Highlights."Favourable results from TPM/Oxymorphone Patch Phase...

Highlights.

"Favourable results from TPM/Oxymorphone Patch Phase I trial
Phosphagenics reported today the results from the Phase I trial of its new pipeline opioid candidate TPM/Oxymorphone. The trial initiated last month was conducted at the Royal Adelaide Hospital. The single dose trial, was essentially a pharmacokinetic (PK) study designed to examine the safety and sustained release delivery profile of the oxymorphone patch at single dosing over 72 hours. Results prove that POH’s oxymorphone patch has the ability to deliver oxymorphone through the skin for 72 hours. The trial also demonstrated that the patch was safe, with no adverse events reported. The Phase I trial results support the progression of clinical development of the Oxymorphone patch to a multi-dose PK study, to be followed by a Phase II trial in CY2H2013. We expect that the multi-dose PK study will be a 4-6 weeks study and will be initiated in July 2013, putting the company on schedule for a CY4Q2013 initiation for the Phase II trial. POH expects to progress the development of both oxymorphone patch and its lead pain candidate oxycodone concurrently. We believe POH’s experiences with the oxycodone patch will make the development part of the new oxymorphone patch relatively straightforward, with the main issue being centred on proving the safety and subsequent efficacy of the product.
 
Oxymorphone expands POH’s pain portfolio
The recent addition to POH’s pain portfolio TPM/Oxymorphone is prescribed for moderate to severe chronic pain and is very similar to oxycodone. Oxymorphone represents a global $1bn target market for POH. Current market leader is Endo Pharmaceuticals with its Opana franchise (Opana IR and Opana ER)  which generated US$400.8m in 2011 sales accounting for 15% of Endo’s 2011 revenues. In 2012 Opana ER sales were US$299.3m accounting for ~10% of Endo’s 2012 revenues. Opana is oral oxymorphone. It is three and a half times more potent than oxycodone, however it has very low bioavailability (the amount of drug absorbed by the body) making it a sensible candidate for transdermal delivery and hence for POH to target. Comments from the management indicate that they will be open to licensing this candidate at an early stage. If further clinical results from the oxymorphone patch are as favourable as seen with the Phase I, in terms of safety and sustained release efficacy profile, we believe the product will attract licensing interest and also get regulatory and physician support. POH may also be able to license the product as a companion product to its lead oxycodone patch, making the combined product deal package more attractive to a potential licensee.
 
TPM/Oxycodone Patch will re-enter the clinic in late March/early April 2013
Phosphagenics is on track to return its lead pain candidate oxycodone to the clinic. We believe POH’s TPM/Oxycodone patch is its main value driver representing a >US$3bn market in the US alone. After resolving the minor crystallisation issues with the TPM/Oxycodone patch, POH is ready to move ahead with the improved product formulation into the second part of its pharmacokinetic (PK) study. The trial will be initiated within the next couple of weeks and will primarily examine the safety and sustained release drug delivery profile of the patch at multi-dosing. Following the completion of the 6 week multi-dosing trial, we expect POH to file an IND with the FDA for approval to start Phase II/III Trial by mid-2013. We believe the multi-dose trial results will aid POH in designing the larger Phase II/III trial to be initiated in 2H13.
 
Investment view – Multiple opportunities emerging
In view of the near term opportunity of POH’s Oxycodone and Oxymorphone products, coupled with the potential revenue streams ensuing from successful commercialization of its cosmeceutical product range, animal health range and the TPM/diclofenac product, we re-iterate our positive outlook on POH and expect it to be re-rated by the market as it moves towards commercializing and licensing of its TPM technology. We value POH at 42 cents base case and 79 cents optimistic case. Our target price of 40 cents sits around the low point of our base case valuation. We see the next value driver and significant milestone for POH as the initiation of the multi-dosing component of the PK study for its lead TPM/Oxycodone patch in the next couple of weeks, followed by the initiation of the multi-dose trial of its new candidate TPM/Oxymorphone patch by mid-2013."