As of the end of April, Dey, an affiliate of Merck KGaA of Germany, began promoting Critical Therapeutics' (Nasdaq: CRTX) asthma drug Zyflo in the U.S.; both companies had announced in March that they would combine their force of 240 sales representatives to focus on allergy doctors to increase product awareness and prescriptions. This comes before a hearing set for May 31 where a committee is to advise the Food and Drug Administration on a new controlled-release formulation of Zyflo that's intended to decrease the dosing frequency to two times daily from four.
While approval is highly likely in this case, the real challenge will be selling the drug once it's approved. There are concerns about elevated liver enzymes (specifically one called ALT for short) associated with using Zyflo, which caused original developer Abbott (NYSE: ABT) to discontinue the drug in June 2003 amid scant sales. Critical Therapeutics acquired rights to the drug in early 2004, and the FDA approved its Zyflo in September 2005. Most recently, Critical Therapeutics developed a controlled-release formulation designed to make Zyflo more competitive in the market by reducing the dosing to twice daily.
However, even with the likely FDA approval, the controlled-release Zyflo still faces strong competition from Merck's (NYSE: MRK) Singulair. While the two drugs work somewhat differently to prevent and treat asthma, they are considered clinical alternatives -- meaning that doctors choose to add one or the other only in patients with poorly controlled asthma who need additional medication. Singulair dominates the market because it is taken once daily with little reported side effects and no need to monitor any blood work.
Shares of Critical Therapeutics have been trading near their yearly low recently despite the deal with Dey, which provides marketing muscle for Zyflo and a source of non-diluting capital -- if the drug is approved. While shares may get a brief bounce upon FDA approval, this may not be a case of "if you approve it, they will prescribe" because of Singulair's place in the market, the reluctance of pharmacy benefit managers to cover Zyflo, and the fact that many physicians are unaware of Zyflo.
The bottom line for Fools is to stay away from Critical Therapeutics. If you are interested in other speculative biotechs with better prospects, check out these articles:
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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. Mike does not have a position in any company mentioned in this article. The Fool has a disclosure policy.
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