Investors Agitated by Alexza Drug Prospects, Buy Shares Anyway

Yesterday, Alexza Pharmaceuticals

faced an FDA panel over its drug Adasuve, which treats agitation in schizophrenia and biopolar patients. The panel voted in favor of the drug's approval, but by a very narrow margin of 9-8. However, the panel also voted that the drug was not safe in conjunction with the FDA's risk plan by a margin of 12-5. Despite the uncertainty caused by the voting results, investors have driven up the stock price by more than 50% this morning. Alexaza originally submitted their application for Adasuve in August 2011, nearly a year after it had received a CRL for the drug. The FDA had previously cited concerns that the company did not adequately demonstrate the safety of the drug, but met efficacy requirements. The FDA added that, "It is likely that, even with adequate screening for pulmonary risk factors, some patients will require respiratory support post-dose, and some patients will be at risk for respiratory failure and death." The new NDA featured a provision that would monitor Adasuve patients in an effort to identify those who could develop lung problems. However, the FDA stated that the provision could pose a problem, as many bipolar and schizophrenic patients who smoke could become too agitated to submit to the monitoring. "Psychotic patients who develop respiratory symptoms may not be able to notify health care personnel in a timely manner, and distress may be confused with acute agitation to the casual observer," added the FDA. Alexza's NDA is based on the results of two Phase 3 clinical trials, as well as stability data obtained from drugs produced in late 2010. Alexza CEO Thomas King showed enthusiasm for the product, stating that, "If approved, Adasuve would be the first drug marketed based on the novel Staccato technology platform. We believe Adasuve can offer physicians and patients a new therapeutic option, which combines rapid onset of action and reliability of medication delivery in a non-invasive formulation that is easy to administer." The FDA panel again questioned the drug's safety as the new proposal failed to solve the FDA's concerns over proper identification of respiratory issues. However, the panel found favor with the drug's efficacy and effectiveness. "This product offers the potential to be a significant contributor to an import need," said Andrew Winokur, a member of the panel. "The company presented impressive efficacy data and the FDA's risk mitigation proposal was reassuring." The drug has a relatively small market, but still expects to generate sales of $150 million per year, according to RBC Capital analyst Jason Kantor. Kantor also believes that Alexza would need to find a partner or raise substantial capital to successfully launch Alexza, which may limit the company's short term upside. However, such a scenario could never occur if Alexza is unable to overcome many of the FDA's concerns over the drug's safety.