West Coast Editor

Two and a half months after taking a hit on the approval of a generic competitor for Periostat - its twice-daily doxycycline for periodontitis - CollaGenex Pharmaceuticals Inc. offered better news in the filing of a new drug application for Oracea, the once-daily version of the drug for rosacea.

The company's stock (NASDAQ:CGPI) closed Monday at $7.87, up only 7 cents, as investors may have held off rejoicing because of a potential glitch in Newtown, Pa.-based CollaGenex's new plan - the firm has no patent for the drug against rosacea.

Reni Benjamin, analyst with Rodman & Renshaw in New York, said the odds are "better than average that [the NDA] will get through the FDA," but word is still pending from the U.S. Patent and Trademark Office on the other risk.

"This is a big overhang," he said. "The majority of people will say it's great they filed an NDA and great that they might have a drug out by the third quarter of next year, but it means nothing if they don't have the patent."

CollaGenex officials are expecting to hear from the patent office "any day," Benjamin added, calling Oracea the firm's "biggest near-term hope."

Included in the NDA were positive results from two Phase III trials disclosed at the meeting of the American Academy of Dermatology in Chicago. Both studies achieved their primary endpoints by getting a greater mean reduction in inflammatory lesion count from baseline for the Oracea-treated patients (61 percent and 46 percent) compared to the placebo controls (20 percent and 20.8 percent).

CollaGenex expects a 12-month review period, with launch in the third quarter of 2006. If approved, Oracea will be the first systemic therapy for rosacea, and the company aims to expand the $500 million market for prescription drugs to treat the skin condition, which afflicts about 13.6 million adults in the U.S.

"Periostat was an important drug, because it was making them money, but Oracea would make them a lot more," Benjamin told BioWorld Today. "If they can get 10 percent of the market, that's $50 million, which is what they were making in all of adult periodontitis."

In May, CollaGenex said it would restructure as a result of the FDA's approval of a generic form of Periostat for sale by IVAX Pharmaceuticals Inc., of Miami, and CorePharma LLC, of Middlesex, N.J.

Periostat, sold as 20-mg tablets of doxycycline hyclate, was the only systemic adjunct to scaling and root planing for adult periodontitis. The company said that, if it failed to win a court challenge, head count would be reduced by 63 people, including all of the dental sales force, though the 34-person dermatology sales force would continue to market topical Pandel (hydrocortisone probutate) for inflammatory and pruritic, corticosteroid-responsive dermatosis in adults.

"They lost that battle," Benjamin noted, but CollaGenex a year earlier had started developing the Oracea formulation.

The firm's revenues for the first quarter totaled $12 million compared to $13.4 million in the first quarter of 2004, with net product sales yielding $11.8 million compared to $13.3 million in the period last year.

"Their cash [situation] is pretty good," Benjamin said. "They have $36 million in cash, and I have them burning about $10 million for the remainder of this year, and then another $10 million to $15 million next year," although the amount could be more if the sales force is beefed up, he said.

In any case, the company has enough money to last "into 2007," he said.

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