Weekly Biotech Report on Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) drug Vantrela

Weekly Biotech Report on  Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) drug Vantrela
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This Week in FDA vs Biotech Part II, Teva’s Vantrela Gets Abuse-Deterrent Label

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vantrelaLast week we reported extensively on Teva Pharamceutical Industries Ltd. (ADR)(NYSE:TEVA) drug Vantrela, up for a panel review on June 7. Vantrela is Teva’s reformulation of hydrocodone for round the clock daily pain management. In that report, we had said that despite a Reuters press release that Food and Drug Administration (FDA) officials had said that Vantrela is not abuse-deterrent when taken orally, there was no evidence from any official FDA document available on the FDA website that indicated that Vantrela was not abuse-deterrent when taken orally.

On June 7, not only was Vantrela approval recommended by a vote of 14 to 3, but the FDA panel also voted 14 to 3 that if approved, VANTRELA ER should be labeled as abuse-deterrent by the oral route.

In that research piece we said the following:

The problem is, the briefing document available on the FDA website does not directly state FDA’s opinion on the abuse deterrence of Vantrela when taken orally. There are some indications in the data that manipulation followed by oral administration is not as effective at deterring abuse as dissolving the drug in a tincture, isolating and injecting, but the data does show some level of effectiveness with manipulated oral administration. So whether the statement that Vantrela ER “does not have abuse-resistant properties when taken orally, according to a preliminary review by the U.S. Food and Drug Administration” in the words of Reuters is speculation, word of mouth or something else is unclear.

Not to toot our own horns or anything like that, especially because we did speculate that the abuse deterrent label would not be recommended for the oral route as we assumed that the Reuters report was based on something that we just couldn’t find, this whole scenario does show the importance of examining primary sources rather than relying on ambiguous reports even from a respected outfit like Reuters. As it turns out, Teva got the label recommendation, and the report turned out to be slightly misleading, though of course not purposely so. Reuters was probably basing its report on someone at the FDA, possibly one of the 3 people that voted against the abuse-deterrent oral label, but the fact that those concerns were not raised in any official document we could find did indicate that the opinion was a minority and should probably have been reported as such.

As a refresher to the science, while Teva is tight-lipped as to the proprietary nature of its abuse deterrence formula, we speculated based on redacted experimental data that Vantrela works by defending the active opioid ingredient in layers of both polar and nonpolar molecules that together would help deter dissolution in both polar and nonpolar solvents. Further, even if a patient were able to dissolve the protective layer away prior to oral ingestion, full extraction of the active ingredient could theoretically require temperatures so high that extracting it would lead to the warping or possibly even destruction of the active pain killing ingredient, our so-called self-destruct mechanism if a potential abuser tries to manipulate the tablets.

Taken together, if our analysis is correct, Vantrela ER should be extremely difficult to manipulate effectively, and the FDA panel has agreed. Teva’s opinion is that the label for Vantrela will say that the abuse-deterrent properties will reduce but not totally prevent successful manipulation. This is good enough. There is most likely a theoretical way to dose-dump Vantrela, but it would probably cost too much to do and require too much chemistry skills for your average abuser to successfully execute.

Since the June 7 panel recommendation, Teva shares are down 4.5%. This down move is nothing but beta market conditions bringing down large caps generally over the past 2 weeks. As we said last week, if approved, Vantrela could add about 3.6% to Teva’s top line. Now that it will probably gain both approval and the coveted abuse deterrent label on oral, intravenous, and intranasal administration, combined with Teva’s experienced and extensive marketing machine, those numbers now look quite probable.

Teva’s financial situation is quite healthy. As of its last annual report, the generics giant only has about $8.4 billion in debt with a market cap of $47.3 billion. That puts its leverage at only 18%, which is very conservative by industry standards.

A 3.6% bump in revenues is not going to push the stock into the stratosphere or anything like that, but it does increase the likelihood that Teva will outperform its peers or at least grow nicely over the next few years. If and when abuse deterrent opioids gain mainstream market acceptence, and that could happen within the decade, then Vantrela could prove even more helpful to Teva’s bottom line as time progresses.

The 4.5% decline in Teva’s stock following this positive FDA panel recommendation should be seen as a buying opportunity. Teva is a long term hold that you can keep in your portfolio without worrying about it for at least the next 5 years.

BY: Rafi Farber and Samuel Rae