Aimmune Therapeutics (AIMT +0.00%) has for a long time been desensitizing people with severe peanut allergies to their nemesis with AR101. In a nutshell, U.S. regulators recently gave the candidate, to be named Palforzia, a big push toward marketing approval and blockbuster sales.
This does not mean peanut butter and jelly sandwiches are returning to our nation's schools, but it has made this biotech stock significantly more attractive. Here's what a complicated briefing document from the Food and Drug Administration (FDA) means for Aimmunne shareholders, and what it doesn't mean.
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What's happening?
On Friday, Sept. 13, 2019, the Food and Drug Administration will bring together a group of independent physicians to talk about Palforzia, formerly AR101. On Wednesday, Sept. 11, 2019, the FDA finally released briefing documents that outline the agency's concerns with Aimmune's application and they didn't contain anything surprising.
The FDA doesn't call together an advisory committee for every new drug application that crosses its desks, but anything different and controversial usually results in a meeting.
Are you serious?
I know it's hard to believe, but more than a few drugmakers have misled investors about their communications with the FDA. For example, the agency often suggests running a larger or longer clinical trial before applying, and investors never hear about it.
Briefing documents for advisory committee meetings are usually the first time investors learn about problems and expectations the FDA made clear to the company long ago. Surprises, or at least confirmations of suspicions, are common enough that a lack of revelations was enough to send Aimmune stock surging.
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Why you shouldn't get too excited yet
There's still a chance the advisory committee won't vote in favor of approving Aimmune's application in its present form. During the dose-escalation period of the pivotal study supporting Palforzia's application, 6.1% of those given the peanut allergen capsules experienced a reaction that required epinephrine use, compared to 3.1% of the patients in the placebo group. The separation grew during the maintenance period as the reaction rate in the placebo group fell to 1.7% while the active arm remained steady at 6.1%.
Either the patients in the active arm felt invincible and started eating with reckless abandon, or they continued reacting strongly to the desensitization treatment despite months of exposure. The briefing document also noted side-effects of ingesting the allergen that they're allergic to led 14.3% of adults to drop out early.
Why Palforzia should be all right
While there's an argument to be made that the risks associated with Palforzia outweigh its protective benefit, it's important to remember that food allergies affect 4% to 8% of children and 1% and 2% of adults. Peanut allergy makes up the majority of all severe food reactions, and there aren't any FDA approved solutions yet.
There are millions of people that could end up hospitalized or worse after accidentally ingesting half a peanut, and it looks like Aimmune's drug can safely reduce that risk for many, but certainly not all of them.
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Most likely scenario
Unless the advisory committee takes issue with something unexpected, a positive recommendation for approval seems likely. The FDA doesn't have to follow the committee's advice, but it probably will with some caveats.
Don't be surprised if the FDA grants Palforzia a conditional approval based on available data, and requires a long-term outcome study for confirmation and full approval. There's also a good chance the FDA will ask Aimmune to produce a risk evaluation and mitigation strategy (REMS) before an approval. REMS are hardly dealbreakers, but asking doctors to jump through extra hoops in order to prescribe a drug doesn't make it any easier to sell.
A buy now?
Following its recent bump, Aimmune's market cap has soared to $1.6 billion, which isn't a lot for a company with a potential blockbuster this close to the finish line. Achieving $1 billion in annual sales is still quite a long shot for Aimmune if it tries to launch this drug on its own, and a lack of interest so far from deep-pocketed partners suggests industry insiders haven't seen anything compelling.
Although smooth sailing to approval from the FDA seems likely, it's way too early to predict a highly successful new drug launch. Friday's advisory committee meeting should shine some light on what kinds of restrictions Palforzia's drug label will include.
Palforzia's the only candidate Aimmune has in late-stage development, and the next drug coming through the pipeline, AR201 recently entered a phase 2 egg allergy trial. If Palforzia isn't a commercial success, it will be a long time before the company even has a chance to produce another revenue stream. It's probably best to wait and see which way the wind blows after Friday's advisory committee meeting before making any decisions you could quickly regret.
