Update on ViroPharma

FDA Issues Complete Response Letter for Cinryze in Acute HAE

On June 3, 2009, the U.S. FDA issued a complete response letter (CRL) relating to ViroPharma’s (VPHM - Analyst Report) supplemental biologic license application (sBLA) on Cinryze for the treatment of acute attacks of hereditary angioedema (HAE). The CRL requests an additional clinical study, due to the FDA’s opinion that the placebo controlled study submitted in support of the sBLA lacked robustness.

We note that the phase III data submitted with the sBLA contained data from a 71-patient trial. ViroPharma also submitted data from an 82-patient open-label program along with the phase III trial.

At this point it is difficult to assess just how much more data the FDA would like to see. We note that the phase III program for DX-88 (ecallantide) submitted by Dyax Corp. contained data from 143 unique patients before the open-label program. This would suggest that ViroPharma would need to conduct at least another phase III trial similar to the 71 patient CHANGE study conducted by Lev in 2007.

The FDA’s CRL brought up no issues of safety, which is not surprising considering Cinryze was approved in October 2008 for the prophylactic treatment of HAE. We also suspect that the efficacy data achieved in the CHANGE program was strong enough to gain approval; the FDA just wants to see more of it. CHANGE demonstrated that patients taking Cinryze at the first signs of an HAE attack had a 2.048x increase in likelihood of the start of unequivocal relief vs. placebo, with the mean time to start of relief at roughly two hours for Cinryze vs. four hours on placebo.

The 82-patient open-label program demonstrated that patients had roughly 93% symptom improvement at the four-hour mark after taking Cinryze. This data compares well with DX-88’s 94% symptom improvement at the four-hour mark (58% for placebo).

The CRL on Cinryze in acute HAE has some income statement and balance sheet impacts.  Firstly, we suspect that prophylactic ramp of Cinryze will remain strong in 2009 regardless. Peak sales in the prophylactic HAE are $250 million, with another $100 million potential in acute HAE. Despite the CRL in acute, we suspect that given the lack of available treatment options for HAE patients, physicians will use the product off-label when presented with an acute HAE patient.

As such, our sales forecasts do not change much, given the delay. Until DX-88 is approved for acute use, Cinryze remains the only available treatment option for many patients (women & children). However, we expect that R&D expense will increase slightly as a result of the approvable letter now that management must conduct another phase III program at roughly 75 to 100 patients. The CRL also delays the potential $87.5 million cash payment to Lev shareholders.

We remind investors that ViroPharma owes $87.5 million to Lev based on either the approval in acute HAE, or two years of C1-INH market exclusivity from the October 2008 prophylactic approval. In August 2008, the FDA issued a complete response letter on CSL Behring’s C1-INH, Berinert.

The race is now back on between ViroPharma and CSL Behring to gain approval in acute HAE. Both have "orphan drug" status, so whichever is approved first locks the other out of the market. A re-filing from CSL Behring is expected later this year, so as of now Berinert may be in the driver’s seat. Thus, ViroPharma may never owe that $87.5 million to Lev. However, we note that ViroPharma does owe a separate $87.5 million to Lev once cumulative sales eclipse $600 million. We forecast this to happen in 2013.

Along with the CRL on the sBLA for acute use, the FDA did issue the go-ahead to allow for prophylactic patients to self-administer Cinryze in their homes. This is an incremental positive in our view because Cinryze is dosed roughly twice a week (intravenously) and was an inconvenience to patients that had to constantly go to their doctor’s office to receive the drug. Now after training, patients will be able to administer Cinryze to themselves. This offers an advantage over DX-88 (ecallantide), which Dyax has noted they have yet to seek self-administration for.

FDA Will Hold Advisory Panel Meeting on Generic Vancocin

In late May 2009, the U.S. FDA announced that it will convene a meeting of its Advisory Committee for Pharmaceutical Science and Clinical Pharmacology to discuss bioequivalence recommendations for oral vancomycin hydrochloride (Vancocin) capsule drug products. The meeting is scheduled for August 4, 2009. The FDA will make background material available to the public no later than two days before the meeting.

We believe the likelihood of a generic Vancocin prior to the FDA panel meeting is virtually nil. However, this meeting could act as the final hurdle for a generic approval. ViroPharma management has been anxiously awaiting this sort of public forum since March 2006 where they can plead their case.

That being said, it is unlikely that a generic product is delayed significantly longer, and we model a generic launch in the fourth quarter of 2009. Given the complexity of manufacturing and the severity of the disease, we believe ViroPharma will hold onto roughly 50% of the market through 2010, slowly dropping in sales by 50% each year thereafter as physicians gain confidence in the generic products. By 2013, we expect ViroPharma’s Vancocin sales to be only $12 million.