I afresh had the amusement of chatting with Flexion Therapeutics (NASDAQ:FLXN) CEO Mike Clayman about the company’s affairs for Zilretta, a anew approved medicine alleviative osteoarthritis of the knee. The aggregation is in the bosom of ablution Zilretta, and if all goes well, it could eventually displace the use of corticosteroid shots in millions of patients. Is now a acceptable time to buy Flexion Therapeutics shares? Read on to apprentice added about this company’s opportunity.
Initially, doctors acclaim over-the-counter affliction medicines for patients who ache from affliction acquired by osteoarthritis of the knee. However, back those medicines fail, doctors appoint opioid affliction medications and corticosteroid or hyaluronic acerbic injections.
Apparently, that happens a lot. Roughly 40% of all osteoarthritis affliction patients are assigned opioid medications, 4.3 actor patients in the U.S. accept anniversary corticosteroid injections, and 1.1 actor patients get hyaluronic acerbic injections in achievement of accomplishing abatement from their knee pain.
Clearly, the use of these treatments is common, but anniversary has cogent drawbacks that accomplish this bazaar accomplished for disruption. For example, opioids are able affliction relievers, but they betrayal patients to addiction risk. The life-threatening abeyant associated with opioid corruption has regulators and doctors agilely attractive for added analysis options.
Corticosteroid and hyaluronic acerbic are beneath chancy analysis options, but unfortunately, they absolutely don’t assignment actual well. The affliction abatement provided by corticosteroid shots generally wears off continued afore a patient’s abutting appointed injection, and the ability of hyaluronic acerbic injections is so ambiguous that it’s not alike recommended for affliction abatement in the latest American Academy of Orthopedic Surgeons guidelines.
Zilretta is an extended-release conception of triamcinolone acetonide, an immediate-release corticosteroid that Flexion Therapeutics has accumulated with its own microsphere technology. It doesn’t accept the addiction risks associated with opioids, and clashing corticosteroids and hyaluronic acid, it can accommodate abiding affliction relief. In trials, patients demography Zilretta saw their affliction bead by about 50% over the advance of a 12-week period.
During our conversation, I asked Clayman how he affairs on leveraging that arguably best-in-class ability and assurance to win bazaar share. He told me that Flexion Therapeutics has hired added than 100 salespeople to alarm on healthcare providers and that those salespeople will be educating providers on how to use Zilretta (it requires bond above-mentioned to use) and how to accomplish abiding they accept agreement from payers.
Corticosteroids don’t crave pre-mixing, and abounding of them are bargain generics that are calmly reimbursed by Medicare and bartering insurers. They’ve been acclimated for a continued time, which agency providers are appealing adequate with them. Nevertheless, best providers apparently won’t anguish too abundant about reconstitution. They’re acceptable to anguish abundant more, however, about accepting paid.
Medicare patients anniversary for about bisected of this market, and Zilretta won’t accept a audible Medicare agreement cipher until aboriginal in 2019. Until then, it will be paid for beneath a assorted J-code. Bartering insurers represent about 40% of the market, so accepting affairs in abode with them for acquittal will additionally be important.
Unlike decree drugs that can be abounding at a pharmacy and taken at home, Zilretta is administered in the healthcare provider’s office. That agency that the provider has to buy it up advanced and again book for Medicare acquittal afterwards it’s been administered. Because of the upfront costs associated with stockpiling Zilretta, providers ability cramp at architecture up a cogent account of it until they apperceive for abiding that they’ll get paid back they use it. Therefore, authoritative abiding that agreement goes off after a block will be important for the aggregation initially.
Overall, Clayman is assured that the aggregation can abode providers’ concerns, but he admits that 2018 is acceptable to be a architecture year. Instead, it appears that 2019 could be the aboriginal big year for Zilretta. At that point, doctors will accept congenital up real-world acquaintance application it, aggregate those adventures with peers, and ironed out any agreement headaches.
Flexion Therapeutics allotment amount has stumbled back Zilretta’s approval. Some of its sell-off is apparently due to “buy the rumor, advertise the news” action apropos to the FDA decision, but some investors may accept awash their shares because of a abstraction beforehand this year that showed accelerated cartilage accident in patients accustomed anniversary shots of immediate-release corticosteroids.
The abstraction didn’t absorb Zilretta, but it did absorb the use of the immediate-release corticosteroid that’s accumulated with Flexion Therapeutics’ microsphere technology. Some investors may be afraid that the use of anniversary shots declines afterward the study, but that affair could be misplaced. There artlessly aren’t a lot of options accessible to these patients added than knee backup surgery.
About 50% of Americans are accepted to advance appropriate knee osteoarthritis during their lifetime, and diagnoses are occurring at more adolescent ages. Back a knee backup alone lasts for about 20 years, assuming these surgeries back patients are adolescent exposes them to a greater accident of acute a additional surgery. Anaplasty is cher and it increases the accident of infection, so it’s adamantine for me to accept that doctors and insurers would adopt activity that avenue until they’ve approved added options, including Zilretta, first.
If I’m right, again Flexion Therapeutics shares could be undervalued. Sales of the hyaluronic acerbic medications Synvisc and Synvisc One alarm in at about $100 actor per quarter, and the corticosteroid and opioid markets are alike bigger.
Currently, there are about 8 actor corticosteroid and hyaluronic acerbic injections administered annually, and Clayman says the bazaar can abutment a net amount of $500 per bang for Zilretta. Some quick algebraic suggests that alike if Zilretta gets aloof 10% bazaar allotment of those injections, it could accomplish $400 actor in anniversary sales. If we accept a price-to-sales arrangement of amid three and four, again you could archetypal for a $1.2 billion to $1.6 billion bazaar cap, which is accurately college than its sub $1 billion bazaar cap now.
Also, investors could be undervaluing the abeyant to bazaar Zilretta across and to aggrandize its use into added osteoarthritis indications. Overall, I anticipate Flexion Therapeutics could be account owning in advance portfolios. Sure, Zilretta could abatement flat, but the adumbration is accomplished for disruption, and Clayman sounds like he’s got a acceptable butt on what needs to be done to tap this opportunity.
Todd Campbell owns shares of Flexion Therapeutics. His audience may accept positions in the companies mentioned.The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a acknowledgment policy.
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