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Heron Therapeutics And HTX-011 Are Both Severely Undervalued

Summary

Christmas came early for Heron Therapeutics, as clinical results for HTX-011 showed a potential for higher dosing than any bupivacaine product on the market.

More importantly, it beat head-to-head the standard local anesthetic treatment for post-operative pain.

By transitive property, it may eventually outperform a competitor product doing $300 million in annual U.S. sales.

Heron has two upcoming drug approvals; the commercialization of these products will keep the company operational until HTX-011 is launched.

On August 1, 2016, Heron Therapeutics (NASDAQ:HRTX) announced preliminary, positive, top-line efficacy results from two Phase 2 studies of HTX-011. HTX-011 is the first long-acting formulation of the local anesthetic bupivacaine in a fixed-dose combination with the anti-inflammatory meloxicam, and is a natural product candidate for the management of post-operative pain and its associated inflammation.

As mentioned in my opening coverage of this stock, there were a couple of desirable goals for these clinical trials beyond meeting the primary endpoints, and HTX-011 blew them away. Thus, HTX-011 has become an extremely valuable asset for the company, joining SUSTOL (a long-acting formulation of granisetron) and HTX-019 [a more tolerable formulation of Merck's (NYSE:MRK) Emend], which are both likely to be approved for the prevention of chemotherapy-induced nausea and vomiting (CINV). Despite the discouraging profit-taking that wiped out all the early gains on the day of the press release, investors should not underestimate the lasting value that these study results carry.

Study 202 - Unilateral Open Inguinal Herniorrhaphy.

Study 202 was a double-blind, randomized, placebo- controlled trial (RCT) in 198 patients undergoing inguinal hernia repair. Efficacy was evaluated using a primary endpoint of the difference compared to placebo in pain intensity as measured by the Summed Pain Intensity score in the first 24 hours post-surgery (SPI 0-24). Key secondary endpoints included the time to first use of opioid rescue medication and total opioid consumption. Two formulations of HTX-011 400 mg (A and B) as well as two routes of administration into the wound (injection and instillation) were tested. Instillation is a local topical application of HTX-011 into the incision site that offers several advantages over injections (see Figure 1 below).

Figure 1. Instillation is Easier and Potentially Safer

As can be expected, HTX-011 performed better than placebo on all key endpoints. The B formulation significantly reduced SPI through 48 hours (SPI 0-48) by 25% (p=0.038) as well as SPI 0-24 (29%, p=0.008), and delayed the time to first opioid rescue medication use by 110% (13.3 hours versus 27.9 hours). These effects can be clearly seen in Figure 2 below, where some placebo patients were already using opioids by the second data point.

Figure 2. HTX-011B Significantly Lower Mean Pain Intensity Scores than Placebo Through 48 Hours

*LOCF = Last observation carried forward

Importantly, HTX-011 delivered just as much pain relief whether administered by instillation or by injection ( 28.4% vs. 29.2% reduction in SPI 0-24, respectively; see Figure 4). Thus, the 400 mg B formulation will be advanced to Phase 3 (along with a 600 mg dose).

Figure 3. Preferable Instillation Route Was Equally Effective to Injection*

For those who think that SPI 0-24 seems like a low number, note that a) the data wasn't adjusted to account for opioid use, b) HTX-011 patients were spared the experience of severe pain (scores of 7+), and c) the placebo effect can be strong. A way to see past the placebo effect is in operations where it is harder to mask real pain. In Study 201, a previous Phase 2 double-blind RCT in 64 patients undergoing bunionectomy (a procedure that produces more lasting pain), the original (weaker) HTX-011 was already better than unlimited opioid use (see Figure 4 below). Here, patients were permitted to take oxycodone 5 mg every 2 hours as needed.

The mean time to the first use of opiate rescue medication was 8.2 hours for the placebo group, compared to 48.2 hours for patients on HTX-011 (p<0.0001). Also in this study, the 200 mg A formulation was found to be similar to the original 400 mg formulation in this study.

Figure 4. Original HTX-011 Formulation Versus Placebo (Unlimited Opioids)

Study 208 - Bunionectomy

In the current double-blind, placebo- and active-controlled trial in patients undergoing bunionectomy, two formulations of HTX-011 (A and B) at a lower 200 mg dose were compared to placebo, as well as to the standard-of-care 50 mg dose of bupivacaine solution...


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