The FDA Breathes New Life Into Esperion's ETC-1002

Worries that the FDA would raise the bar for cholesterol-fighting drugs seeking future approval sent high-flying Esperion Therapeutics (ESPR -0.48%) lower over the past month, but a new decision by the FDA to lift a clinical hold on the use of high doses of the company's ETC-1002 could help spark investor enthusiasm again.

Curbing cholesterol
Doctors have turned to statins to lower cholesterol since the 1980s, but they could soon have new therapies at their disposal that could work better for millions of patients.

This summer, the FDA is expected to issue approval decisions on two new injectable therapies, Regeneron's Praluent and Amgen's Repatha, that, when used alongside statins, significantly lowered bad cholesterol levels in tough-to-treat patients.

Further down the pipeline, Esperion's ETC-1002 -- an oral drug that works differently than statins, Praluent, and Repatha -- could also offer new hope. Mid-stage trial results released by Esperion earlier this year show that patients taking a 180 mg oral dose of ETC-1002 alongside statins saw their bad cholesterol levels fall by as much as 24%.

Raising the bar
Historically, the FDA has been willing to assume that positive cardiovascular outcomes come hand in hand with lower cholesterol, and that assumption has saved drugmakers billions of dollars and countless time that would otherwise be required to conduct expensive, long-term clinical trials to determine cardiovascular outcomes.

However, recent statements made by the FDA advisory committee responsible for evaluating Praluent and Repatha last month could mean that assumption may not continue into the future. In discussing the pros and cons of Praluent and Repatha, committee members showed a growing reluctance to accept the status quo of lower cholesterol levels equating to fewer cardiovascular risks.

If the committee's reluctance translates into a policy shift that leads to companies submitting cholesterol drugs for approval only after cardiovascular studies are complete, then it could mean Esperion faces a much tougher, longer, and costlier route to approval than its predecessors.

Easing a headwind
Although ETC-1002 showed a statistically significant reduction of bad cholesterol during its mid-stage trials, a cloud has stayed over ETC-1002 due to the FDA's clinical trial hold on doses greater than 240 mg.

That clinical hold was put in place in 2009 after weak PPAR alpha/gamma activities were observed at high doses of ETC-1002, both in vitro and in animals, and some investors worried that if the clinical hold remained in place, it could delay, or derail, any eventual filing for approval of ETC-1002, even at its lower 180 mg dose.

Therefore, the FDA's decision to remove its dosing restriction eliminates a major overhang that has weighed down Esperion's share price.

Big money at stake
Since ETC-1002 is Esperion's only drug candidate, and ETC-1002's success or failure is critical to the company's ability to survive, it's not too shocking that investors breathed a collective sigh of relief following the FDA's decision. 

To get a feel for just how big the potential opportunity could be for ETC-1002, consider that ETC-1002's inventor is the same person responsible for developing Lipitor, the world's top-selling statin. At its peak, Lipitor was bringing in more than $12 billion in annual sales. 

Granted, its unlikely ETC-1002 will be anywhere near as successful as Lipitor, but ETC-1002 could still have billion-dollar potential. Most analysts think Praluent and Repatha could each see peak sales of $2 billion per year, and ETC-1002's oral dosing is an advantage that could give it an edge over those two drugs.

Of course, a lot still needs to go right for Esperion before ETC-1002 can deliver on its sales potential. Specifically, the company (and its investors) still need more insight into whether the FDA will require a completed cardiovascular study prior to Esperion submitting its new drug application. Because of that uncertainty, there's still plenty to consider before buying shares in Esperion, but investors willing to accept that risk might end up rewarded.