Zacks_Analysts' Blog : More to Transcept than Intermezzo - Analyst Blog

In the past we’ve written extensively on Transcept Pharma’s (TSPT) Intermezzo, and our belief that when approved it will fill a much-needed void in the nocturnal awakenings area of the insomnia market.



Transcept is currently pushing forward with enrollment in a 40 patient Highway Driving Study designed to answer the U.S. FDA’s concerns outlined in the complete response letter received last October on the potential for next-day residual effects with Intermezzo relating to driving ability. We expect management will complete this study later in 2010, and re-file for approval early next year.



However, besides Intermezzo, Transcept investors have another candidate to focus on. Transcept is currently in early stage development with TO-2061, a low-dose ondansetron augmentation for potential use as an adjunctive therapy in adult patients with treatment-resistant obsessive compulsive disorder (TR-OCD). Ondansetron, a 5-HT3 antagonist, was approved in January 1991 under the brand name Zofran at GlaxoSmithKline (GSK) for the treatment and prevention of chemotherapy-induced nausea and vomiting.



A Wide-Open Opportunity



TR-OCD is an area where there are no FDA-approved treatment options for patients. First-line therapy for OCD includes treatment with selective serotonin reuptake inhibitors (SSRI), including Prozac, Luvox, Paxil or Zoloft. Unfortunately, 40% to 60% of patients will fail this within the first few months.



When a patient fails first-line SSRI therapy, psychiatrists often look to augment therapy with off-label atypical antipsychotics. This is a rather poor option. Nearly 70% show no improvement signs with atypicals. In fact, most only see added adverse side-effects, including weight gain and metabolic disorder commonly associated with these drugs.



Similar to SSRIs, ondansetron affects serotonin pathways and may enhance SSRI effects on OCD symptoms. The drug also reduces dopaminergic activity, similar to atypical antipsychotics, and may inhibit repetitive behavior by down-regulating dopamine. Transcept has conducted two pilot studies characterizing the potential of low-dose ondansetron in TR-OCD: Study A, ondansetron augmentation in patients who responded poorly to at least 12 weeks of SSRI treatment combined with an atypical antipsychotic (n=14), and Study B, ondansetron augmentation in patients who responded poorly to at least 12 weeks of SSRI treatment alone (n=21).



Results show that patients resistant to multiple treatments improved when ondansetron was added. Ondansetron augmentation in SSRI treatment-resistant patients produced clinically meaningful improvement in OCD symptoms. Ondansetron improved the symptoms in >50% of patients who responded poorly to SSRI treatment. And 8 of the 12 responders relapsed within four weeks after the ondansetron treatment period was stopped. Finally, low-dose ondansetron was well-tolerated in both studies, with no dropouts due to adverse events.



An IND has been filed and accepted by the U.S. FDA in the second quarter 2010. Transcept will follow a 505(b)(2) pathway for TO-2061, relying on the substantial preclinical safety data on Zofran by GlaxoSmithKline. The next step for Transcept is to conduct a PK and dosage form study. Typical doses of Zofran for CINV are 16mg to 24mg per day. The dose for TO-2061 will be substantially less. This should begin later in 2010, with completion planned for the first half of 2011.



Following completion of the PK analysis, management plans a phase II proof-of-concept program to begin in late 2011. The planned phase II program will be well-designed (double-blind, placebo-controlled) and large enough (at roughly 150 patients), that, if successful, management could potentially use the data as one of the two required pivotal phase III studies for NDA submission. Top-line results from the planned phase II are expected in the second half of 2012.



With Upside Leverage



Commercializing TO-2061 presents an attractive opportunity to leverage the co-promotional agreement with Purdue Pharma on Intermezzo to psychiatrists. By 2014, Transcept could be promoting both Intermezzo and TO-2061 with a relatively small specialty field force. We estimate the costs of developing TO-2061 through proof-of-concept are less than $10 million.



At the end of the first quarter (March 31, 2010), Transcept held over $83 million in cash and investments. With a current market capitalization of only $125 million, we think the market is vastly undervaluing the future potential for both Intermezzo and TO-2061 at Transcept.
Read the full analyst report on "TSPT"
Read the full analyst report on "GSK"
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