REPH is currently developing three drugs: Intravenous (IV)/ intramuscular (IM) Meloxicam, Fadolmidine [Fado], and Dexmedetomidine (Dex). Meloxicam is a rapid-onset, long-acting preferential COX-2 inhibitor that Recro believes will be useful in a post-operation setting, to manage moderate to severe pain. Fado is a selective alpha-2 adrenergic agonist that has demonstrated sedative, analgesic, and anxiolytic properties. It differs from Meloxicam in that it does not cross the blood/brain barrier enabling intrathecal administration for pain or anesthesia. It also has potential as a topical treatment for pain associated with regional nerve pain due to nerve damage (neuropathies). The third, Dex, was developed in the early 1990s by Abbott as a sedative. In 1999 it was FDA approved for IV administration for sedation in an ICU setting. IV-Dex sales were reported to be $276 million in 2015.
Recro Pharma has formulated Dex at an eight to a tenth of the dosage currently used. With this new dosage, REPH has observed minimal sedation while maintaining an analgesic effect.
Note that Meloxicam, Dex, and Fado could be combined with (especially meloxicam) AcelRx’s (Nasdaq: ACRX) DSUVIA/DSUVEO and ZALVISO, as well as Trevena Inc’s (Nasdaq: TRVN) Olicierdine Injection. Meloxicam’s indication may change to mild to moderate pain considering efficacy issues in the 2018 CRL. Treatment of moderate to severe pain could involve treatment with opioids like the ones mentioned. This could be just the recipe the world needs to meet
REPH Received a CRL In 2018
In the first half of 2018, REPH ran from the mid-$7.00s up to the mid-$12.00s as their PDUFA Action Date in May 2018 approached. On May 24th, 2018 they released a PR notifying investors of their Complete Response Letter (CRL) for IV meloxicam….it was bad news. The FDA said:
“…data from ad hoc analyses and selective secondary endpoints suggest that the analgesic effect does not meet the expectations of the FDA. In addition, the CRL raised CMC related questions on extractable and leachable data provided in the NDA.”
Recro Pharma responded by requesting a meeting with the FDA, which was scheduled and took place in July 2018. In September, they released a PR following receipt of the official meeting minutes from the July 2018 Type A meeting with the FDA. In the meeting, Recro Pharma discussed both concerns the FDA had mentioned in the CRL. After the meeting, Recro said they anticipated resubmitting the New Drug Application (NDA) for IV
There have been several good signs from Recro since last October. These include:
1. An expansion of their Contract Development and Manufacturing Organization facilities
2. The publication of previously released data from a Phase II trial evaluating IV meloxicam for the management of moderate to severe pain following abdominal hysterectomy surgery
3. Good results suggesting IV meloxicam has the potential to provide a meaningful clinical benefit over ketorolac with respect to a decreased risk of platelet dysfunction (bleeding risk)
4. An amendment to their IV Meloxicam License Agreement with Alkermes, reducing their cash requirement for 2019 by $30 million
5. An amendment to their credit facility from Athyrium, allowing for access to a previously inaccessible $40 million
6. Recro has posted 87 job openings in anticipation of IV meloxicam being approved
7. Recro announced a five year manufacturing and supply agreement with Novaris
The share price has been on a steady uptick since October 2018.
In the months leading up to the May 2018 PDUFA Action Date, REPH ran up approximately 70% from the mid $7.00s to the mid $12.00s.
Given the current status of progress for Recro, I expect the stock to have a similar, but smaller, run-up as we approach the new March 24th, 2019 PDUFA date. If you decide to enter this trade, select a target percentage gain, and exit the trade when you reach your goal. I do not advise that you hold through the PDUFA date.
Now’s the time to enter a swing trade position. I see at least 20% upside in this stock as the PDUFA approaches. I expect the drug to be approved, but I do not recommend holding through the PDUFA data. Set a profit target, and stick to your plan! It is always better to exit a trade “early” and leave a little extra profit on the table, than to hold too long and lose any portion of your capital.
I am long REPH.
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