Thursday, August 12, 2010
FDA and IPO
This week Trius, a biotech in California, went to the public markets in an attempt to raise money to support its proposed Phase III trials for its antibiotic, torezolid. First – a few disclaimers. I do not consult for Trius (I’m one of the few consultants who don't). I did not buy stock. I have no inside knowledge whatsoever. I have not discussed their IPO with analysts. So, I probably don’t know what I’m talking about – but at least I have no conflict of interest!
The FDA prides itself, and rightly so, in being business neutral. The FDA does not take business considerations into its deliberations on proposal by sponsors or in evaluation of data or anything else. But there is a connection, fortunately or not, between the business world and the public health need for new antibiotics to fight resistant bacteria since new antibiotics must come from the pharmaceutical industry. So, what does this have to do with the FDA? That gets us to Trius and their IPO.
Trius was first established as Rx3 in 2004. In late 2006 or early 2007, they became Trius Therapeutics and licensed an oxazolidinone (like Zyvox) antibiotic from Dong-A Pharmaceuticals in Korea. In 2008 they embarked on Phase II trials in complicated skin infections for their drug (now called torezolid). After their Phase II trials, Trius was faced with two problems. First, I’m sure their investors were thinking about some sort of exit – as in cash. Second, Trius and their investors wanted to embark on Ph. III trials by establishing a partnership, by being bought by a larger company, or, by going to the public markets for financing.
In my personal opinion, their Phase II trials were not designed to convince potential partners. A very large majority of patients enrolled had abscesses. The FDA and others are not sure antibiotics play a major role in curing this disease since the abscesses can be and are treated surgically. Trius also failed to include a comparator antibiotic such as Zyvox, which would be their major competitor, in the trial. So one cannot judge how torezolid stacks up against the competition.
So, Trius ends up having to go to the public markets for financing for their proposed Phase III trials. This occurs at a bad time. The markets, as everyone can see, are not at their most welcoming to new entrants these days. And, just as Trius was about to pull the trigger on their IPO, the FDA decided that they did not know how sponsors should even conduct phase III trials in skin infections, the indication being sought by Trius for torezolid. While the FDA sorted out the issues they (but no one else) had with skin infection trials, Trius was forced to pull its IPO since without a regulatory path forward, no one was going to invest. Well, the FDA seems to now have sorted out its problems and will issue guidance on skin infection trials in the near future. Trius has negotiated a phase III trial design that is currently acceptable to the FDA. So Trius restarted its IPO process. But, the FDA has been giving mixed signals lately. As recently as the August 2-3 workshop on clinical trial design and conduct, the FDA indicated that very tight non-inferiority margins might be required – but this is not what Trius had negotiated with the FDA. These kinds of confusing statements had everyone in an uproar. The investors voted with their feet. The proposed stock price for Trius’ IPO went from $14 to $5. They raised $50 million. I’m sure this is much less than they originally anticipated in 2009.
Trius may be OK financially since they will now have access to after market monies to help finance their trials. Their investors may not have achieved the cash exit they desired, so they may not be too happy.
But we all should be panicking. The Trius IPO experience tells us that investors no longer trust the FDA. They don’t trust the agency to keep its word, they don’t believe that there is a stable path forward for antibiotics at the FDA, and they are generally skeptical about antibiotics as a therapeutic area – all for good reason given recent FDA behavior. But this means that investments in antibiotic research will be all but frozen.
The FDA has a chance to redeem itself. On September 7th during the advisory committee meeting to consider ceftaroline. (Full disclosure – I do have a consulting contract with Cerexa – but they haven’t spoken to me in over a year). The world will be watching. The FDA, regardless of the ultimate outcome for ceftaroline, has to be reasoned and reasonable.