Since I last wrote about Cypress Bioscience (CYPB) two months ago , the stock has moved lower with the Company now trading even closer to its net cash position of $4 per share with a closing price on Friday of $6.43 per share. The level of short interest has remained steady this year and is still high at 6.6 million shares compared to a float of about 32 million shares and average volume that is just over 300,000 shares per day. Most of the options action in Cypress Bio is focused on December (12/20/08 expiration) with an open interest in the 10.00 calls exceeding 16,500 contracts versus over 14,000 put contracts at the 5.00 strike.
The upcoming FDA decision date [PDUFA] for milnacipran in the treatment of fibromyalgia [FM] is set for the end of October for Cypress Bio and its co-promotion partner on the drug, Forest Labs (FRX). More importantly, data is expected to be released during 4Q08 in another Phase 3 clinical trial of milnacipran for the same indication. Milnacipran has the advantage of over a decade of use in more than 50 countries as an anti-depressant outside of the U.S., resulting in over 20 million months of tracking data for these patients. This extensive drug database adds to over 2,000 patients studied by Cypress Bio in two previous Phase 3 trials and about 1,000 patients with FM enrolled in the pending Phase 3 trial.
Given the well-known characteristics of milnacipran and its established mechanism of action as a dual serotonin [5-HT] – norepinephrine [NE] reuptake inhibitor [SNRI], the major issue for FDA approval is one of cardiovascular safety. Since milnacipran inhibits NE more strongly than 5-HT (a 3:1 ratio), it increases both blood pressure (2 – 3 points for diastolic and systolic on average) and heart rate (7 – 8 beats per minute on average). To address any potential safety concerns by the FDA, Cypress conducted a Phase 3 ambulatory blood pressure monitoring trial with 270 patients to measure the changes in blood pressure and heart rate at regular intervals throughout the day following 100 mg and 200 mg daily doses of the drug as a proactive step (i.e. the FDA did not request the additional data) in preparation for the NDA review by the agency.
The previous two Phase 3 studies of milnacipran in the treatment of FM yielded mixed results with regard to achieving statistical significance for the pre-defined primary endpoints. In September 2005, a six-month trial with 888 patients failed to reach statistical significance for the pre-defined primary endpoint, but results were promising enough to warrant further study. In May 2007, Cypress Bio surged on statistically significant results for milnacipran in the treatment of FM in a three-month trial with 1,196 patients based on a composite responder approach which evaluates the improvement among patients across multiple symptoms to provide a more complete assessment of efficacy since the condition being treated involves a variety of symptoms such as widespread chronic pain, fatigue, sleep disturbances, and increased sensitivity to light touch.
With Cypress Bio trading even closer to its $4 cash cushion, I plan to start accumulating shares in the coming weeks near its 52-week low around the $6.50 per share level in anticipation of the topline Phase 3 results expected 4Q08 and the FDA decision at the end of October. I think the Phase 3 results will be a positive catalyst for the stock, but would be surprised if milnacipran is approved without some sort of delay by the FDA. I think any delays will be minor and the drug could be approved by early 2009, but the pending Phase 3 trial results should be sufficient to move the stock back to double digits with positive results and no safety concerns.
$28.67 (09/13/08)
