August 13, 2008

Anesiva Set for Takeoff

Anesiva (ANSV) is a tiny biopharmaceutical company about to enter a stage of high growth thanks to the successful launch of a niche pain relief product that has the potential for adoption as the standard treatment for pain related to needle procedures and orthopedic surgeries.

It All Starts With Zingo: Zingo is a needle free, painless, topical product approved by the FDA for use on children ages 3 to 18 in order to numb the skin prior to drawing blood or inserting an IV. Each Zingo device contains .5 mg sterile lidocaine powder. When the device is activated, compressed gas accelerates the lidocaine particles into the skin, numbing the area after approximately one minute. This is a vast improvement over anesthetic creams which can take between 30 to 60 minutes to work.

Any parent should welcome the use of Zingo on their children in order to assuage the fear of pain associated with any procedure involving a needle. In order to provide better care to their clients, doctor offices should be quick to adopt the product for use in their offices.

Zingo has been approved for use by the FDA and the product was launched at the end of June in the United States. According to information in the company's second quarter 2008 press release, Anesiva has signed an exclusive licensing and distribution agreement for territories in the Middle East and expanded a current distribution agreement to include "most of Europe."

Adult Zingo: The FDA has also accepted Anesiva's application to expand Zingo's use for adults. The Prescription Drug User Fee Act will require the FDA to make a decision regarding approval by January 2009.

The company estimates 18 million pediatric needle procedures are performed annually in U.S. hospitals alone. With the pending approval for adults in the U.S. as well as Europe, Zingo has a huge potential market.

Adlea in the Pipeline: The company is in Phase III trials of Adlea, a long-acting, non-opioid analgesic drug candidate designed to provide pain relief for weeks to months after a single local application. The Phase III trials are currently focusing on the use of Adlea in knee replacement surgery.

Currently, orthopedic surgery patients are given opioids such as morphine for pain relief. The advantage that Adlea has over opioids is that is applied to the surgical area locally instead through the entire body like morphine. Trial data has also shown that one application has been effective managing pain for up to months at a time.

Phase II trials are currently underway for the use of Adlea in hip replacement surgery as well as arthroscopic shoulder surgery. Anesiva also sees osteoarthritis and tendonitis patients as a potential market for Adlea.

Recent Quarter Results: The company reported 2008 Second Quarter results on August 7, which looked similar to many small biotech companies:

For the second quarter of 2008, the net loss was $21.9 million, or $0.54 per share. In the second quarter of 2007, the net loss was $13.8 million, or $0.51 per share. The net loss for the six months ended June 30, 2008 was $43.4 million, or $1.08 per share, and for the six months ended June 30, 2007, the net loss was $25.5 million or $0.93 per share.

As of June 30, 2008, cash, cash equivalents and investments were $48.7 million compared to $90.8 million at December 31, 2007. The company believes it has sufficient resources to fund anticipated expenses for the remainder of 2008 and into 2009.

The company attributed the increased operational expenses to the preparation for the launch of Zingo and the continued development of Adlea.

Conclusion: With Zingo, Anesiva has delivered a product that has distinct competitive advantages over any other available product, and has potential for widespread adoption among a large customer base.

With Adlea, the company also has an additional product in late stage trials that has significant advantages over any other pain management drug on the market.

With shares trading right around $2.00, this seems like a cheap price to pay for two potential blockbuster drugs, one of which is already on the market and should contribute to the company's income statement as early as next quarter.

Disclosure: The author holds a long position in ANSV.

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