Why Flexion Therapeutics' New Pain Drug Could Be a Game-Changer

Flexion Therapeutics' (FLXN) Zilretta is awaiting an FDA approval decision. If the regulator gives it a green light, Zilretta could reduce the use of opiates and corticosteroids in treating osteoarthritis of the knee.

In this clip from The Motley Fool's Industry Focus: Healthcare podcast, Todd Campbell joins analyst Kristine Harjes to discuss Zilretta's market opportunity.

Kristine Harjes: Last company we want to talk about today is one that called Flexion. In December of last year, they filed for approval of their drug, which is called Zilretta.

Todd Campbell: Yeah. Zilretta is an intriguing drug, because it could reduce the need for both opioids and corticosteroid shots. If you suffer from osteoarthritis of the knee, you know how much pain you're under regularly because of it. Typically speaking, you start off with things like NSAIDs, so you're taking things like aspirin and ibuprofen and those types of things. Then you may advance to other types of solutions, including corticosteroid injections that are given once every three months. The problem with that is once those corticosteroid injections oftentimes wear off relatively quickly, in a matter of weeks -- if you're still suffering from chronic pain, you might need other pain-relief medications, including opioids. Zilretta, in its trials, showed it could control pain for the entire three-month period. Since it's not an opioid, that is theoretically a major advantage. If you can control pain for that entire period, and remove the need to have to rely on opioids as a back-up medication, it wouldn't take a lot of patients who are suffering from pain that requires corticosteroids to make this drug into a top seller. And, full disclosure, I happen to be long the stock myself, and a lot can go wrong from here. The FDA could come back and say they want more studies, the FDA could reject it. We're not on the market yet, but this is an intriguing drug.

Harjes: And if it does end up on the market, peak sales estimates are upwards of $500 million, and perhaps could even be a blockbuster drug if the label ended up being expanded to reach some other joints. Approval should come in October. One other thing you need to mention when you're talking about this drug is the potential buyout rumors. At The Motley Fool, we don't believe in buying a stock just because of the buyout rumors. But I think when you're looking at the share price of this company and trying to understand how much the market cap has moved lately. This is the center of that story. So, pretty much on March 23, FiercePharma reported that Flexion's board had voted to accept a buyout offer from Sanofi that would be worth more than $1 billion in cash, which has inflated this company's market cap quite a bit. Today, it's standing around $845 million. You have a whole handful of Sanofi executive going from Sanofi over to Flexion. Just last week, one of the top officials at Sanofi joined Flexion as the chief medical officer. So it certainly does seem like this buyout would make sense, although, to my knowledge, neither company has commented to confirm that it actually is even being discussed.

Campbell: Right, it's all rumor and innuendo right now. You're drawing lines between some dots. Who knows what ends up happening? Obviously, there's a lot of activity in this space; that means there's a lot of options that Sanofi could be considering. Don't buy a stock, any stock, this stock, based upon the potential for a suitor to come and pony up some money to buy. Instead, look at all of these companies on the basis of, can they displace the use of opioids and help reduce the risk of dependency and potential deaths?