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United Therapeutics Could Lose The Battle For PAH Therapies

Ironically, the efficacy result from FREEDOM-M is similar to the 20-meter placebo-subtracted 6MWT benefit associated with inhaled Tyvaso from its pivotal study. But unlike the Tyvaso study, the pivotal study of oral treprostinil doesn't meet the FDA's statistical hurdle for regulatory approval based on a single trial (p less than 0.01.)

Biotech investors know the FDA can be unpredictable. United Therapeutics' bulls contend that the FREEDOM-M study of oral treprostinil demonstrated a statistically significant improvement in walk performance. Any concerns about the study results will be mitigated by FDA's comfort with the activity of treprostinil in PAH since two formulations of the drug have already been approved. These are fair points, but I still believe the most likely outcome on Oct. 26 will be a complete response letter with an FDA request for an additional study.

Even if oral treprostinil receives FDA approval, United Therapeutics faces a more insidious problem.

In the 15 years since United Therapeutics first licensed rights to treprostinil from Glaxo Wellcome -- now GlaxoSmithKline (GSK - Get Report) -- the PAH market has changed dramatically. Multiple drugs in three different classes -- prostacyclin analogs like Remodulin, endothelin receptor antagonists (ERAs), and PDE-5 inhibitors -- have been approved for treatment of PAH. Although the long-term prognosis remains dim, physicians now have a wealth of treatment alternatives. Importantly, many of these drugs will go generic within the next few years.

New competitors are also closing in. Later this week, Bayer will present Phase III data for a first-in-class drug, riociguat (formerly BAY 63-2521), at a major scientific conference. Follow-on drugs, such as Actelion's ERA macitentan, are also in late-stage development. Finally, although Novartis' bid for regulatory approval of Gleevec in PAH encountered some safety-related difficulties, the company may yet be able to secure marketing clearance.

Physicians are also increasingly using these drugs in combination. I think that makes oral treprostinil's inability to play well with other drugs in the PAH sandbox a fatal commercial flaw. Oral treprostinil can't easily be combined with ERAs or PDE-5 inhibitors, as the failed FREEDOM combination trials clearly show, and it doesn't otherwise fit well into the treatment algorithm. Bulls might argue that single-agent oral treprostinil -- if approved -- would be used ahead of Tyvaso or Remodulin, but that seems like a Pyrrhic victory.

I'm not entirely sure what the FDA will decide this week -- risk-tolerant investors might consider a small short position -- but it's ironic that an 12-year-old comment about treprostinil by a top FDA official still rings true: Despite the efforts at resurrection through reformulation, treprostinil, with its minimal benefit and meaningful toxicity, just isn't a very good treatment for PAH.

Long-term, that's bad news for United Therapeutics.

Sadgehi has no position in United Therapeutics.
Nathan Sadeghi-Nejad has 15 years experience as a professional health-care investor, most recently as a sector head for Highside Capital. He has worked on the sell side (with independent research boutiques Sturza's Medical Research and Avalon Research) and the buyside (at Kilkenny Capital prior to Highside). Sadeghi-Nejad is a graduate of Columbia University and lives in New York. You can follow him on Twitter @natesadeghi.
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