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Theravance's Telavancin - Tried And Tested?

THRX 080909

Shares of biopharmaceutical company, Theravance Inc. (THRX) have appreciated 12% from their July low and currently trade around $14. Waiting at the altar for the FDA decision is Theravance's Telavancin, a potential treatment for bacterial infections, which has had a bumpy ride in the regulatory review process thus far, with a decision date set for September 16.

This is Telavancin's third go-around with the FDA. Telavancin, a once-daily injectable antibiotic, has been discovered and developed by Theravance and Japanese drug giant Astellas for tough-to-treat skin infections caused by drug-resistant bacteria, including MRSA (methicillin-resistant Staphylococcus aureus). According to reports over 1.2 million U.S. hospital patients are infected with MRSA each year and the mortality rate from MRSA infection could be as high as 10%.

The New Drug Application for Telavancin for the treatment of complicated skin and skin structure infections was initially filed with the FDA in December 2006. The NDA was based on two phase III studies, which demonstrated Telavancin's non-inferiority to standard therapy, Vancomycin, in clinical cure, microbiological eradication, and overall therapeutic response rates.

However, in October 2007, the FDA requested more data or re-analysed clinical data, revised labeling and resolution of current good manufacturing practices compliance issues not specifically related to Telavancin before the antibiotic could be fully approved. In December 2007, the company was notified that the Food and Drug Administration's Anti-Infective Drugs Advisory Committee would make a recommendation on Telavancin on February 27, 2008.

Accordingly, Theravance submitted its complete response to the FDA on January 21, 2008. However, on February 25, 2008, the regulatory agency cancelled the scheduled panel review of Telavancin stating that it needed more time to resolve "several outstanding issues" connected to the drug and that it would set another meeting in the future if necessary. Finally, the FDA panel took up the review of Telavancin on November 19, 2008 and the panel voted 21 to 5 recommending the approval of the antibiotic. The advisory committee also recommended that the company needed to develop a strategy to prevent the drug's unintended use by pregnant women.

But, the second time too, Telavancin was not lucky enough to pass the FDA muster and it was issued a complete response letter on February 26, 2009. The complete response letter required a Risk Evaluation and Mitigation Strategy (REMS), data on patients with certain renal risk factors from the cSSSI (complicated skin and skin structure infection) and HAP (Hospital-Acquired Pneumonia) studies, revisions to the draft label, and a customary safety update related to Telavancin.

The FDA accepted Theravance's response to the February 2009 complete response letter on April 24 and assigned a decision date of September 16 for Telavancin. In addition to skin infections, Telavancin is also under regulatory review for hospital-acquired pneumonia with a decision date set for November 26.

As mentioned, Telavancin is being developed by Theravance in partnership with Astellas under a deal inked in 2005. Through June 30, 2009, Theravance has received $170 million in upfront, milestone and other fees from Astellas and is eligible to receive up to an additional $50.0 million in remaining milestone payments related to regulatory filings and approvals in various regions of the world, primarily in the U.S. As per the agreement, if Telavancin is commercialized, Theravance will be entitled to receive royalties on global sales of Telavancin by Astellas that range from the high teens to the upper twenties depending on sales volume.

Theravance also has collaboration with GlaxoSmithKline plc (GSK), dubbed HORIZON, to develop and commercialize a Long-Acting Beta2 Agonist, or LABA product candidate for the treatment of asthma and COPD (chronic obstructive pulmonary disease). A phase III study in COPD under the HORIZON program is expected to be initiated in October. Another product candidate in the company's respiratory franchise is GSK961081, a bifunctional Muscarinic Antagonist-Beta2 Agonist, being developed in partnership with Glaxo and is in phase II clinical studies.

For the second-quarter ended June 30, 2009 -- the results of which were announced late last month, the company reported a net loss of $21.7 million or $0.35 per share, narrower than the year-ago quarterly net loss of $27.0 million or $0.44 per share. Revenue, which includes milestone payments under the company's agreements with GSK and Astellas, was $5.5 million for the second quarters of 2009 and 2008. As of June 30, 2009, the company had total cash of about $176 million and total debt of $173 million.

As antibiotic resistance continues to grow, there is a desperate need for alternative treatments to fight the bad bugs. High cost of development, low rate of return on investment, which the antibiotics provide compared to other drugs that treat lifelong diseases and a stringent regulatory approval process have made pharmaceutical companies less interested in developing antibiotics.

In sharp contrast, despite a series of regulatory setbacks, Theravance has been moving ahead with its research program dedicated to finding new antibiotics with steely resolve. Will the company's patience pay off at least this time? Stay tuned...

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