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George Ronan
George Ronan
Articles (67) 

What the Latest Approval Means for La Jolla Pharmaceutical

A look at the latest regulatory approval in the US

December 22, 2017 | About:

It has been an incredible week as far as drug approvals are concerned. The Food and Drug Administration has broken its own record for approvals in one year and has put five drugs (so far) this week over the line in the U.S.

The latest approval to hit the wire is rooted in a drug being developed by La Jolla Pharmaceutical Co. (NASDAQ:LJPC).

Here is a look at the drug in question, with a discussion of what the approval means for the company going forward.

So, as mentioned, the drug is a La Jolla asset called GiaprezaTM. With GiaprezaTM, the company was targeting an indication of low blood pressure in patients with septic or other distributive shock.

When a person gets an infection, they have the potential to develop what is called septic shock. It comes about on the back of incredibly low blood pressure levels and can have a serious impact on the way the body works. Basically, if you cannot get oxygen to major organs efficiently, the said organs are at risk of shutting down. It is blood that carries the oxygen to these organs, so if you have low blood pressure, there is a chance there is not enough oxygen traveling to the organs and – by proxy – a chance of organ failure.

The same happens with disruptive shock, although it is not based on an infection or septic-induced low blood pressure issue, it is based on a different input (the potential inputs are wide-ranging, but the issue and the outcome are the same).

With GiaprezaTM, La Jolla is trying to combat this issue. The drug works as a sort of adjuvant to the current standard of care therapies in this space (those that seek to raise blood pressure) and, as per a very strong set of data, it can improve the efficacy of the standard regimen when administered as a combination treatment.

That is what the data suggested, anyway. Nothing is confirmed until the FDA greenlights it – and that is what just happened.

The FDA announced after hours on Thursday it was approving the drug in its target indication and – as might be expected – La Jolla is running up on the news. At time of writing, La Jolla goes for a little over $32 a share – up more than 13% on the daily open and close to 30% on yesterday's close.

So what does the approval mean in real terms?

Well, this is a very large market in the U.S. Distributive shock is the most common type of shock in the inpatient setting, affecting approximately one-third of intensive care unit patients. Estimates suggest tthere are just shy of 1 million cases annually in the U.S. and, of these, 90% are septic-based. Further, more than 300,000 of these patients do not achieve blood pressure increases to the degree that would be deemed optimal post-treatment.

This means the company has a solid market of at least half a million individuals it should be able to saturate relatively quickly and, while we do not have peak sales estimates for this one just yet, the potential to turn this population into a multimillion-dollar market is far from unrealistic.

So what's next?

Now, it is all about launch. The company wants to get the asset on shelves in the first quarter of next year. Keep in mind the company may issue some equity to raise cash before then, so there is a bit of a near-term dilution risk, but things look strong longer term.

Disclosure: The author has no positions in any of the stocks mentioned in this piece.

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