On Oct. 6, the FDA approved Flexion Therapeutics’ Zilretta for osteoarthritis knee pain and is now in the middle of launching the drug and installing its commercial operations.
On Oct. 6, the U.S. Food and Drug Administration (FDA) approved Flexion Therapeutics’ Zilretta for osteoarthritis knee pain. The company is now in the middle of launching the drug and installing its commercial operations. Todd Campbell, writing for The Motley Fool, spoke with the company’s chief executive officer, Mike Clayman, to gain insight into the company’s progress.
The traditional route for patients who have pain from osteoarthritis of the knee is over-the-counter pain medications first. When that no longer works, physicians usually prescribe opioids and steroids or hyaluronic acid injections.
Zilretta (triamcinolone acetonide extended-release injectable suspension) was designed to improve the effect of intra-articular corticosteroid treatment. It is an extended-release formulation of triamcinolone acetonide (TA) that prolongs the effects of the steroid after it is injected into the joint. TA is an immediate-release corticosteroid that the company has combined with its proprietary microsphere technology. Campbell writes, “It doesn’t have the addiction risks associated with opioids, and unlike corticosteroids and hyaluronic acid, it can provide lasting pain relief. In trials, patients taking Zilretta saw their pain drop by about 50 percent over the course of a 12-week period.”
So Zilretta appears to be both best-in-class in terms of efficacy, as well as being safer than opioids, which have a high risk of addiction. In hopes of leveraging that, Flexion has hired more than 100 sales staff. Their job will be to visit doctors and educate them on how to use Zilretta. A key part of their job will also be educating them—and likely reassuring them—on how to get reimbursement for the drug from insurers.
Campbell writes, “Medicare patients account for about half of this market, and Zilretta won’t have a distinct Medicare reimbursement code until early in 2019. Until then, it will be paid for under a miscellaneous J-code. Commercial insurers represent about 40 percent of the market, so getting contracts in place with them for payment will also be important.”
Zilretta will need to be administered in the physician’s office. As a result, doctors will need to buy Zilretta upfront and store it for use, then file for Medicare payment after administration. There are concerns that these upfront costs might keep physicians from building up inventory until they understand or are confident they will get paid to prescribe it. Making sure this happens is Flexion’s top priority.
Campbell writes, “Overall, Clayman is confident that the company can address providers’ concerns, but he admits that 2018 is likely to be a building year. Instead, it appears that 2019 could be the first big year for Zilretta. At that point, doctors will have built up real-world experience using it, shared those experiences with peers, and ironed out any reimbursement headaches.”
Campbell goes on to look at the company’s value. Shares spiked after the approval, hitting $29.93, then dropped to $19.62 on Oct. 26, before rebounding to $26.32 on Nov. 27. Shares are currently trading at $24.57. He suspects some of the sell-off is related to “buy the rumor, sell the news” activity, but potentially might be related to an earlier study showing that patients who received quarterly shots of immediate-release corticosteroids had accelerated cartilage loss. The study didn’t, however, involve Zilretta, although it did involve TA. Campbell notes that concern may be unfounded. “There simply aren’t a lot of options available to these patients other than knee replacement surgery.”
His conclusion? The company shares are probably undervalued. There are presently 8 million corticosteroid and hyaluronic acid injections given each year, and the company believes the market can support a price of $500 per injection for Zilretta. If Zilretta grabs only 10 percent of the market, it could bring in $400 million annually, and Campbell notes that the potential for the company’s market cap with those sales would range from $1.2 billion to $1.6 billion if everything goes according to plan.
