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QRxPharma Poised For Pain Relief
BY EVA BROCKLEHURST - 11/03/13
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• QRX - QRXPHARMA LTD

Biotech QRxPharma ((QRX)) has sparked speculative interest this year, given the potential for a positive review of a New Drug Application with the US Food and Drug Administration. Brokers are keenly aware that a go-ahead from the US authority for the MoxDuo IR oxycodone-morphine combination could be a game changer for the stock.

QRX has resubmitted the NDA including the results of Study 022, as requested by the FDA. This extra data shows that the product, for relief of severe pain, could lower the rate of respiratory depression in patients compared with morphine or oxycodone alone. The advantage of MoxDuo IR (immediate release) is that its pain relieving qualities have less side effects than those commonly associated with morphine and oxycodone. These include respiratory depression, constipation, nausea, vomiting and somnolence.

In Citi's view, all the data so far revealed supports the efficacy of the product and there is no reason to suspect MoxDuo IR should not gain approval. Moreover, there are no unexpected toxicity or adverse safety issues reported. Since June 2012, QRX has disclosed more information about the effect of MoxDuo IR against opioid-induced respiratory depression, showing it cuts the incidence of the serious side effect substantially.

Only 55% of drug applications are approved on first application to the FDA, another 20% gain approval after a re-submission and another 8% after a second re-submission, according to Bell Potter. So, the chances remain quite good for success with the re-submission. What pleases Bell Potter is that QRX has a significant licensing deal ready to go for MoxDuo IR with Actavis, a major generic drug company. Actavis would be able to bring substantial marketing power to the drug in the US.

QRX expects to file MoxDuo IR for regulatory review in Canada, Europe and Australia by mid year. Citi notes the possibility the company could announce a European strategic/commercial partnership prior to filing. The broker believes skewing any deal terms to upfront cash payments versus long-term royalties would be preferable. Bell Potter assumes that QRX's average royalties on net sales of MoxDuo IR in the US would start at 10% and gradually converge on 20% by year 10, as more of the Actavis sales reach higher thresholds.

Bell Potter assumes, with the successful re-submission, that all of QRX's three MoxDuo products, IR, IV and CR can be launched in the US by the end of 2016. CR is the controlled release proprietary 3:2 morphine/oxycodone formulation, encompassing both sustained delivery technology as well as abuse deterrent and tamper resistant features. IV is the intravenous variant, being developed as first line therapy for acute moderate to severe hospital-based administration. This formulation has completed a proof-of-concept Phase 2 trial.

After the first half results in which the company posted a $5.2 million loss, Citi noted the company had enough cash to fund the rest of its plans for 2013. The broker believes there is significant upside for the stock once MoxDuo is approved and retains a Buy rating. This is one of the three rating the stock on FNArena's database. The other two, JP Morgan and CIMB, also have Buy recommendations. The price targets diverge quite strongly, reflecting the large risks associated with biotech companies which have products up for scrutiny by health officials. Citi has set the top at $2.33 while JP Morgan has the lowest at $1.03. The consensus target of $1.72 suggests 40.1% upside to the last share price.

Bell Potter has a target of $2.30, recently raised from $1.10. The broker believes the current share price is undervaluing the stock's potential and maintains there's a strong possibility of a re-rating after the meeting scheduled with the FDA advisory committee in mid 2013. A response from the FDA is expected in the September quarter.