Shares of Heron Therapeutics Inc. sank 27% in morning trading, after the San Diego-based firm disclosed a second complete response letter (CRL) for HTX-011 in postoperative pain. The CRL, received from the FDA on June 26, the anticipated PDUFA date, stated the agency was unable to approve the NDA in its present form and called for additional nonclinical information.

None of the four nonclinical issues identified relate to observed toxicity or represent “significant barriers to ultimate approval,” according to Heron. Specifically, three of the issues relate to confirming exposure of excipients in preclinical reproductive toxicology studies, while the fourth relates to changing the manufacturing release specification of allowable levels of an impurity based on an animal toxicology study. The company plans to request a type A meeting to obtain agreement with the FDA for NDA resubmission.

Nevertheless, the CRL is surprising, as approval was widely anticipated. In a report earlier this month, Northland Capital analyst Carl Byrnes said he was “highly confident” regarding the drug’s approval, and looked forward to the regulatory go-ahead in Canada in the third quarter of this year, with a favorable opinion likely from the EMA in the second half of 2020. Those applications are still pending.

Evercore ISI analyst Josh Schimmer suggested in a June 29 research note the FDA might be suffering from some “COVID grumpiness, too,” in view of its rejections of both Heron’s NDA and the application seeking approval of a nonalcoholic steatohepatitis indication for Intercept Pharmaceutical Inc.’s obeticholic acid, which also earned a CRL.

“Given how trivial these issues are,” Schimmer wrote of the HTX-011 CRL, “we suspect this delay reflects some agency disarray in the pandemic as well as this division’s problematic track record, which really should have a spotlight shone upon it. Alas, this is the same division which showed its ineptitude with the opioid crisis, which helps put this disappointing update in context.”

If there’s a silver lining, Schimmer suggested, it was the fact that “at least this delay comes alongside a second COVID wave, which would have been a launch headwind anyways.”

Evercore bumped back its launch projections for HTX-011 to 2021.

Heron used its Biochronomer drug delivery technology to formulate the compound, a long-acting, extended-release formulation of bupivacaine, a local anesthetic, in a fixed-dose combination with the anti-inflammatory drug meloxicam. Adding meloxicam is meant to help reduce local inflammation and allow bupivacaine to work for three full days following surgery as the active ingredient is released. In studies, HTX-011 given as a single-dose application via needle-free syringe to coat the affected tissue within the surgical site before suturing, provided a faster, easier and potentially safer route of administration than the multiple injections required for standard-of-care local anesthetics.

In late April 2019, gatekeepers smacked Heron with its first CRL, citing chemistry, manufacturing and controls and nonclinical information while not questioning efficacy or safety. The contract manufacturing site used to make the compound was later reinspected, with no objectionable Form 483 conditions turning up.

Heron in May kicked off a phase Ib/II study with HTX-034, its next-generation product for postoperative pain, in patients undergoing bunionectomy. Like HTX-011, the compound is a fixed-dose combination, extended-release solution of bupivacaine with meloxicam – formulated with the same polymer as HTX-011 – but adds a third agent meant to boost bupivacaine’s activity even more.

Cowen analyst Boris Peaker said in a report that, “while much of investor focus is on [HTX-011] we believe that positive updates for HTX-034 can be a positive catalyst for the platform, as it can broaden the company's offerings for post-op pain control in much the same way as Heron's chemotherapy-induced nausea and vomiting [CINV] drugs Sustol [granisetron] and Cinvanti [aprepitant] demonstrate positive synergies due to provider and indication overlap.” Sustol, a long-acting 5-HT3 antagonist, was approved for CINV in the summer of 2016. Cinvanti, a polysorbate 80free, intravenous formulation of a P/neurokinin-1 receptor antagonist, first won the FDA’s green light for that indication in November 2017. A few weeks ago, phase IIb results from Study 209 with HTX-011 in primary unilateral total knee arthroplasty were published online by The Journal of Arthroplasty.

Heron’s stock (NASDAQ:HRTX) closed June 29 at $14.26, down $5.56 or 28%.

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