M Pharmaceutical says it has reformulated an anti-obesity treatment that achieved over $900 million in sales before an undesirable side effect reduced the drug’s popularity
M Pharmaceutical Inc. ( CNXS:MQ ) ( OTCQB:MPHMF ) ( FRA:T3F2 ) is a Canadian micro cap with mega cap ambition. The company has reformulated an anti-obesity treatment that achieved over $900 million in sales before an undesirable side effect reduced the drug’s popularity.
M Pharmaceutical interim CEO Brian Keane says the drug is going through expedited clinical trials, and will be available in the new formulation in about two years.
Listen to the podcast interview with Brian Keane:
M Pharmaceutical acquired a company called Chelatexx earlier in 2016, which is the company that acquired C-103, a reformulation of Orlistat, for an advance payment of US$200,000 plus 10 million M Pharma shares. A “low single-digit” royalty percentage will be paid to Chelatexx on the net sales of the drug.
Orlistat is a drug designed to treat obesity. Its primary function is preventing the absorption of fats from the diet, thereby reducing caloric intake. Orlistat works by inhibiting pancreatic lipase, an enzyme that breaks down triglycerides in the intestine. Without this enzyme, triglycerides from the diet are prevented from being hydrolyzed into absorbable free fatty acids and are excreted undigested.
The World Health Organization suggests that global obesity has more than doubled since 1980, with over 1.9 billion adults overweight in 2014, of which more than 600 million were obese. An estimated 39 per cent of adults were overweight and 13 per cent were obese in 2014.
Obesity is known to be a leading cause of heart disease and stroke, diabetes, musculoskeletal disorders, and some cancers. The risk from these ailments rises proportionally with Body Mass Index (BMI), a simple index of weight-for-height that is commonly used to classify weight in adults.
The Chelatexx reformulation of Orlistat is patented until 2030 in the U.S.
Orlistat is approved by the Food and Drug Administration for weight management and sold by Roche as Xenical (prescription) and by GlaxoSmithKline as alli (over-the-counter). Orlistat is the best-selling weight loss medication of all time with peak sales over $900 million in 2007. The Chelatexx formulation aims to address side effects associated with Orlistat, which have led to the decline in sales to approximately $200 million in recent years.
Keene says that the FDA “confirmed in writing” that the reformulation is eligible for its 505(b)2 pathway that would speed the approval process by accepting previously proven trial data.
“So in essence what happens is instead of going through a two, three, four, five year pathway, the FDA has given us sort of a map and a direction to allow us to rely on that previous data, and showing that our reformulation eliminates that side effect.”
James West is an investor and the author of the Midas Letter, an investing research report focused on Canadian markets. The views expressed here are his own and are presented for general informational purposes only — they should not be construed as advice to invest in any securities mentioned.
James West and/or associated funds do not own shares in any securities mentioned in this article. For the full Midas Letter disclosure policy, click here. Postmedia and Midas Letter have a revenue sharing arrangement.
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