Abuse deterrent opioids are all the rage these days. While they are exciting, the sector is far from secure. There are only two approved on the market. One is Xtampza from Collegium Pharmaceutical Inc. (NASDAQ:COLL) and the other is Embeda from Pfizer Inc. (NYSE:PFE). Teva Pharmaceuticals Industries Ltd. (ADR) (NYSE:TEVA) will soon see its Vantrela join the market as well. Whether any or a combination will conquer the market from regular easily abused opiate painkillers or which one will come out on top is more likely a question of marketing rather than effectiveness in actually deterring abuse. This is for the simple reason that social media has made information sharing so simple that dedicated abusers will figure out a way to bypass all abuse deterrent mechanisms at some point and share it on YouTube.

Up to bat in the abuse deterrence space is Egalet Corp (NASDAQ:EGLT). Its Arymo ER is designed to deter abuse by the oral, nasal, and intravenous routes by being as hard as steel, literally. According to the FDA transcript which we’ll see shortly, tools used to grind steel were used to try to grind Arymo, with only partial success. Users who attempt to dissolve it in a solvent will find that it gels to the point of being impossible to flow through a needle.

Arymo got a vote of 16-3 for an oral abuse deterrence label, 18-1 for nasal and IV, and 18-1 for approval. Going through the panel meeting transcript (the meeting took place back on August 4) reveals more than just the specific chances for Arymo and by extension Egalet. The way that the FDA and its advisory panel related to Egalet’s data is revealing for the future of abuse deterrent opioids in general.

Most importantly for investors interested in this nascent space, is to realize that the whole area is quite tenuous. There is great concern in the FDA that these new formulations not add fuel to the fire of the opioid addiction epidemic in the United States. Just because a medication is harder to abuse does not mean it is less addictive, and there is concern that abuse deterrence may actually encourage more dangerous forms of manipulation. Second, labeling can be revoked easily, and postmarketing studies are required for all these formulations. It’s not like these abuse deterrent drugs are going to conquer the opioid market in a day and completely replace standard painkillers in a flash. These companies are operating in a new space the testing of which is very difficult to standardize, which presents some problems.

Our Inside The FDA investigation of Egalet revealed, among other things, that testing these formulations for abuse deterrence is more difficult than it sounds. Endpoints such as “drug-liking” are not quantitative and panels don’t like it when endpoints cannot be quantitatively measured. The question of which tools to use for which routes of abuse is another question. Because each abuse deterrence mechanism is different, the type of tools that can be tested for each must be different. This opens up potential questions for panelists and in turn the FDA itself that, while they did not trip up the actual label recommendation, may come up in postmarketing studies as potential flies in the ointment.

Case in point, in our review of this transcript, the Egalet spokesman claimed that “thousands of hours” were spent in coming up with tool combinations that could break Arymo’s abuse-deterrent properties. Put it on the market though, and thousands of people can collectively put in hundreds of thousands of collective hours in a matter of weeks.

Even so, important to understand concerning abuse-deterrent labeling is that it does not mean that an opioid is impossible to abuse.

In the words of the FDA:

The fact that a product has abuse-deterrent properties does not mean there is no risk of abuse. It means rather that the risk of abuse is lower than it would be without such properties.

The target population for abuse deterrence is primarily opioid naïve patients, primarily young people who may have gotten a tooth pulled and are on, say, Vicodin. If someone like this were to accidentally chew a pill, he may achieve a high that he may want to repeat. If he has a predilection to addictive behavior patterns, he can quickly fall into abuse. Arymo being hard as steel, it is impossible to chew, so there is less likelihood of accidental dose-dumping that could cause a patient to lapse into quick drug addiction.

In the words of one panelist:

The determined abuser is determined, and we are not likely to be able to deter them with this formulation or any other. But it’s those other abusers, casual abusers, or first-time abusers, who are likely to be sufficiently deterred by this to the point that they may move to something that is less likely to end their lives.

From our analysis of the transcript, though the FDA panel was not universally impressed and there were issues, the FDA is likely to recommend an abuse-deterrent label for all administration routes for Arymo. This does not mean, however, that the product will succeed in the market. First, there is the question of competition obviously. Arymo has disadvantages compared to already-approved Xtampza from Collegium. The first is that it is not the first to market, and the second is that Xtampza can be dissolved in food and Arymo must be swallowed. Given that the target here is young opiate-naïve patients, some may be unable to swallow pills. Xtampza also has clear advantages in geriatrics where patients may be unable to swallow pills at all.

The FDA has delayed its approval for Arymo, but this happens often, and the agency requested no additional data. While we feel that Arymo will get its abuse deterrent label, this is only the beginning for the drug, and for the entire abuse-deterrent space as a whole. As we’ll see going through the transcript, there are major challenges to the whole concept of abuse deterrence opioids in the first place, not the least of which (not even mentioned at all in the transcript) is the continued legalization of medical cannabis and its gradual exit from taboo status. Cannabis is of course known to be a potent and much less problematic and addictive pain reliever than opiates, and would obviate a substantial amount of the need for abuse-deterrent opioids in the first place.

Nevertheless, investors can feel relatively safe taking a position in Egalet assuming they get the label they seek, especially considering the recent fall coming out of the FDA delay announcement. In terms of being a long term hold though, that is another question entirely.

The Transcript

The very first thing to notice about this transcript is the introductory remarks from the FDA itself. These were made by Dr. Ellen Fields, who made this key statement in her opening address to the panel and the attending public:

We are watching the postmarketing data closely for any signs of unintended problems associated with these products.

This is an open admission that nobody knows how abuse deterrent products will impact abuse habits. They could increase opioid prescriptions, or they could end up encouraging more dangerous routes of abuse in an attempt to bypass the barriers. The key thing to note is that the FDA does not yet know, which is why postmarketing studies are required for all companies involved in the space. For all we know, abuse-deterrence could end up causing more deaths for these reasons, and then the label becomes a liability. This is a long shot, but a possibility nonetheless.

Egalet CEO Robert Radie then followed with his own presentation of the data surrounding Arymo’s abuse-deterrent properties. Key to his statement was this line, which should help Arymo stand out in the market. Says Radie, “There was no evidence of a clinically significant food effect, and no evidence of dose dumping in the presence of alcohol.” Collegium’s Xtampza by comparison, while it does have certain advantages over Arymo in terms of oral administration, must be taken with food. Arymo need not be, and its lack of interaction with alcohol is a considerable plus.

Regarding the tools tested for the purpose of manipulating the drug, a fascinating footnote here is that the optimal grinding tool was actually revealed to be a Dremel grinding tool, used to grind steel. That gives us an idea of how hard these pills really are.

The intranasal data found that even with the most effective tools, most particles were too large to be snorted, and regarding the IV route, the resulting liquid was too viscous to be injected in anything but a very large needle that IV drug users do not use. But again, if they try, injecting a viscous gel into a vein could prove fatal, something to watch out for in postmarketing.

Panel Questions

Some questions posed by panelists were answered well, but others were not. One particularly interesting panelist question was from one Dr. Bilker:

My question was, if somebody were to actually chew the gel, I guess like gum, would it release — would that circumvent the ER property?

Egalet’s Dr. Flick could not answer the question, which led in turn to this exchange about tools used

FLICK: We have to know that you did your best, that there was nothing left in the laboratory, and that you’re willing to say that definitively. If you can’t say that definitively, there isn’t a person on this committee that’s going to vote for approval, at least not me. If you can say that definitively, then we can move on.

DAYNO: Yes, I can say that definitively.

FLICK: Good.

The importance of this particular exchange is not to say that Egalet’s Dr. Dayno was being forced into a corner, but that postmarketing studies, if they find that Arymo or any other abuse-deterrent opioid can be abused with whatever tool that was not tested, could end up leading to the revocation of the label.

FDA to Panel – Convince Us!

Following this exchange, the FDA’s words to the panel right before voting were quite eye-opening in terms of the role of these panels and the importance of the actual vote count. Said FDA Dr. Sharon Hertz to the panelists:

It’s extremely important because we have been swayed by committees where we’ve had disagreements. You folks clearly let us know when you disagree with us, and that’s incredibly important. And we actually listen, and we can be swayed.

Then what’s as important as specific answers is your reason for your answers. You may notice we take quite a bit of notes. I mean we will get a transcript as well, but we look at these notes — I’m still referring to my notes from advisory committees from years past, because the deliberations are as important as the final votes or the final answers.

That last statement alone should change the way we all read cursory news of an FDA panel review vote. A vote could theoretically be unanimous with qualifiers in the reasoning up the wazoo, leading to an FDA rejection. Bare vote counts have misled investors in the past, even institutional once. Though in this case, as we’ll see, there were few qualifiers to yes votes. There were some but they were not serious or many.

The Questions, The Vote

The first question was a discussion question:

Please discuss whether there are sufficient data to support a finding that Arymo ER, morphine sulfate extended-release tablets, has properties that can be expected to deter abuse, commenting on support for abuse-deterrent effects for each of the three possible routes of abuse: oral, nasal, and intravenous.

One panelist, one Dr. Floyd, suggested a rewording of the question on the grounds that “expected to deter” suggests that real-world data was actually collected on true abuse-deterrent statistics, quantitatively speaking, of Arymo vs other opiates without abuse-deterrent properties. This panelist’s votes repeatedly contained the caveat that the wording of the question was misleading. He preferred, “…have properties that make them difficult to manipulate…” rather than “expected to deter”.

Most panelists were unqualified positive though, and were particularly impressed by Arymo’s lack of interaction with alcohol, which just by itself makes it a safer than other opiods.

The actual vote on the oral abuse label was 16 to 3. Dissenters were, first, one Dr. Charles Emala, who voted no because, “the drug’s rapidly extractable in an ingestible volume solvent making it easy to abuse by the oral route.”

Here is a perfect example of how the reasoning for a particular vote is so important. It was the FDA itself that said that abuse deterrence does not mean that there is no risk of abuse, but that the risk is lower than drugs without such properties. Does Arymo meet this criteria? Certainly. If the FDA takes itself at its own bureaucratic word (never assured) then this no vote is inconsequential.

A second no vote was by one Dr. Tobias Gerhard. He voted no because:

I think putting that claim of oral abuse deterrents on the label might do a disservice because I think there’s significant potential that it might lower the bar to prescribe a long-acting opiate. And I think we have some issues with the effectiveness of long-acting chronic opiate use.

But the question was not about whether Arymo will lower the barrier to prescription opiates. It was about whether it is abuse-deterrent via the oral route.

And here is where we come to perhaps the most important issue going forward not just for the abuse-deterrent opioid space, but for the function and importance of FDA panels as a whole. And that is this:

Essentially, we do not know what is more consequential for the FDA in terms of their panels – the actual vote or the reasoning behind it. If the FDA rejects the abuse-deterrent label for Arymo via the oral route, we can be sure that it is the reasoning that is much more important than the vote itself. And that may be the true import of the FDA decision here. The way it decides to go here, especially if it denies the oral abuse-deterrent label, will speak volumes about how it makes decisions in light of its own panels. This information will be much more useful than the refrain “The FDA is not required to follow the recommendations of its panels but generally does so,” that we read in nearly every article on an FDA panel vote.

The final no vote on the oral route came from one Dr. Arfken, who voted no because “the category of oral abuse is too broad for me. If it had been for chewing, I would have voted yes.”

The vote on the nasal route was 18:1 in favor of the abuse-deterrent label, as was the intravenous vote. The approval vote was the same, with few significant qualifiers.

Conclusion

Our conclusion is that Arymo will get approved and will probably get its abuse-deterrent label for all three routes. If it does not get the label for the oral route, that would mean that going through the reasoning for these votes is much more important than the final tally.

Even if Arymo is approved with all three label targets, the prospect of postmarketing studies still hangs over the entire sector. All abuse-deterrent properties will be broken at some point via collusion on social media. If postmarketing studies show that these formulations are increasing opioid prescriptions and having no effect on hospitalizations and death, that could endanger the entire niche.

Egalet may be a nice short term buy on the assumption that Arymo will be approved with the desired labels, especially in the wake of the recent FDA delay on the drug, but past that, the abuse-deterrent opioid space is too young and uncertain to be a buy and hold.