How FDA approvals can change the fate of ASX-listed healthcare stocks

The lucrative Australian healthcare sector often grabs investors’ attention with the potential to deliver remarkable profits. To understand the nitty-gritty of investing in healthcare stocks, a multifaceted approach is required. Multiple variables are responsible for increasing investors interest in the healthcare sector, including demographics, novel discoveries, latest developments, FDA approvals, patents, and ongoing clinical trials, to name a few.

Particularly, the FDA approval process is an important aspect that provides a good idea on the fate of a healthcare stock. In general, FDA approval signifies soaring stock price. A company’s share price tends to rise if the company receives a new drug approval. However, to avoid drug approval disappointments, investors need to consider each company and each approval individually.

FDA approval refers to the process of drug review by the Center for Drug Evaluation and Research (CDER) that performs a crucial public health task to make sure that safe and effective drugs are available to the market. An FDA approval indicates that the drug is designed to offer benefits outweighing any known and possible risks for the patients.

In Australia, the clinical studies undergo many regulatory controls for guaranteeing the participants’ safety. The use of therapeutic goods provided in clinical studies is regulated by the Therapeutic Goods Administration (TGA) as part of the therapeutic goods legislation. The researchers and clinical trial sponsors must be conscious about the requirements to manufacture, supply, import and export therapeutic goods in Australia.

In this article, we are discussing three healthcare stocks, namely Compumedics Limited, Paradigm Biopharmaceuticals Limited, and Clinuvel Pharmaceutical Limited, focusing on their respective FDA approvals.

Compumedics Limited (ASX:CMP)

A leading global medical device company, Compumedics Limited is an innovative developer and manufacturer of diagnostics technology for sleep disorders, brain research, and monitoring neurological disorders, including long term epilepsy monitoring (LTEM). The company recently announced the “US FDA Clearance for Compumedics’ Orion LifeSpan™ Magnetoencephalography (MEG) single Dewar system”, after successful installation and 1^st phase commissioning of the single Dewar Orion LifeSpan™ MEG at Barrow Neurological Institute in Phoenix, Arizona, the US. Also, the components offered with Orion LifeSpan™ were approved.

Following the FDA approval, MEG can be used for routine clinical examinations, chiefly for epilepsy & mapping pre-surgical brain function. Moreover, the sites may now bill both private as well as public insurance plans for MEG examinations regularly. Given about 36,000 MRIs installed worldwide at present and 2,000-3,000 MRI systems sold per year, Compumedics believes MEG might pursue a similar path over time.

Furthermore, the FDA approval represents a significant milestone for the Compumedics’ MEG sales and marketing efforts with the company now expected to enter the profitable US clinical market with its single Dewar MEG technology. Depending upon the specification, it is anticipated that each system will typically sell for around US$3 million to US$4 million. In the coming months, the dual adult/child Dewar is planned for installation at BNI, with FDA submission to follow. The regulatory submissions for other regions are well progressed and are expected to proceed smoothly.

Following the FDA approval announcement, Compumedics’ shares soared 26.61% on 17 February 2020. CMP last traded at $0.860 on 19 February 2020, down 1.714% from the previous day’s closing price.

Paradigm Biopharmaceuticals Limited (ASX:PAR)

Biopharmaceutical company Paradigm Biopharmaceuticals Limited engaged in repurposing an FDA-approved drug, injectable pentosan polysulphate sodium (PPS) for inflammation treatment under the name Zilosul®. The company recently announced that the first participant had been administered with Zilosul® (iPPS) in the US under the FDA approved Expanded Access Program (EAP). Under the EAP program, the participants will be receiving two Zilosul® injections subcutaneously per week for a period of six weeks. This is in accordance with the proposed protocol for the approaching Phase III Pivotal Study to be discussed with FDA in the forthcoming Pre-IND meeting scheduled on 19 February 2020.

While a total of 10 patients will be treated (including Ex-NFL Players) under the EAP, the remaining nine patients to be treated will be staggered to initiate over the next four weeks, with the company anticipating the last patient to receive final dosing (last injection) in mid of May. Paradigm predicts data reporting on patient outcomes in the early part of Q3 CY2020.

With Paradigm moving forward towards the initiation of the Phase III Pivotal Study and commercialisation of Zilosul® as a potential first-line treatment for Knee Osteoarthritis, this step could represent an important milestone for the company.

Expanded Access Program

Also called “compassionate use”, the expanded access program offers a pathway to provide doctors access to investigational drugs, biologics, and medical devices that are used to diagnose, monitor, or treat patients with serious diseases or conditions for which there are no comparable or satisfactory treatment options available except clinical trials.

Earlier in September 2019, Paradigm received clearance for its first expanded access IND from US FDA within the thirty-day review period.

PAR last traded at $3.920 on 19 February 2020, down 0.759% from the previous day’s closing price.

Clinuvel Pharmaceutical Limited (ASX:CUV)

Clinuvel Pharmaceutical Limited is a global pharma company involved in the development and provision of innovative treatments for patients with serious genetic and skin diseases having a clinical need for photoprotection, repigmentation and genetic defects. The Melbourne-headquartered company has operations in North America, Europe and Singapore.

Clinuvel had received US FDA approval for its new drug SCENESSE® (afamelanotide 16mg) to be used on patients in the vast US market, as the 1^st ever treatment for a rare genetic metabolic disorder causing absolute intolerance to light. Post the announcement, the shares of the company soared 69% to $45 on 09 October 2019.

Source: ASX

The company recently declared that it has asked for a meeting with the US FDA pursuing a design approval for CUV104, its multicenter Phase IIb study, and the necessary data package required for the supplemental New Drug Application (sNDA) filing for SCENESSE^® (afamelanotide 16mg) in vitiligo, a disease resistant to treatment which causes loss of pigmentation. At present, there are no pharmaceutical agents approved for vitiligo in the USA.

In Australia, priority review has recently started for the use of SCENESSE® technology in rare disease EPP, by Australian TGA.

CUV last traded at $25.420 on 19 February 2020, down 0.742% from the previous day’s closing price.

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