PLX Pharma ($PLXP): This aspirin will give you headaches

1. $PLXP has launched a new immediate release aspirin that has the same properties as enteric-coated aspirin but at 14 times the price.
2. based on history the company is likely to discontinue the product within two years because sales will be very modest in the company is likely going to cash or possibly bankrupt.
3. Sell or short the stock at $15-$18/share before the November earnings.

PLX Pharma ($PLXP) has launched an over-the-counter immediate release aspirin that is coated with lecithin and phosphatidylcholine rather than existing commercial coatings. Here is their investor presentation: https://ir.plxpharma.com/static-files/d4b8911a-a0f3-47dc-8be0-d84af718ded9 On page 4, they note that they are the only liquid filled aspirin, that they address “the limitations of standard of care enteric aspirin,” that they have fewer gastric erosions and stomach ulcers compared to immediate release aspirin, and that they have a $10 billion opportunity. On page 12, they show how they get to the $10 billion opportunity: 42.8 million people who have either experienced a cardiovascular event that requires daily aspirin ($6.4 billion) or who are diabetic ($3.6 billion). A quick calculation shows that they expect people to pay $19.61 cents a month for 12 months for their product.

In order to launch this form of aspirin coated in lecithin, they had to apply for approval from the FDA. The approval summary is here: https://www.accessdata.fda.gov/drugsatfda_docs/nda/2013/203697Orig1s000MedR.pdf On page 6, the FDA says “The Sponsor was required to submit an NDA for PL2200 because it contains soy lecithin which the quantity [whited out]… previously allowed as an excipient.” Page 11, it states that PLXP began clinical trial preparation in 2007. On page 14, it states that an NDA was submitted to the FDA in 2012. This submission consisted of two bioequivalence studies and one study on gastrointestinal toxicity. Bioequivalence studies show that their aspirin is bioequivalent to “Genuine Bayer aspirin.” The gastrointestinal toxicity study was single-blind, not double-blind, and compared to “Walgreen’s aspirin.” On page 32, the medical reviewer noted that the inclusion/exclusion criteria were so restrictive that “results may not generalize to a consumer population.” On pages 34 and 35, the medical reviewer notes that videos of endoscopy that would show stomach ulcers were not correctly reviewed by the central blinded reviewer. The videos were divided into four batches and sent separately to the central reviewer, but because of labeling mistakes, the Central Reviewer reviewed the first batch of videos twice instead of reviewing the first batch and then the second batch, so the entire study is invalid. On page 35, the medical reviewer also notes that 20% of the videos were considered “non-invaluable without specifying the reason.” On page 36 it says “the benefit of the CR (Central Review) review and adjudication process planned by the sponsor to assure objectivity of the assessments was largely negated by the procedural error. A major proportion of the assessments (not further explained in the submission) was apparently obtained from the site investigative reports without further review.” Finally, on page 45 in the summary under significant adverse events, it states “In the GI [Gastro-Intestinal] mucosal injury study…the sponsor concluded that there were no clinically or statistically significant differences between treatment groups in the incidence of AE’s” and the medical reviewer comment was that “we are unable to tell whether there is a difference in G.I. lesions as there was not agreement and some mix-up of materials for the central reviewers to examine.” In the end, PLXP was granted the same OTC label that all other immediate release aspirins have. The aspirin is called Vazalore and here is its label: https://www.accessdata.fda.gov/drugsatfda_docs/label/2019/203697Orig1s004lbl.pdf. Here is the label for Bayer chewable aspirin: https://www.cvs.com/shop/aspirin-regimen-bayer-81mg-chewable-tablets-pain-reliever-36-pack-prodid-1012142 It is almost identical word for word, except that Vazalore has soy lecithin so its label says not to use it if you are allergic to soy. These aspirins all say that for uses other than pain or fever, the patient should consult a doctor first. What is not on this Vazalore label is that it reduces stomach ulcers. PLXP actually advertises on television that it’s aspirin does reduce stomach ulcers by referencing its published study, but it is highly likely that the FDA will intervene to stop this advertising since the FDA has not allowed this claim.

It is also interesting that the national advertising division of the Better Business Bureau issued a press release on January 6, 2020 (https://bbbprograms.org/media-center/newsroom/nad-plxpharma-claims) that it recommended that PLXP discontinue 10 claims and modify two others. “The claims at issue, which appeared in online advertising, were challenged by Bayer Healthcare LLC, maker of Bayer aspirin products and pertain solely to Vazalore’s use for secondary prevention.” Claims to be discontinued were as follows:

1.“Vazalore achieves therapeutic efficacy 4 times faster than EC Aspirin.”

2.“Faster … antiplatelet response than enteric coated aspirin.”

3.“Vazalore delivers 2X better platelet response than enteric coated aspirin.”

4.“… more predictable antiplatelet response than enteric coated aspirin.”

5. “65% lower risk of acute gastric ulcerations than plain aspirin.”

6.“Vazalore vs. Aspirin: 47% lower risk of erosions or ulcers; 71% lower risk of ulcers.”

7.“The Miracles of Aspirin Fully Realized.”

8.“Better gastrointestinal safety” (or modify it to convey the limited message that Vazalore causes fewer erosions and ulcers in the first week of treatment than traditional immediate release aspirin).

9.“A better, more efficient and safer delivery platform for active pharmaceutical ingredients. We saw something good, but had a vision to make it better.”

10. That Vazalore’s delivery system allows for an experience with aspirin that is safer, more efficient, and objectively “better” than traditional aspirin.

Claims to be modified were:

1. Modify the claim, “Vazalore has up to 5X greater absorption than enteric coated aspirin” to avoid conveying the message that the claimed difference in absorption related to superior clinical efficacy and disclose that the reported results were limited to diabetic, obese subjects.

2. Modify the claim, “fast, reliable, predictable antiplatelet activity” to disclose that it is based on testing of diabetic, obese subjects and healthy subjects.

It is also the case that their data do not show a difference in ulcer formation compared to “enteric-coated” aspirin, which is the most commonly sold form. Here is the PLXP paper from 2010 that looked at seven days of ulcer formation in patients taking 325 mg of $PLXP aspirin compared to standard immediate release aspirin that was not “enteric-coated”. (https://plxpharma.com/wp-content/uploads/2015/09/AJG-Nov2010-PL-ASA-002-Trial.pdf) on pages two — three, they show that seven days, the incidence of ulcers was 5.1% in the $PLXP arm and 17.6% in the standard arm. These claims were not allowed by the FDA as noted above, because there was a mix-up in the videos. Here is a 1991 study of 300 mg a day of enteric-coated aspirin given for five days compared to standard aspirin. (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1368496/pdf/brjclinpharm00056-0078.pdf) The ulcer score for enteric-coated aspirin at 300 mg was the same as placebo! Similar studies for enteric-coated aspirin were first published in the New England Journal of Medicine in 1980. (https://www.nejm.org/doi/10.1056/NEJM198007173030305?url_ver=Z39.88-2003&rfr_id=ori:rid:crossref.org&rfr_dat=cr_pub%20%200pubmed) Three doses of 325 mg three times a day for 7 days of enteric coated aspirin showed zero gastric or duodenal ulcers in 4/5 subjects, and 3 gastric, but zero duodenal ulcers in 1/5 subjects. This dose is three times the dose tested by $PLXP over the same 7 days. These results are widely known and advertised by Bayer and other makers of enteric-coated aspirin. PLXP does not market an enteric-coated aspirin.

Bottom line: $PLXP has gotten approval for yet another immediate release aspirin with no FDA sanctioned claim that differentiates it from any other aspirin, and specifically not different from enteric-coated aspirin from Bayer, the most popular aspirin by sales.

Launch: $PLXP has shipped bottles of its aspirin in two standard dosages, 81 mg and 325 mg, to pharmacies around the country. The company and its presentation to investors says that it will cost about $25 per month, although we see above that their projections and their investor report assume a cost closer to $20 per month. If you type in “aspirin” at CVS.com, you get the following: https://www.cvs.com/search?searchTerm=aspirin Vazalore is found at the bottom and CVS like all the other pharmacies shows you the cost per pill. The most common cost cited is about six cents per pill except for Vazalore, which is $0.83 per pill or approximately 14 times higher. The Vazalore box, as noted before, has the same bleeding risk on it as all the other aspirins have, but in TV ads they are making the claim that it causes fewer ulcers: https://www.ispot.tv/ad/O9uB/vazalore-arcade-game We will see how long those TV ads last before the FDA intervenes.

We have been here before — literally

This is not the first company to try launching an aspirin that prevents stomach ulcers. In 2016, Aralez ($ARLZ), formerly called Pozen ($POZN), launched a prescription aspirin, called Yosprala, that contained 40 mg of omeprazole, an acid reducer also available over-the-counter, at a price of $20 for the co-pay paid by the patient. It made the same claims to investors that $PLXP is making: multibillion dollar opportunity. Nonetheless, prescriptions never exceeded 2000 (4 week moving average). Aralez never disclosed actual sales during 2017, but in May 2017, they cut the price 50% to $10/month, and in March 2018, it discontinued the product “for commercial reasons.” Nuvo Pharmaceuticals ($NRIFF) bought Yosprala and sublicensed it to Genus Lifesciences (private), which relaunched Yosprala in 2019. (https://www.empr.com/home/news/yosprala-available-again-for-secondary-prevention-of-cvd-with-gastroprotection/) We don’t know what the sales are, but if a physician had a significant concern about stomach ulcers, they could prescribe Yosprala today.

They could also simply suggest the patient take omeprazole, or famotidine along with the regular aspirin. It is generally not recommended that omeprazole be taken long-term, although the long-term studies with Yosprala have not revealed any serious safety concerns, but famotidine, an acid reducer with a different mechanism that is recommended for long-term use, works just as well to reduce stomach ulcers as noted in this 2009 publication in the Lancet of a study conducted by Merck ($MRK). (https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(09)61246-0/fulltext#:~:text=Famotidine%20is%20effective%20in%20the,in%20patients%20needing%20vascular%20protection.) Going back to the CVS website, 20 mg of famotidine can be purchased for about $0.23 apiece, so even taking two of them a day plus a standard aspirin would cost $0.52 a day, while providing fully validated ulcer prevention, compared to Vazalore at $0.83 a day with no valid ulcer prevention.

The Mucinex team

Part of the excitement around the $PLXP story is that it is brought to you by the Mucinex team. The chairman of $PLXP, Michael Valentino, was a key employee at Adams Respiratory, which developed Mucinex, a long-acting guaifenesin, and which was sold for $2.3 billion five years after Mucinex got FDA approval. Mucinex benefited, however, from a loophole in drug approvals. Guaifenesin — which makes you cough up mucus — was first approved in the United States in 1952 before the creation of the modern FDA in 1962 that required safety and efficacy trials for approval. When Mucinex was approved under an NDA in 2002, the FDA decided to pull all other forms of long-acting guaifenesin off of the market since they had not done the NDA-worthy efficacy studies to support its use. Overnight, Mucinex was left as the only long-acting guaifenesin. With the market to themselves they were able to build brand identity very quickly and generate significant sales, leading to the sale of Adams Respiratory in 2007 for $2.3 billion. This strategy will not succeed for aspirin, and the company is not saying that they will employ the Mucinex strategy for Vazalore. Vazalore actually got its first FDA approval in 2013, with subsequent additional approvals in 2019 and in 2021. There has been no attempt by PLXP to use these approvals to get other aspirins off the market. In fact on the August 6, 2021 earnings call, the CEO said “we understand what specialists like cardiologists and neurologists require in making treatment decisions for their patients, and the importance that strong clinical data can play in their understanding and appreciation of vasa lawyers novel delivery mechanism.” This shows that their approach is to convince doctors that Vazalore has the same medical profile as Yosprala, the prescription aspirin plus omeprazole. She also said, “through our market research, we’ve learned that the top influencer for the consumer is their physician.” This comment recognizes that the driver for new aspirin use will be the physician. That means that PLXP needs to be calling on doctors right now in order to drive sales of their product. She mentioned all of the promotional work they expect to make at medical meetings and the published studies that they plan to hand out to doctors.

The problem, however, is that promotion to doctors has been difficult since the beginning of the Covid-19 pandemic. Even companies launching truly breakthrough products for cardiovascular conditions, such as Esperion (ESPR), have had a difficult time meeting with doctors and educating them about the products, and have had significantly weaker sales than were expected. Furthermore, as $PLXP notes, OTC products like Vazalore are not paid for by health insurance: patients must pay out-of-pocket. $20 — $25 a month may not seem like a lot to spend, but any patient who has had a major cardiovascular event, such as a heart attack, will be on multiple medicines already for blood pressure, cholesterol, or diabetes — and aspirin! The co-pay for all of these drugs really adds up and it is unlikely that a person will reach for a brand-new aspirin at 14 times the price of the well-known and well trusted Bayer aspirin, without a very compelling reason. Meanwhile, on the August 6, 2021 call, the CEO did say that they would be providing samples for physicians to pass out to their patients. Again, this emphasizes that the physician will be the driver of revenue. Let to their own, the consumer is unlikely to pick Vazalore. One obvious question that physicians will have is why the benefit on stomach ulcers is not found on the Vazalore box. In my experience, “we must educate physicians” is a telltale signal that a launch will struggle. In this case, the “education” to doctors about reduced stomach ulcers will show only that Vazalore is the same as enteric-coated aspirin.

2021 Sales

On the August 6, 2021 earnings call, the Oppenheimer analyst noted that the company had indicated in the past that it was really comfortable with the concept it could be in the black effectively on Vazalore sales. Analysts are currently expecting $4.6 million in sales in the third quarter, and $5.4 million in the fourth quarter leading to almost 10 million for the year 2021. Sales in 2022 are expected to be $30.7 million. The launch occurred in August. In order to generate $4.6 million in sales, the third-quarter will have to see almost 93,000 patients a $25 a month for two months. The company did say that they would record sales at the time the product when it arrives at the customer’s warehouse, but that they will also record reductions to gross revenue for provisions for retailer promotional programs, product returns, prompt pay discounts, coupon redemptions by consumers. Given the rise of Covid-19 levels in the southern part of United States that surpass the previous highs, and the challenges of detailing to doctors who according to the company will be the drivers of sales, it is simply not imaginable that 93,000 patients will suddenly start paying 14 times what they normally would pay for a daily aspirin. The vast majority of the people who would be candidates for this daily aspirin will already be on aspirin, while the incremental patients will be those who are newly getting heart attacks and would need to see their doctors to get a recommendation for an aspirin. At $20/month Yosprala never had more than 2000 prescriptions (rolling four-week average) as noted above.

Looking at sales a different way, even if Vazalore were discounted to $19.61/month as implied in the $PLXP investor presentation, to generate 10 million in sales in 2021, they would need 113,000 patients starting in the middle of August, or 127,000 patients starting September 1. These numbers appear wildly optimistic, and certainly unprecedented given the Yosprala experience of no more than 2000 prescriptions.

At $17.71/share, $PLXP has market cap of $476 million. Typical biotech/drug stocks are trading at 5x future 12 months’ revenue. The projected revenue for 2022 is $30.7 million. If we were to apply that to PLXP, then the stock should be trading at $5.71 a share. Even if we moved to 10 times 2022 revenue, we have a fair value of $11.42 a share. Since Vazalore is an aspirin with the same legal claims that all the other aspirins have, even five times revenue is too high. Teva ($TEVA), leading to more company, trades at 0.63×2022 revenue. Of course, I don’t believe there will be any material revenue for PLXP just as there was none for Yosprala.

We’ve been here before, part 2

Baudax Bio ($BXRX) received FDA approval in 2020 for an intravenous form of ibuprofen, Anjeso, to be given after surgery. The company CEO is Gerri Henwood, who among other things founded a company called Auxilium Pharmaceuticals (AUXL), which was sold to Endo in 2015 for $2.6 billion, even more than Adams Respiratory. At the time of launch, Anjeso was priced at a 50% premium to the intravenous ibuprofen sold by Cumberland Pharmaceuticals for the same indication. The benefit was that Anjeso could be given once a day, while Cumberland’s required three or four doses per day. At the time of launch, the same Oppenheimer analyst who covers $PLXP also recommended $BXRX with a price target of $16 a share and sales in 2020 of $6.9 million rising to $35.9 million in 2021. Actual sales in 2020 were $493,000, while year-to-date sales in 2021 are $400,000. $BXRX trades near $0.63 a share.

In June 2005, Nitromed ($NTMD) received FDA approval for Bidil, a combination of two generic drugs, to increase survival in black people with congestive heart failure. The price was about 10 times the cost of taking the two drugs separately, and in July 2005 the analysts at Leerink released a survey of doctors that projected a patient population of 230,000 at $2500 a year, for a potential market of $575 million. Bidil sales in the first year were $1 million, and peaked in 2008 at $15.3 million. $NTMD was bought by a private equity firm for $0.80/share in 2009.

There are quite a few additional examples that could be added, but the pattern is clear: introducing a drug without a true benefit over existing therapies while charging more than 10 times the price leads to disappointing sales. $PLXP’s Vazalore has the same boxed label as all other immediate release aspirins, and studies that they claim show superiority are, according to the FDA, seriously flawed. They will need to do additional studies to demonstrate that their technology truly has the value they claim for it, and in the meantime history suggests that sales will be disappointing and that the product is likely to be discontinued within two years of launch. The stock price should follow a trajectory similar to that of BXRX or NTMD and be well below $1 if not bankrupt in a year.