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Biotech Mailbag: NeurogesX Patchy at Best

The Biotech Mailbag opens this week with an email from Dean M.

"Any thoughts about NeurogesX's (NGSX) positive phase III data for post-herpetic neuralgia and their pending applications in Europe and the U.S.?"

NeurogesX is a tiny drugmaker with a pain patch, NGX-4010, that applies a synthetic form of capsaicin (yes, the hot stuff from chili peppers) directly to the site of pain. NGX-4010 provides longer-lasting relief than other pain patches and creams, and it does so without significant side effects.

The company is seeking Food and Drug Administration approval for NGX-4010 as a treatment for post-herpetic neuralgia, or nerve pain associated with shingles. The company filed a new drug application Oct. 22 and hasn't yet announced whether the agency has accepted the filing. The FDA has 60 days to accept or reject a new drug application filing, so NeurogesX should have something more to say toward the end of December.

NGX-4010 is also under review by European regulators, with an approval decision expected in the first half of next year.

All of this seems good, yet NeurogesX shares, at $1.60, are barely above the company's cash on hand. So what gives?

Well, NeurogesX is going to have to raise some money fairly soon, which in this market is a black mark. And there are questions about how the company plans to commercialize the pain patch if approved here or in Europe. A domestic sales force is going to cost money to build (hence the need to raise cash or find a co-promote partner here) while across the pond, NeurogesX definitely needs to find a partner.

The commercial market for pain patches, pills and ointments can be tricky. The space holds some big competitors, like Pfizer (PFE) and many smaller ones, like Endo Pharmaceuticals (ENDP). How well will tiny NeurogesX compete, especially if NGX-4010's label is restricted, at least initially, to treating shingles-related nerve pain?

The best thing that could happen to NeurogesX is to be gobbled up by a larger drugmaker with an existing pain drug franchise. Absent that, my sense is that investors in this market will be gun-shy with this stock until they see tangible results. Don't forget that the FDA is a fickle place these days when it comes to new drug approvals, and the pain-drug area is notorious for delays.
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