24 Jun FDA erred on women’s libido drug; don’t reward Palatin Tech…
The Food and Drug Administration made a mistake Friday by approving a new drug called Vyleesi for women with low sexual desire. This is what happens when drug regulators lower — nearly to the floor — their own risk-benefit standards just so they can pander to special interests.
More on why FDA should have rejected Vyleesi in a moment. First, let’s deal with the Wall Street repercussions of this bad decision, starting with the inevitable, unsurprising but also undeserved jump in the stock price of Palatin Technologies (PTN).
Despite being the original developer of Vyleesi, Palatin will derive almost no economic value from the product now that it’s reached the market. U.S. marketing rights were sold to AMAG Pharmaceuticals (AMAG).
Per the terms of their agreement, AMAG owes Palatin $60 million in cash upon Vyleesi’s approval. Palatin has 260 million fully diluted shares outstanding, so that $60 million payment amounts to 23 cents per share.
Early Monday, Palatin shares were up 67 cents, or 50%, to $2. So, traders have turned a $60 million cash inflow into an extra $174 million in market value. You don’t put a trading multiple on cash. Palatin’s market value is now a bloated $520 million.
Palatin’s management team knows it lucked into a winning lottery ticket, which is why the company filed a $40 million stock-sale arrangement with an investment bank on Friday night, just minutes after the Vyleesi approval was announced.
At least Palatin doesn’t have to spend any money on Vyleesi. AMAG fares even worse because the Vyleesi approval now compels management to commit millions of dollars in sales and marketing expenses for a treatment that will generate minimal revenue. The health care investment bank SVB Leerink forecasts Vyleesi peak sales of only $90 million in 2025.
Incredibly, AMAG suggests Vyleesi can deliver $700 million in peak sales. The gaping disconnect between AMAG and sell-side analysts — not folks normally predisposed to offer stingy sales forecasts — is remarkable.
AMAG shareholders hated the Vyleesi licensing deal when it was struck in January 2017, and I’m pretty sure they were hoping for an FDA rejection on Friday. That would have been the best, money-saving outcome. It’s weird to say, but an FDA approval was bad news for AMAG and its already aggrieved shareholders.
None of this would have happened had the FDA done its job and rejected Vyleesi. Unfortunately, the agency set this slow-moving train wreck in motion with the 2015 approval of Addyi, the first drug aimed at treating women with low sex drive. Addyi, taken as a daily pill, was barely effective and caused women to faint, particularly if taken with alcohol. The risks of Addyi clearly outweighed its benefits, but the FDA was pressured into approving the drug by some pharma-funded women’s groups. Addyi has been a commercial flop with peak sales of around $13 million per year.
But Addyi set a regulatory precedent, which made it hard, but not impossible, for the FDA to turn down Vyleesi. If you’re going to approve one bad drug for women with low sex drive, then saying no to a second bad drug for the same indication is harder to do. I was expecting the FDA not to make the same mistake twice, which is why I predicted a Vyleesi rejection. I was wrong because I gave the agency too much credit.
The Vyleesi data don’t prove me wrong. Only 8% more of the women who injected themselves with the drug compared to a placebo shot had a modest increase in sexual desire. On a separate sexual “distress” score, the difference between Vyleesi and placebo was 4%.
Women struggling with sexual dysfunction, like men struggling with sexual dysfunction, deserve safe, efficacious treatments; unfortunately, the market has not given women many options. Vyleesi did not help women have more sex. In the clinical trials, there was no difference in the number of sexually satisfying events between the drug and placebo.
But 40% of the women did report nausea after Vyleesi injections, and 13% of those women had to take anti-nausea medicine. Vyleesi causes darkening of the gums and skin on the face and breasts in about 1% of women. The drug is also associated with transient increases in blood pressure.
All in, injecting a placebo is probably a wiser choice. It might sell better, too.