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Image source: Celator Pharmaceuticals.

Clinical stage drug-developer Celator Pharmaceuticals (NASDAQ:CPXX) has secured coveted breakthrough therapy designation from the FDA for Vyxeos, its novel treatment for acute myeloid leukemia (AML). The FDA status potentially accelerates the company's timeline and helps clear the way toward potential commercialization of Vyxeos next year.

Innovating care

AML is a tough-to-treat cancer, especially when it's caused by previous exposure to cancer treatment or environmental factors. In these cases, it's referred to as secondary AML.

For the past two decades, patients with secondary AML have been treated with two chemotherapies: cytarabine and daunorubicin. Cytarabine is administed on days 1 through 7, while daunorubicin is administered on days 1 through 3. Because of that dosing schedule, this standard of care is commonly referred to as 7+3.

Vyxeos is an optimized 5:1 formulation of cytarabine and daunorubicin, and in clinical trials, it delivered impressive results versus 7+3.

Specifically, the overall survival of patients receiving Vyxeos was 9.56 months, or 3.61 months better than 7+3. The hazard ratio was 0.69, representing a 31% reduction in risk of death versus 7+3. And, the percentage of Vyxeos patients still remaining alive after two years was 31.1%, versus 12.3% in the 7+3 control arm.

Importantly, Vyxeos delivered these life-extending results while also delivering similar safety to 7+3.

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Image source: Celator Pharmaceuticals.

Advancing to market

Previously, Celator Pharmaceuticals' management indicated plans to complete its application for approval of Vyxeos in the third quarter of this year. Typically, the FDA issues a decision on approval or denial of an application 10 months after accepting the application.

However, the FDA can accelerate that timeline in certain circumstances.

Namely, if the FDA determines that a therapy addresses a life-threatening indication, and there's significant clinical evidence that it may offer a substantial improvement over existing therapies, then it can award the drug breakthrough therapy status. 

Now that Vyxeos has been awarded this designation, Celator Pharmaceuticals can benefit from closer contact with top FDA officials that may help it overcome any hurdles that may pop up. This status also offers the possibility that the FDA will grant Vyxeos a priority review. If it does, then a decision from the FDA on Vyxeos could come within six months of its application, rather than the normal 10 months.

Tapping a market

Assuming Celator Pharmaceuticals hits its target for a third quarter application, Vyxeos could conceivably be approved and commercially available in the U.S. by the end of the second quarter of 2017.

If priority review isn't granted, then it's more likely a FDA decision would occur at some point next summer.

In either case, an approval offers big market opportunity for Celator Pharmaceuticals. About 25% of all AML cases are secondary AML, and while more than half of secondary AML patients respond to 7+3 first-line therapy, most secondary AML patients relapse. Despite intensive post-remission therapy, the long-term survival rate for secondary AML patients is only about 10%.

Because Vyxeos may significantly improve outcomes for these patients, its safety is similar to 7+3, and since doctors are already comfortable with the two chemotherapies comprising Vyxeos, there's a good chance it quickly becomes standard of care. If it does, it could result in hundreds of millions of dollars in annual sales for the company.

Looking ahead

It's reassuring that the FDA has awarded the company breakthrough therapy designation, because that suggests the agency likes what it sees so far. This fiscal year, the FDA has received 74 requests for breakthrough therapy designation, but it's only approved 19 of those requests.

Still, Celator Pharmaceuticals' ability to reward investors with profits depends on an FDA approval. Although it looks good right now, investors should remember there's no guarantee the FDA will green light Vyxeos. There's also the risk that doctors will be slow to embrace it if it does.

While those risks shouldn't be ignored, I don't think they're likely to materialize, and for that reason, I think this stock is worth including in risk-tolerant investors' portfolios. Obviously, anything can happen from here, but I think this company's upside makes its stock incredibly intriguing.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter, where he goes by the handle @ebcapital to see more articles like this. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.

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