Kitov Pharmaceuticals Holdings Ltd (ADR) (NASDAQ:KTOV) Tanks; Opportunity Ahead of NDA Submission?

Take a look at the winners and losers ahead of market open in the US on Wednesday, and Israel-based Kitov Pharmaceuticals Holdings Ltd (ADR) (NASDAQ:KTOV) would top the list of losers. The company is down close to 12% on its Tuesday morning open, and pre market on Wednesday, is down a further 5%. While there is no apparent reason for this sell side pressure, it would be naïve to suggest it is completely unfounded. Having said this, from a development pipeline perspective, Kitov has for a while now been one of the more intriguing Israeli biotech’s. A slew of recent announcements support a bullish bias throughout the next 24 months, and so the recent pullback might offer an opportunity to get in at a discount ahead of upside throughout the remainder of this year and beyond into 2017. With this in mind, let’s take a look at some near-term milestones.

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The company’s lead development candidate (and the drug that underscores the majority of its open market valuation at present) is called KIT-302. It’s a combination of two already approved drugs, with a target indication of osteoarthritis and hypertension. Hypertension is a common side effect of the majority of the currently available standard of care osteoarthritis drugs, and essentially what Kitov is trying to do here is combine the standard of care treatment in the two indications so as they can be offered as a combination, rather than a patient having to take the osteoarthritis drug, and when the side effects present themselves, follow it up with the hypertension treatment. From a return on investment perspective, it’s a pretty solid strategy.

The two drugs in question are Celebrex, which Pfizer Inc. (NYSE:PFE) developed initially but is now available as a generic, and besylate. They target the osteoarthritis and hypertension respectively, but concurrently.

The company reported phase 3 data back in 2015, which demonstrated efficacy and tolerability across the patient population involved. In a pre-NDA meeting with the FDA, Kitov established a pretty straightforward path to commercialization, with the only hurdle that could have potentially presented an issue being a request from the agency that Kitov calculate the efficacy data on which its NDA will be based using a different mathematical formula to the one initially used. This didn’t pose any problems, with the company recalculating as per the agency’s request and the data still demonstrating efficacy (and in turn, the meeting of the trial’s primary endpoint) under revised formulation.

So, what’s next? Well, the company just reported the completion of the successful manufacturing of the first batch of the drug, and suggested it (along with its manufacturing partner Dexel) should have no problem scaling up if and when the FDA gives the drug the green light for commercialization. For those not familiar with the latter mentioned manufacturer, Dexel is widely regarded as the go to tablet and capsule manufacturer in Israel. That Kitov has secured a manufacturing partnership with it, and further, that this partnership has successfully completed a first batch production, should be considered as a step forward. This was just announced yesterday, making the overarching market decline even more curious, but there we go.

There is not going to be any independent review, which further simplifies the path to commercialization, and Kitov is aiming to have its submission with the FDA before the close of 2016. This is the next major milestone, and acceptance of said submission should serve up some immediate upside in the company’s market capitalization. Beyond that, of course, we’re looking for an FDA green light for marketing and subsequent commercialization operations to provide and underwrite the majority of Kitov’s market potential going forward.

All said, this is a bit of a strange one. Oftentimes, rumors out of Israel can create selloffs on the local Tel Aviv exchange before the news hits US markets, and so it may be worth holding off on any exposure for 24 hours to see if anything arises that can be associated with the decline. If not, however, and if this really is a phantom pullback, it’s an opportunity to get in cheap behind what looks to be a promising candidate for approval. One to keep an eye on closely over the next few days, and beyond that, going forward into 2017.

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