Alexza Hopes New NDA Submission Will Relieve Agitation

Alexza Pharmaceuticals ALXA has recently submitted a new NDA to the FDA for their Staccato loxapine drug (AZ-004), in the hopes of having it approved for treatment of agitation within schizophrenia and bipolar patients. Alexza received a CRL for the drug in October 2010, as the FDA cited safety concerns with regards to an observed, post dose decrease in forced expiratory volume in patients with compromised airways. Alexza met with the FDA in December 2010 and April 2011 to discuss the parameters of a REMS agreement which would help in identifying specific patients that would be adversely affected by the drug. These meetings brought up several key points that the company hopes to address. The symptoms that developed within patients with respiratory conditions typically were resolved spontaneously or with the help of an inhaled bronchodilator. Respiratory events also developed in less than 1% of patients. There were also no reports of any serious adverse events within any of the clinical trials. Alexza has spent the past year compiling data in the hopes of resolving this safety issue. The FDA suggested that patients with respiratory issues be monitored for a period of time relative to a possible complication, and that medication be readily made available should a complication occur. Alexza CEO Tom King has sought to expand commercialization opportunities for AZ-004. The company has already signed a deal with Biovail, which received exclusive North American rights to the drug in exchange for a $40 million upfront payment. Alexza also hopes to find partners to market the drug in Europe, Asia, and Latin America. Alexza is currently trading for just over one-third of its 52-week high when it previously faced an FDA decision. If Alexza can gain approval of AZ-004, as well as find partners to market the drug in other countries, its share price could see significant upside from current levels. ACTION ITEMS Bullish: Traders who believe that the FDA will approve AZ-004 might want to consider the following trades. • The FDA has noted that an advisory committee will likely meet to discuss the prospects of AZ-004. A positive committee vote will could drive shares higher, and improve the probability of FDA approval. • Partnership agreements will potentially open international marketing opportunities, and expand revenue streams from the drug. • The company has noted that a PDFUA date will likely be set for early 2012. Traders will want to watch the stock's price and see if it appreciates in anticipation of that date. Bearish: Traders who believe that AZ-004 will face additional issues in the approval process may want to consider other options. • The FDA will release briefing documents two days prior to the advisory committee meeting. These documents could potentially highlight additional safety issues of the drug that are not yet public. • A negative vote by the panel could hurt the drug's prospects, as the FDA usually follows the panel's recommendation.