Flexion Arthritis Drug Approval Sparks Acquisition Rumors
On Oct. 6, the U.S. Food and Drug Administration (FDA) approved Flexion Therapeutics’s Zilretta for osteoarthritis knee pain. On Oct. 10, it announced it had initiated an underwritten public offering to issue and sell four million shares of its common stock.
Which has underlined that Flexion is a company that is often the target of acquisition rumors. Serge Belanger, an analyst with Needham & Co., wrote in a note today, “We expect [Flexion] to garner increased interest from larger players looking to add a differentiated non-opioid asset with a significant market opportunity.”
Reportedly, Paris-based Sanofi is in talks to buy the company, although neither company has confirmed.
About 15 million people in the U.S. were diagnosed with osteoarthritis last year, a sizeable market.
The Street writes, “Shares were down slightly in premarket trading Tuesday though Flexion closed at $29.93 on Friday, up 10.4 percent, following news of the drug approval. The stock ended Monday’s trading session at $28.24, down 5.7 percent. The company’s market cap stood at $901 million as of Friday’s close.”
“Our focus right now following the approval is to execute our commercial launch plan,” said Scott Young, Flexion spokesman, in a statement. “We’ve been preparing for this for three years. We’re tremendously excited about the next chapter in Flexion’s history.”
Flexion expects the drug will be on the market in the U.S. by the end of this month. The drug’s product label will also include data from a double-blind, randomized, parallel-group trial that evaluated blood glucose concentrations in patients with Type 2 diabetes. Belanger wrote, “The approval and comprehensive label give us confidence that Zilretta can be a game-changer for OA knee pain.”
Back in early August, Flexion was considered a potential mover if the FDA approved Zilretta. Analysts project peak sales of $500 to $600 million for the drug, and if approved for other joint indications, could hit the $1 billion blockbuster mark.
Some of the interest is related to Zilretta being a non-opioid pain medication in the current opioid epidemic. Todd Campbell, writing for The Motley Fool in July, said, “That’s really the sweet spot that Flexion Therapeutics is targeting, developing a new way to control pain that isn’t an opioid, that can control pain more consistently, and potentially, as a result, reduce the need to rely on these rescue medications which, as we talked about previously in that prior show, it can increase the likelihood of getting addicted and contributing to the opioid epidemic.”
Campbell’s comments were part of a broadcast with The Motley Fool’s Industry Focus: Healthcare analyst Kristine Harjet. She noted, “They assumed a hypothetical cost of $500 per treatment, and they used the actual cost of some comparable treatments, some of the more traditional ones and also the hyaluronic acid injections…. So, it improves QALY [a quality of life metric], quality of your life, and it also does it at a lower cost for that improvement. And since this is a chronic treatment, that’s pretty huge, because not only would you find insurers more willing to accept this, but they’re going to accept it year in and year out, and that’s constantly generating revenue flow, which, especially as the population ages, that’s only going to grow.”