Stock of the Day
Nov 10, 1999
QLT PhotoTherapeutics: Upcoming FDA Review Is Key
QLT PhotoTherapeutics (Nasdaq:QLTI - news) is in the business of developing drugs for photodynamic therapy. This involves the use of photosensitive drugs that can be activated by laser to treat cancer, eye diseases and other conditions. The Canadian company just reported third quarter results on Tuesday, but the big day for QLT will be when an FDA advisory panel reviews its potential blockbuster drug on November 17.
The drug up for review is called Visudyne, and the FDA panel is considering it as a treatment for the wet form of age-related macular degeneration (AMD), the leading cause of blindness or severe vision loss in people over 50. Nearly 500,000 new cases of wet AMD develop each year, 200,000 of those in North America. QLT has partnered with Ciba Vision, a unit of Novartis, to market Visudyne and some analysts figure the drug has potential to top $500 million in annual sales by 2003. QLT will manufacture the product and receive royalties on the sales.
After years of successful clinical trials showing Visudyne was safe and effective in slowing the progression of AMD, the company filed for regulatory approval and received priority review status (meaning within six months) from the FDA. It turned out to be even faster, just three months after filing, that the advisory panel will convene to make a recommendation on Visudyne. The FDA normally follows the recommendations of the advisory panel, so commercial launch is expected in early 2000 assuming they give the thumbs up next Wednesday.
Most biotechs are still in the development stage with several years of navigating the clinical trial and regulatory process ahead of them. As a biotech firm poised to commercialize its potential blockbuster product, QLT is therefore on the verge of joining a very select group of biotech companies.
QLT's stock price more than doubled this year in anticipation of these events, but the stock has given back about twelve points in the past month. The apparent reason for this retreat is concern voiced by at least one analyst about the risk of "qualified" approval of Visudyne, that is, a narrower label than the company is seeking which could reduce the potential market for the drug. The concern relates to one analysis of a subgroup of Phase III trial patients which raises the possibility that Visudyne is less effective in treating a less aggressive form of the disease (occult vs. classic).
Deutsche Banc Alex. Brown analysts believe these concerns are unfounded, though, noting that the FDA consistently rejects any subgroup analysis not prospectively defined at the initiation of the study, as was the case here. Furthermore, they cite physicians as saying that making a distinction between occult and classic AMD is often difficult in the clinical setting and unlikely to factor into whether they prescribe treatment with Visudyne and photodynamic therapy. Basically the Deutsche Banc analysts think physicians are eager to start using Visudyne broadly and the FDA is eager to approve it.
QLT already has one product on the market, Photofrin, approved for treating several forms of cancer. It has only produced royalty revenues of C$1.8 million in the first nine months of 1999, but the company is testing it on several more disease indications and hopes to expand the market potential for this drug. This photosensitive drug accumulates in rapidly growing cells, which characterizes cancerous cells. Once the drug accumulates in a tumor, it can be "activated" by laser to release a toxin that kills the cells it is in, with no damage to the healthy cells around it. Its noninvasive nature and limited side effects make photodynamic therapy a marked improvement over existing cancer treatments such as surgery, chemotherapy and radiation.
The near-term key for QLT PhotoTherapeutics will be its upcoming FDA review of Visudyne, though. If the panel does recommend approval and does not narrow the prescribing label, QLT's stock should regain the momentum lost in recent weeks. Then the focus can turn to final approval and commercial launch in early 2000, and of course how quickly the treatment is adopted by the medical community as reflected by the sales ramp in the subsequent quarters. If all goes according to that plan, then QLT has a shot at joining the top-tier of biotech stocks. |
