Here is an interesting one. We have covered Egalet Corp (NASDAQ:EGLT) on a number of occasions in the past here at Market Exclusive, with a specific focus on its abuse deterrent opioid application, which has been with the FDA for the better part of 12 months in its latest iteration. The company has repeatedly tried to get the asset approved and advanced into the commercialization phase, but has had numerous setbacks – primarily related to the label that it is seeking, a label that promotes the asset as abuse deterrent.

Opioid abuse is a huge problem in the US, and is now at epidemic levels. The FDA has implied on a number of occasions over the last couple of years that it will show some degree of lenience towards any drugs that attempt to overcome this epidemic (it is costing the US government billions of dollars annually in both healthcare and criminal/legal costs) and this has brought with it a wave of companies, big and small, attempting to capitalize on this lenience. As it turns out, however, the agency has been anything but lenient in its approach to giving these sorts of drugs a green light for commercialization, at least with the label they are seeking.

When PDUFA comes, many of these abuse deterrent assets are picking up approval, but failing to get the label they want. We will look at this in a little more detail shortly, but before we do, what just happened with Egalet?

First up, it is worth noting that the J.P. Morgan biotechnology conference kicked off yesterday, and this week is notorious for volatility in the space. Mergers and acquisitions are announced numerous times a day, and pivotal data hits press at a rate not seen at any other time during the year. As such, any movement is subject to reversal on a dime, and this is exactly what we have seen with Egalet.

On Monday, the company announced that its abuse deterrent opioid asset – ARYMO™ ER (morphine sulfate) extended-release (ER) tablets – had been approved by the agency for the management of pain severe enough to require daily, around the clock, long-term opioid treatment and for which alternative treatment options are inadequate.

Immediately following the announcement, Egalet’s market capitalization gained 20%, as markets interpreted the approval as positive for the company. However, as we have seen so many times before over the last 12 months, when the reality of the situation became apparent, these gains quickly dissipated.

What was the reality?

The FDA had approved the drug in the target indication (the above-mentioned pain management indication) but has not approved an abuse deterrent label for the drug. The problem with this is, that Egalet now has a drug that works, and that it is able to sell, but the market for these chronic pain management assets is so saturated already, that it is almost not worth spending the money to commercialize the drug given the return potential. In other words, Egalet now has just another opioid asset in a sea of already approved opioids.

It is not all bad. If the company can educate physicians as to the abuse deterrent properties of the drug (which it will have to be very careful about given that the abuse deterrence is off label, but it is still possible) then some physicians may prefer to administer Egalet’s asset over that of the competition, based on its composition. Again, however, this is going to be costly, and the question has to be raised as to whether it’s worth the outlay.

So what’s next? We wouldn’t be surprised if the company pushes forward with some extra trials in an attempt to supplement the initial, approved application, and in turn, try and get the agency to change his mind on the abuse deterrent labeling. For us, that’s really the only way that Egalet is going to get any degree of return on this one going forward.

As things stand, the gains logged post-approval have pretty much been eaten away by the sentiment surrounding the label ruling, and Egalet is sitting flat on its pre-approval market capitalization. The conference continues, however, so chances are this and many others in the space won’t remain flat for long.

We’re going to monitor the conference as it plays out. Stick with us for coverage and updates!