INSYS is Targeting a $700 Million Market With Syndros

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biotech

On December 1, 2016, US biotech INSYS Therapeutics, Inc. (NASDAQ:INSY) is set to present at the Piper Jaffray 27th Annual Healthcare Conference in New York. The company has had a pretty volatile month, with the resignation of its CEO preceding the release of some better than expected financials, but the presentation will likely set the tone for December. The company submitted an NDA for its lead pipeline candidate back in June, and the FDA subsequently accepted the filing in August. This NDA will likely form the basis of the presentation, so in anticipation of the event, let’s take a look at the drug in question in an attempt to examine the implications of an approval for INSYS and its shareholders.

The treatment is called Syndros, and is an oral solution formulation of dronabinol. Dronabinol is a lab-produced version of THC, the active ingredient of cannabis. Its target indication is two-fold as per the latest NDA – anorexia associated with weight loss in patients with AIDS, and nausea and vomiting associated with cancer chemotherapy. How does it work? Well, just as with any cannabinoid therapy, dronabinol interacts with the endocannabinoid system in our bodies. We’ve got a range of cannabinoid receptors (which combine to form the aforementioned system) in our bodies – the two most well known are CB1 and CB2. CB1 is generally associated with the brain, while CB2 generally the central nervous system. When cannabinoids enter our bodies they lock with the receptors, and induce the pain killing and nausea reducing effects commonly associated with their use. Additionally, they induce hunger, which is the basis of the anorexia indication we mentioned a little earlier. In this form, the treatment is a spray form that a patient administers under their tongue.

So how did the drug perform in trials? The trial on which the NDA is based compared Syndros to Marinol, which is the current standard of care prescription for dronabinol. It won out across a range of comparison points. The primary focus was absorption and rate of absorption, with Syndros demonstrating detectable plasma levels (an indication of absorption) at 15 minutes in 100% of patients, versus less than 25% for Marinol. Bioequivalence from an efficacy perspective came in on par, so at a glance there seems to be no reason why the FDA won’t approve the therapy.

What about market potential? The AIDS indication accounts for circa 45% of prescribed dronabinol, while the cancer indication accounts for the remaining 55%. The market is very concentrated, with only 8,000 physicians responsible for more than 70% of total prescribed dronabinol. Why is this important? Well, it reduces the cost of pitching the treatment for INSYS if it only has to pitch (and in turn sell) the benefits of Syndros to a small physician base. The company expects to send out a sales force of 40-50 reps, with a goal of converting more than $500 million annual revenues from current SOC to Syndros. Additionally, INSYS slates an expansion of more than $200 million on this initial $500 million convert. This puts a total market potential for Syndros of $700 million annually, with an expected 5% CAGR over the next five years.

So what are we looking for near term, and when will we find out if the FDA has approved the treatment? PDUFA (decision date) is April 1, 2016, so this is the date to keep an eye on. However, in the run up to that date, we will likely get an FDA advisory panel review, and this will offer insight into the chances of approval going forward. The FDA doesn’t always agree with the opinions of its advisory teams, but more often than not, an advisory panel nod will indicate a corresponding nod from the agency.

If the company gets approval, and can successfully implement its commercialization strategy, the treatment could be a real game changer. INSYS generates less than $100 million a quarter from its currently approved therapies (specifically its Subsys cannabinoid pain management product) meaning Syndros has the potential to more than double the company’s revenues on its initial convertible market. As such, it’s definitely one to watch going forward.

Keep an eye on the presentation for any updates, and expect some upside potential on the coverage. You can check out the live webcast here.

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