Updated from Oct. 2
plunged 62% Thursday after the company said late Wednesday that efforts to seek U.S. approval for its experimentalFabry disease drug, Replagal, will be delayed into next year because ofconcerns raised by the Food and Drug Administration.
The Cambridge, Mass.-based firm also warned that third-quarter salesfor Replagal in Europe were lower than expected in the current quarter. Theshortfall is forcing TKT to cut its 2002 sales estimate for the drug.
The surprise disclosure by TKT of serious problems with Replagal comesless than two weeks after the FDA abruptly postponed a Sept. 27 advisorypanel meeting that was scheduled to review the drug. A similar panel forGenzyme and its Fabry disease drug, Fabrazyme, also was postponed. At the time, the FDA said the panels were postponed because of conflict of interest issues with some of the doctors invited to participate at the panel meeting.
Shares of TKT sank $20.72, or 62%, to $12.53 in recent trading Thursday.
On a conference call to discuss the Replagal setback, TKT CEO Richard Selden came under attack from several angry fund managers who questioned his credibility in the face of prior statements that all was well with the company's FDA discussions. One particularly irate fund manager ended the question-and-answer period of the call by asking Selden if, and when, he expects to be contacted by investigators from the
Securities and Exchange Commission
TKT finds itself in a particularly vulnerable position because of its competitive battle with Genzyme. The FDA is supposed to render a decision under rules defined by the Orphan Drug Act, which means that only one drug gets approved and is granted seven years of market exclusivity. If TKT's Replagal is running afoul of the FDA, that might just clear the path for Genzyme's Fabrazyme to claim the top prize.
Genzyme shares were up $2.70, or 13%, to $23.70.
Wednesday, TKT said the FDA's review of its approval application forReplagal listed concerns with clinical data. In particular, the companysaid regulators concluded that the data supporting the primary endpoint ofthe drug's pivotal study -- a reduction in pain -- was not sufficient forthe drug's approval.
TKT says it will now try to use other data from its study in an attemptto get Replagal approved, even tough the FDA also has concerns with this data. As a result, any FDA decision on the drug'sapproval will be delayed into the first half of 2003, the company warned.The company also said it is not yet sure when the FDA would scheduleanother advisory panel meeting, although it hopes such a panel will meet at the end of the year or early next year.
What's got so many Wall Street followers of TKT so angry about this sudden change of fortune is that the company had not indicated that the FDA had problems with its data on Replagal.
"TKT executives have sat in my office and told me to my face that their regulatory plan was superior to Genzyme's and that their discussions with the FDA were golden," said one very skeptical fund manager. "Now, all of a sudden, the FDA tells them that the pain endpoint is no good? Come on, these guys knew there was a problem all along and chose not to tell anyone." This fund manager has no position in TKT.
On its conference call, Selden insisted that the company became aware of the FDA's position over the course of conversations taking place in the last month. A decision to disclose the obviously material information was made today because the company essentially decided it was best to "agree to disagree" with the FDA and switch approval strategies, said Selden. The CEO described this change as "moderate" and he expressed confidence that Replagal would be approved and become a commercially successful product.
Not everyone is so confident anymore. "TKT is really behind the eight-ball for U.S. approval," says Leerink Swann biotech analyst Bill Tanner. "This change in strategy is huge." Tanner rates TKT outperform and his firm has done banking for the company. (Expect a downgrade from Tanner Thursday.)
Salomon Smith Barney analyst Elise Wang believes Genzyme is now in a much stronger position to garner approval and orphan drug status for its Fabry disease drug. TKT could still try to break Genzyme's market exclusivity by arguing to the FDA that Replagal is safer or more effective, based on data from its clinical studies, she says. Wang has an in-line rating on Genzyme and she owns the company's shares. Her firm doesn't have a banking relationship with the company.
Replagal was approved in Europe last August, but Wednesday, TKT saidthird-quarter sales will be lower than second-quarter sales of $8.8million. As a result, the company reduced 2002 Replagal sales guidance to arange of $30 million to $35 million, from $35 million to $42 million.
Genzyme's drug is also approved and in use in Europe. To this point, most analysts give TKT a slight edge in market share, but the third-quarter sales disappointment may force a change in that opinion.
"Sales have been lower than expected over thesummer, but we are back on track for strong growth in the fourth quarterand onward," said Bo Ashlund, CEO of TKT-Europe-5S, the company'smajority-owned European subsidiary.
TKT releases financial results Oct. 30. The company is expected tolose 55 cents per share in the third quarter and $2.19 per share in 2002,according to a consensus estimate compiled by Thomson Financial/First Call.
Fabry disease is a genetic disorder that causes lipids, or fats, to build up inside a person's cells. Normally, the body produces an enzyme that breaks down those fats, but not in Fabry patients. As those fats build up in tissues like nerves, kidneys or the heart, patients suffer from severe pain, their organs start to deteriorate and they eventually die. The drugs developed by Genzyme and TKT both replace that missing enzyme, allowing the body to break down the fats.