. Estrogens have established efficacy in relieving menopausal symptoms and postmenopausal osteoporosis, while BZA has demonstrated protective effects on the uterus and breast. BZA has been approved in Europe and Japan for the treatment of postmenopausal osteoporosis.
BZA/CE improves menopausal symptoms, but less effectively than standard HT
The efficacy and safety of BZA/CE have been evaluated in multicenter, randomized, double-blind, placebo- and active-controlled, phase III studies referred to as the SMART trials. In total, there are five SMART trials. SMART-1 evaluated the endometrial safety of six BZA/CE doses. Two doses (BZA at 20mg and CE at 0.45 or 0.625 mg) were selected for subsequent trials.
The efficacy of BZA/CE for vasomotor symptoms was evaluated in the SMART-2 trial in 332 symptomatic women. At week 12, treatment with BZA/CE at both doses significantly reduced the number of hot flashes by 74% (10.3 hot flashes at baseline vs. 2.8 at week 12) and 80% (10.4 vs. 2.4), respectively, versus 51% (10.5 vs. 5.4) with placebo. The mean daily hot flush severity was also significantly reduced for both BZA/CE doses compared with placebo at week 12. However, based on results from the Women's Hope study, HT reduced the number of hot flashes from baseline by over 90% and the improvement with mean daily hot flush severity was also greater compared with the two BZA/CE doses.
The efficacy of BZA/CE for vulvar/vaginal atrophy was evaluated using four measures in the SMART-3 trial in 664 postmenopausal women. BZA/CE was shown to be effective at treating these vaginal symptoms compared with placebo or BZA alone.
The efficacy of BZA/CE for osteoporosis prevention was evaluated using bone mineral density (BMD) measures in SMART-4 and SMART-5, and two sub-studies within the SMART-1 trial. In the SMART-1 trial, BZA/CE at both doses significantly increased lumbar spine and total hip BMD compared with placebo at 2 years. Similar phenomenon was observed in the SMART-4 and -5 trials. In SMART-4, however, the increases of BZA/CE on spine BMD (~0.80% increase from baseline) were significantly lower than those observed for HT (~2.22% increase from baseline). In SMART-5, the increases of BZA/CE on spine BMD were also lower than those observed for HT. Although both BZA/CE and HT could effectively increase BMD compared to placebo, HT consistently shows a better efficacy profile with regard to BMD.
BZA/CE trials could not determine long-term safety
The safety of BZA/CE was evaluated against HT or placebo in the SMART-1, -4 and -5 trials. SMART-1, -4, and -5 evaluated endometrial safety as indicated by the incidence of endometrial hyperplasia. Endometrial hyperplasia is excessive growth of cells lining the endometrium or uterus and poses a risk factor for the development of endometrial cancer. At year one, the incidence of endometrial hyperplasia with BZA/CE was similar to that in the placebo group in the SMART-1 and SMART-5 trials. At year one of SMART-4 trial, no cases of endometrial hyperplasia were identified in the BZA 20-mg/CE 0.45-mg group, the CE group, or the placebo group. However, three cases (1.1%) were confirmed for the BZA 20-mg/CE 0.625-mg group. One explanation for this is the difference in the administered BZA/CE formulations. The bioavailability of BZA in the formulation was 18% lower than the formulation used previously, resulting in insufficient level of BZA to maintain endometrial safety. Such formulation and stability issues could serve as a hurdle in the FDA approval process.
High breast density is a risk factor for developing breast cancer. In the SMART-1 trial, BZA/CE demonstrated non-inferiority versus placebo while HT showed a significant increase in mean percent breast density at one year, suggesting a potential advantage of BZA/CE over HT. There was a higher incidence of AEs leading to study discontinuation in the HT group due to metorrhagia, uterine hemorrhage, and vaginal hemorrhage.
For a one-year period, BZA/CE did seem to have a favorable safety/tolerability profile. The overall incidence of adverse events was similar among treatment groups. However, these studies could not properly evaluate longer-term safety effects of BZA/CE. Specifically, the studies did not evaluate AEs such as cancers that occur relatively infrequently. Notably, this cancer risk is a primary concern with HT. Thus, despite having compromised efficacy, BZA/CE may not have better long-term safety than standard HT.
The FDA has set a high safety bar for alternative therapy to treat menopause
Previously, the FDA delayed approval of BZA for the treatment of postmenopausal osteoporosis because of concerns about the incidence of stroke and blood clotting. In particular, the agency required additional analysis of the incidence of stroke and venous thrombotic events, raising doubt about the BZA/CE combination therapy quickly gaining approval.
Recently, the FDA approved the first non-hormonal therapy, Brisdelle, for the treatment of hot flashes. The approval was considered somewhat surprising given the poor efficacy of Brisdelle compared to HT. Overall, this suggests that the FDA prioritizes safety over efficacy in menopausal therapeutics, which further decreases the likelihood of Aprela being approved. In addition, Pfizer previously sought an extended label for its drug Pristiq to cover hot flashes, but received a complete response letter requesting additional studies on the safety of the drug. Generally, the FDA has set a high bar for safety of alternative menopausal therapy and, in our opinion, Aprela does not clear this bar.
A solid business model and extensive pipeline may overcome any short-term setbacks
In early August, many analysts downgraded Ligand's stock. This was likely due to a combination of a run-up in price and a halt in the development of two drug candidates being developed in partnership with The Medicines Company (MDCO) and Merck (MRK). This news came on the heels of the company's second quarter earnings report, which shows revenue up by 67% and royalty payments up by 63% over the previous quarter. The company has also doubled it shareholder's equity from one year ago and is currently generating a positive cash flow. With 85 drugs in its pipeline and the potential to double its royalty-generating assets over the next few years, Ligand can tolerate a few setbacks. Thus, we see Ligand stock as a promising long-term investment, but one to avoid through the beginning of October.
Summary
Ligand's Aprela improves menopausal symptoms and postmenopausal osteoporosis simultaneously, although its efficacy seems to be not as good as that for HT. Regarding safety, currently available data do not provide sufficient evidence that Aprela has a better long-term safety profile than HT. We believe that the FDA will likely continue applying stringent safety criteria to potential menopause drugs, leading us to conclude that Aprela is unlikely to obtain FDA approval. Nevertheless, the company's business model and extensive drug pipeline has gained considerable positive attention from investors, which we believe is well deserved.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Business relationship disclosure: Beacon VP Investments is a team of analysts. This article was written by Dr. Hyun Ji Noh and Sophie Wang, two of our team members. We are not receiving compensation for the article (other than from Seeking Alpha). We have no business relationship with any company whose stock is mentioned in this article.
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