For those of you without Acrobat, here's the Lehman report:
Headline: Interneuron Pharmaceuticals: Announces Positive Pagoclone Data Author: CA Butler,PhD/R.Rouse (212)526-4410 Rating: 1 Company: IPIC Country: COM CUS Industry: BIOTEC Ticker : IPIC Rank(Prev): 1-Buy Rank(Curr): 1-Buy Price : $11 3/8 52wk Range: $33-9.75 Price Target: $33 Today's Date : 11/21/97 Fiscal Year : SEP ------------------------------------------------------------------------------ EPS 1996 1997 1998 1999 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: -0.09A -0.07A -0.07A -0.51E -0.51E - -E - -E 2nd: -0.34A -0.19A -0.19A -0.56E -0.56E - -E - -E 3rd: -0.34A -0.17A -0.17A -0.54E -0.54E - -E - -E 4th: -0.16A -1.29E -1.29E -0.57E -0.57E - -E - -E ------------------------------------------------------------------------------ Year:$ -0.76A $ -1.73E $ -1.73E $ -2.18E $ -2.18E $ -0.28E $ -0.28E Street Est.: $ -1.34E $ -1.53E $ -2.26E $ -2.33E $ -0.59E $ -0.28E ------------------------------------------------------------------------------ Price (As of 11/20): $11 3/8 Revenue (1997): $66 Mil. Return On Equity (97): N/A Proj. 5yr EPS Grth: N/M Shares Outstanding: 41.0 Mil. Dividend Yield: N/M Mkt Capitalization: $466 Mil. P/E 1997; 1998 : N/M; N/M Current Book Value: $3.03/sh Convertible: None Debt-to-Capital: 1% Disclosure(s): C, A ------------------------------------------------------------------------------ * Interneuron announced results of its Ph. 2 trial with Pagoclone in panic disorder. A Phase 2/3 dosing trial is currently underway and should be completed by mid-98. These data support additional value in Interneuron beyond Redux.
* Remember Interneuron will likely file with the FDA for approval of Citicoline in stroke by yearend. Further, LidoDex (a nasally administered drug for immediate relief of migraines) should move into man soon.
* Additionally, bucindolol (a drug in Phase III trials for congestive heart failure) should conclude its trial later this year or early in 1998.
* Interneuron's stock has been hampered by the potential liability of Redux. Our due diligence suggests the probability that Interneuron is found negligent is minimal.
* Two trials from IPIC and American Home Products will be concluded in early 98 which we believe will substantiate that Redux use does not correlate with an increase in heart valve disorders. Accordingly, our rating remains BUY 1.
------------------------------------------------------------------------------ DATA SUMMARY -Interneuron
announced results of its Phase II trial utilizing the drug Pagoclone for panic disorder. A Phase II/III trial is also currently underway having enrolled 203 patients of 280 total. Enrollment in the Phase II/III three arm dosing (50 ug three times per day (TID), 100 ug TID, or 200 ug TID) trial should be completed by early 1998 and data from the 10 week study should be presented mid-year next year.
The data from the Phase II study was performed at a single center at the University of Bristol by Dr. David Nutt and included 16 patients with two arms: drug (8 patients treated with 100 ug TID), and placebo (8 patients). All patients were normalized for two weeks to a baseline having 2-10 panic attacks per week. Eligible patients (16) were then randomized to receive pagaclone or placebo for 2 weeks followed by a one week washout period and then crossed over for weeks 4 and 5 with week six also being a washout period (thus the patients who received drug moved to the placebo group in weeks 4 and5 and those in the placebo group for the first two weeks received drug for weeks 4 and 5). Pooled data from those receiving drug demonstrated a 40 percent reduction in panic attacks while they were on drug. Interestingly, when patients were removed from drug their panic attacks returned though there was no withdrawal nor rebound effect. Further there was no sedation , thus suggesting the safety of the drug is favorable. Withdrawal and sedation are problems with commonly used benzodiazepines.
THE MARKET -The
National Institutes of Mental Health estimate that 23 million Americans suffer from anxiety, with 2.5 million suffering from panic disorders. Such patients are believed to have a decreased action of a neurotransmitter, GABA (gamma amino butyric acid), which increases the activity of certain neurons. Interneuron is developing pagoclone as a regulator of GABA neurotransmission whereby the drug increases the action of the neurotransmitter and thus reduces the excessive activity of the neurons responsible for the anxiety/panic. To date, drugs from other classes, including benzodaizapines (such as Valium) serotonin modulators (such as Buspar) and serotonin agonists (to a small extent) have been studied and/or used in this area, yet may cause sedation, hangover, dizziness, dangerous drug/alcohol cross-reactivity, and the potential for addiction. Early studies of pagoclone indicate that such adverse events may be lessened and these Phase II data appear to substantiate this hypothesis..
We have assessed a probability of success of 50% for the product, and have forecast potential registration of the product in FY 2000 with revenue potential to approach approximately $350 million. Exclusive worldwide rights for pagoclone were licensed from Rhone-Poulenc Rorer to Interneuron in exchange for milestones and royalty payments. A $250,000 milestone payment to Rhone-Poulenc Rorer is being paid as a result of these Phase II findings.
CONCLUSION -Future
drivers of the company include citicoline (CerAxone) filing for stroke by yearend, potential early halting of the Phase III trials of bucindolol trials in congestive heart failure by yearend. An IND for LidoDex (a nasally administered combination of Lidocaine and Dextromethrophan) for the treatment of migraines should be filed soon. Finally, we anticipate some resolution to the Redux liability in early 1998 following the release of data from the two trials ongoing with Redux. One trial, sponsored by IPIC, includes 1000 patients (those on drug versus those absent drug) all of whom are to receive echocardiograms to asses health of heart valves. The second trial is sponsored by American Home Products and includes 1200 patients: placebo, those on Redux, and those on phen/fen. Echocardiograms are also being obtained on these patients as well. It is our judgment these data may create an early settlement of the liability claims thus minimizing Interneuron's legal expenses. Nevertheless, we believe the pagaclone data supports that Interneuron has value outside of Redux supporting our rating of 1-BUY.
BUSINESS DESCRIPTION: Interneuron is a diversified biopharmaceutical company engaged in the development of products that mimic or affect neurotransmitters for the treatment of neurological and behavioral disorders. ------------------------------------------------------------------------------ Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities. |
