NeurogesX Wins Big Approval

FDA Approves NeurogesX's Qutenza

After the market closed on November 16, 2009, NeurogesX (NGSX - Snapshot Report) announced that the U.S. FDA had approved Qutenza (capsaicin patch) for the management of neuropathic pain due to postherpetic neuralgia (PHN).  We expect management to spend the next several months preparing for the launch by facilitating reimbursement procedure, establishing distribution channels, hiring and training the specialty sales force, and conducting the manufacturing for commercial supply.

Key to our bullish sales forecast for the drug will be establishing a permanent reimbursement code for both the product and application, as Qutenza requires administration by a physician or healthcare professional.

Qutenza is a cutaneous (skin) patch designed to treat peripheral neuropathic pain conditions. The Qutenza patch provides a pure high concentration (8%) of a synthetic capsaicin, known as trans­-capsaicin, directly to the site of pain via a rapid-delivery cutaneous delivery system designed to provide three months of relief with minimal potential for side effects, abuse, or drug-drug interactions.

Qutenza has been studied in roughly 2,500 patients during its clinical program. Clinical studies have shown that PHN pain can be reduced for up to 12 weeks following a single one hour treatment. In the phase III PHN trial, patients administered Qutenza saw an average 30% to 32% reduction in pain vs. 20% to 24% for the control. Additionally, a significant number of patients on Qutenza demonstrated greater than a 30% reduction in pain over the course of treatment.

We believe management’s goal in the U.S. is to promote the product through an in-house specialty sales force -- eventually that may grow to the size of 80 to 100 representatives. The company has spent the last few months expanding the senior management team to bring in directors of marketing, commercial operations, sales and business development.

Management also recently conducted a qualitative and quantitative marketing study in preparation of approval. As of now, our financial model assumes a launch during the first half of 2010 with a small specialized sales force of around 20 to 25 representatives. This group will target the top quartile or so of the 5,000 pain centers and 10,000 neurologists that are high-prescribers for PHN. When progress is made here, management will probably look to expand through expansion of the force or signing a co-promotion agreement.   

Outside the U.S., NeurogesX has partnered Qutenza with Japanese large-cap pharmaceutical company Astellas. NeurogesX received approval for Qutenza in the European Union in May 2009. The deal with Astellas includes all 27 EU member states, plus Iceland, Norway, Liechtenstein and Switzerland, along with the Middle East and Africa. Astellas plans to be ready to launch the product during the first half of 2010, and will pay NeurogesX a scaling mid-teen to mid-twenty percent royalty on sales.
 
We continue to be positive on NeurogesX. We are maintaining our Outperform rating and expect the share to trade upwards towards are $12 target over the near-term.

Read the full analyst report on NGSX