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NuPathe Migraine Patch Faces Decision Day


The patch was shown to be effective and safe in company studies. Investors bailed following a sale of stock to one investor.

At the end of the month, the small specialty drug company NuPathe (PATH) will learn whether its patch for migraine headaches can be sold in the US. A number of investors are choosing not to hang around and find out.

NuPathe is down more than 50% this year as it inches closer to the August 29 deadline for the Food and Drug Administration to make it decision on Zelrix, a transdermal patch that delivers an older medicine, sumatriptan. The patch uses an electrical current to make sure the medicine is delivered through the skin.

Why do we need a patch to deliver a medicine that's already on the market? NuPathe says some migraine sufferers delay taking sumatriptan pills when they're vomiting or even nauseous (common conditions with migraines). NuPathe say these people may be more prone to wear the patch over taking a pill. The company also says the delivery of the medicine may be more consistent using a patch. Citing its own research, the company says the patch may have fewer side effects as existing products, including chest tightening, tingling and numbness of extremities.

The drug was tested against a placebo in company studies and found to be effective and generally safe. As part of its third and last phase of studies NuPathe conducted for approval consideration, the company tested to make sure the patch didn't cause skin irritation. In a regulatory filing, the company says it may be asked by the FDA to conduct a skin sensitivity study.

The question on approval of Zelrix comes down to the same issues as any other drug application. The FDA weighs the unmet need, the effectiveness and the safety. This isn't another breakthrough skin cancer treatment. Migraine patients have options for treatment already. The issue of skin irritation or sensitivity already has been raised for this drug. So investors will want to weigh the risk-reward factors that FDA officials are considering here.

In recent weeks, concerns over approval have not been the main catalyst for the sell-off. Investors didn't like the company's agreement announced August 2 to sell up to $30 million in stock to one investor, Aspire Capital Fund, over the next two years at an agreed-upon price of $7.07 a share. The deal is seen as dilutive to the stock even though Aspire agreed to buy at a premium to the current share price.

Shares of NuPathe rose 2% to $4.42 in midday trading Friday. The stock is down almost 40% in the past month.

For those investors who believe the company's drug has a good shot at winning approval, some analysts predict stock will more than triple in the next year.

Leerink Swann analyst Joseph Schwartz is one such bull. He puts Zelrix approval at 90% probability and recommends buying the stock with a 12-month price target of $17 a share.

While it's potentially a big drug for a small company, bear in mind Zelrix isn't being touted by anyone as a future blockbuster.

Sales in five years may exceed $200 million, Stifel Nicolaus analyst Annabel Samimy estimates. She recommends buying the stock with a price target of $13 a share.

"We remain optimistic on the Zelrix opportunity and expect it to quickly find its place in the market," she says in a recent note.
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