Esperion tanks after inviting Wall Street to parse its regulatory future

Esperion Therapeutics ($ESPR) is developing a cholesterol-lowering pill that management believes could play spoiler to this year's high-profile, blockbuster-in-waiting new injections. But key to the bull case for Esperion is whether the FDA will require the company to run a long, costly safety study before approving its cardio drug. And, parsing a vague update on the drug's future, Wall Street is turning bearish.

Esperion CEO Tim Mayleben

The issue stems from an apparent change in terms on ETC-1002, Esperion's Phase III-ready drug. Back in August, the company watched its shares soar after announcing that, per the FDA, approval for ETC-1002 "will not require the completion of a cardiovascular outcomes trial." The company had "an informative and collegial meeting" with regulators, CEO Tim Mayleben said in a statement at the time, presenting "a clear regulatory path forward for development and approval of ETC-1002." The plan: run Phase III trials and an outcomes study at the same time, using the former to win approval in smaller patient populations and the latter to broaden ETC-1002's label after the fact.

Cut to Monday and the situation looks more complicated. Looking over the minutes of that collegial meeting, Esperion reiterated its plan to start the outcomes trial before submitting the drug but walked back some of August's definitive diction. The company said it's now accelerating its plans to start the aforementioned safety study because "any concern regarding the benefit/risk assessment of ETC-1002 could necessitate a completed cardiovascular outcomes trial before approval."

Which is to say "will not" turned into "could" in about a month's time, and that, to investors, is an alarming evolution. Esperion's shares plunged about 10% on Monday and then tumbled another 28% after hours.

The case for ETC-1002, slated to enter Phase III development in the fourth quarter, is that it can beat cheap statins on LDL reduction and undercut a new class of injected therapies on price. Across its mid-stage development, the drug has consistently reduced bad cholesterol by around 25% from baseline, and while that doesn't measure up to the LDL-lowering effects of recently approved treatments from Sanofi ($SNY) and Amgen ($AMGN), Esperion's pill will be much cheaper to manufacture than those antibodies.

But that value proposition is seriously imperiled if Esperion is an outcomes trial away from approval, and until the company can definitively affirm its path to market, it's unlikely to sniff the all-time highs it reached this summer.

- read the statement (PDF)

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