Three years after the share price of drug developer Chiasma Inc. (Nasdaq: CHMA) plummeted 63% in a single day, after the US Food and Drug Administration (FDA) unexpectedly required another trial by the company before its drug could be approved, the company raised $34.5 million on Nasdaq.
Most of Chiasma's management left the company after its misfortunes, and a majority of its employees were laid off, including from its Israel R&D center. Under the management of president and CEO Mark Fitzpatrick, however, who was CFO when the company had its troubles, Chiasma is still developing the same products for treatment of acromegaly.
Chiasma believed that it would be able to develop its product for treatment of acromegaly with only a single trial and a treatment group, without a control group, because the disease is fairly rare and the product is not exactly new - it is an oral version of material given by injection that is known to have a beneficial effect on the disease. Chiasma hoped that it would only have to show that the levels of the drug in the bloodstream among patients treated with its product were the same as those obtain through injections. The FDA, however, required an expensive and lengthy trial with a control group that might not justify the investment.
Chiasma nevertheless persisted and began another trial, this time with a control group, after coordinating the trial protocol with the FDA. The trial group, which had 56 patients, was probably the result of a compromise between the FDA's need for additional information and the realization that if the trial requirements are too high, the product will not reach the market. The company now believes that the first results from this trial will be published in the third quarter this year, and that the product can be submitted for approval by year-end, with hopes of obtaining approval by mid-2020.
In addition to the regulatory risk, Chiasma's product also has marketing risk, because the company has to convince the patients that taking the drug daily is preferable to an injection, which is painful and requires a visit to a medical facility, but only once a month.
The current deal is at $4.75 per share, reflecting a 17% discount on the market price when the deal was announced. The share price dropped following the financing round, but by only 2%, still above the price in the offering. Investors apparently believe that the company will be able to use the money for its business.
As of the end of 2018, Chiasma had $41 million in cash. The company's current market cap is $172 million, following a 47% rise in its share price since its 63% one-day crash.
Published by Globes, Israel business news - en.globes.co.il - on April 8, 2019
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