Cypress Bio Nearing Profitability

In January 2009, the U.S. FDA approved Cypress Bioscience’s (CYPB - Analyst Report) Savella (milnacipran HCl) for the management of fibromyalgia. Following the minor re-workup of a cosmetic formulation change, the product became commercially available on April 28, 2009.

In connection with its approval in January 2009, Cypress received a $25.0 million milestone payment and $6.5 million in expense reimbursement for clinical trial costs from partner Forest Labs (FRX - Analyst Report). Forest and Cypress are now actively detailing the drug.

Forest Labs, with its estimated 1,400 representative primary care sales force, and Cypress, with it estimated 100 representative specialty and hospital sales force, will co-promote the drug. Additionally, the duo will collaborate with patient advocacy groups and will be distributing product and disease state information in physician's offices, pharmacies, and over the Internet.

The program will focus on raising awareness of fibromyalgia, educating patients about new treatment options such as Savella, and encouraging treatment compliance. We note that Forest Labs has successfully employed this type of approach in the past with the launches of Lexapro for depression and Namenda for Alzheimer’s disease.

The primary focus since the launch has been meeting with managed care organizations and making presentations to the key plans. Forest’s goal is to have Savella placed in an unrestricted formulary position, either Tier 2 or Tier 3 in most of the major plans.

For 2009, we believe Savella sales will be roughly $20 million, in-line with guidance at Forest Labs. We project that number will grow to $76 million in the U.S. in calendar 2010, and eclipse $500 million worldwide by 2013. Our financial model assumes a 15% royalty on U.S. sales of Savella, which should be enough to drive Cypress to profitability in 2011.