On January 20, 2010, Transcept (TSPT) management met with the U.S. FDA to discuss the complete response letter issued last October on Intermezzo. The letter brought up issues on potential inadvertent re-dosing in a single night and inadvertent dosing with less than four hours of bedtime remaining. The FDA also requested additional data demonstrating that Intermezzo, when taken as directed in the middle of the night, would not present an unacceptable risk of next-day driving ability (for additional details on the letter, see our November 17, 2009 report).
We do not expect management to comment publically on the meeting until the final minutes have been issued. This is usually a 30 to 45 day process, putting a potential release from the company on the future plans for the drug sometime in late February 2010. Management will probably release fiscal 2009 earnings in March 2010.
Based on our analysis of the complete response letter and discussions with management, our best guess is that the company will institute a radical re-design in packaging for Intermezzo. Quite simply, we expect that Transcept will package Intermezzo in a very similar fashion to how Merck (MRK) has packaged Maxalt-MLT (rizatriptan benzoate).
Maxalt is an orally disintegrating tablet, similar to the sublingual design of Intermezzo, indicated for the treatment of migraine attacks in adults. The packaging for Maxalt includes a large individually-wrapped (“unit of use”) tablet inside a pouch roughly the size of a cocktail napkin. Anywhere from 8 to 12 of these packets can fit inside a standard box. The pouch is child resistant, requiring a fold-and-tear method to open and expose the pill. The pouch is also large enough to provide instructions for use (IFU) and cautionary language on each individually-wrapped unit. And finally, the pouch is air-tight to protect the sublingual formulation from degradation.
We expect that management at Transcept will also use the large size of the packet to include dosing information relating to when the product should be used on each pouch. This can include a chart or graph showing time of night and time to morning, simple graphics to remind the patient that they must be able to devote at least four hours to sleep after dosing. The good thing about the large pouch is that is also acts as a billboard / reminder to the patient that they have already dosed one Intermezzo so far that night and another tablet should not be taken.
Although we note this never occurred in the phase III program. Management may also include a dosing wheel or sliding scale chart in each box that patients can use to determine when it is appropriate to take Intermezzo depending on when they would like to wake up the next morning. Nothing suggested here is revolutionary. Nothing here is strange to the FDA. These are techniques that seem to be working for Merck with Maxalt and clearly attempt to answer the FDA’s concern on misdosing. The FDA asked Transcept to address “methods to avoid” misdosing, and we believe this does the trick.
With respect to the potential for a driving study, we expect that this is something Transcept plans to initiate in the second quarter 2010. Assuming the meeting minutes come back in late February 2010, management will probably push forward with the design of the driving study in March. If all goes well, the trial should begin in April.
Based on what we’ve seen in the past from driving studies, Transcept will probably seek to enroll 30 to 35 patients (in The Netherlands) testing 3 arms: Intermezzo, placebo and an active control (zopiclone) in a cross-over design. These studies are typically very quick with only a few months to analyze the data. Total cost should be around $1 million. Our best guess is that management will be in position to re-file for approval around October 2010. Assuming a standard (class-II) review of six-months, we could be looking at FDA action in Intermezzo around April 2011.
Approval in April 2011 will be 10 months after the June 30, 2010 full milestone payment deadline from Purdue. As a reminder, the milestone then declines by $2 million each month starting in July 2010, so by April 2011 Transcept loses out 10 months, or $20 million.
Still, including the transfer of the manufacturing and intellectual property to Purdue, approval will earn Transcept $10 million, so the total milestone upon approval will still be a respectable $20 million. This is on top of the $25 million upfront Transcept received in August 2009, and an additional $80 million in sales related milestones and royalties that can be earned in the future.
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