2023-04-05 09:45:55 ET
Summary
- Igalmi, an FDA-approved drug for agitation treatment in schizophrenia or bipolar disorder patients, faces unfavorable real-world prospects.
- Igalmi's $375,000 net revenue in 2022 disappointed, causing a 39% drop in BioXcel's stock value due to concerns about market adoption and target patient limitations.
- Analysts point out barriers to formulary adoption, emergency department launch difficulties, and potential limitations in expanding to dementia and at-home agitation treatments.
- Investors should carefully evaluate the risks and uncertainties surrounding Igalmi and its potential impact on BioXcel's stock value, as the drug's current trajectory suggests ongoing market struggles.
- I maintain a "Sell" recommendation for BioXcel Therapeutics, despite the notable decline in its valuation.
Introduction
The FDA-approved Igalmi from BioXcel Therapeutics ( BTAI ) for the acute treatment of agitation associated with schizophrenia or bipolar I or II disorder in adults has garnered attention. BioXcel's efforts to promote Igalmi notwithstanding, the drug's early market adoption seems underwhelming. Since my initial article expressing concerns about Igalmi's real-world relevance, BioXcel's stock has dropped approximately 39%. This article provides an update on the previous analysis and delves further into the difficulties Igalmi is encountering in the market, including concerns about the drug's efficacy and safety, competition from established treatments, and potential limitations in its target patient population.
BioXcel's Financials
Let's first review the company's most recent financial report . BioXcel Therapeutics' net revenue for the fourth quarter of 2022 was approximately $238,000 and $375,000 for the full year 2022, which was due to early product trials and limited market access. The company's R&D expenses increased to $32.5 million for the fourth quarter and $91.2 million for the full year, primarily due to an increase in clinical trial costs related to multiple pivotal BXCL501 clinical programs. SG&A expenses also increased to $20.7 million for the fourth quarter and $68.8 million for the full year, mainly due to personnel and launch costs of Igalmi in the US. The company had a net loss of $54.8 million for the fourth quarter and $165.8 million for the full year, which includes non-cash stock-based compensation. BioXcel had cash and cash equivalents of $193.7 million at the end of 2022, compared to $233.0 million in 2021. The company expects a cash runway into 2025 with the full execution of its strategic financing with Oaktree and Qatar Investment Authority.
BioXcel's Igalmi Struggles Following FDA Approval, Disappointing Investors
In April 2022, the FDA approved Igalmi, leading investors to anticipate a significant boost in revenue for BioXcel. However, the company's 2022 financial report revealed a mere $375,000 in net revenue, indicating that Igalmi struggled to gain market access following its approval. This disappointing revenue generation, despite Igalmi's approval, likely contributed to BioXcel's stock value declining by roughly 40%.
Investors probably expected a more considerable impact from Igalmi on BioXcel's revenue, particularly given the company's $91.2 million in R&D expenses and $68.8 million in SG&A expenses, mainly stemming from clinical trial costs and Igalmi's launch. The limited revenue generated by Igalmi in 2022, even after its April approval, suggests the drug encountered significant challenges in establishing a market presence. This may have led investors to overestimate Igalmi's market potential and ultimately resulted in BioXcel's stock value decrease. The drug's performance, though still in its early stages, raises concerns about its future prospects and BioXcel's overall growth trajectory.
Concerns Raised Over Igalmi's Market Adoption and Potential Limitations
After reviewing BioXcel's quarterly update, I concur with analyst Chris Howerton's apprehensions regarding the underwhelming adoption of Igalmi. He pointed out the increased obstacles to the drug's formulary inclusion and a difficult launch course in emergency departments. These factors could significantly hamper the drug's market penetration and overall success.
In addition to the aforementioned concerns, Howerton also raised doubts about Igalmi's potential for expansion in treating dementia and at-home agitation. Such limitations could negatively impact the results of the upcoming Tranquility and Serenity trials slated for the first half of 2023.
My insights on this issue align with the analyst's comments, as the barriers to Igalmi's adoption might hinder its ability to establish a strong presence in the market. Successfully navigating the challenges associated with formulary adoption and emergency department launches is critical for any drug, and Igalmi is no exception. Furthermore, the drug's potential inability to expand into other areas, such as dementia and at-home agitation treatments, may curtail its overall market potential.
Challenges Facing Igalmi as a Treatment for Agitation in Schizophrenia or Bipolar Disorder Patients
The VA Pharmacy Benefits Management Services recommends Igalmi (dexmedetomidine) as a possible treatment for mild to moderate agitation in patients with schizophrenia or bipolar disorder. However, they also acknowledge that the medication's use is restricted due to multiple reasons. For instance, its long-term effectiveness beyond 24 hours is unknown, it may cause potential adverse reactions, and there is a lack of comparative studies with other treatments. Moreover, dexmedetomidine should be avoided by patients with specific heart conditions or risk factors, and its potential for abuse is uncertain.
The VA PBM's final recommendation of using dexmedetomidine for patients who cannot tolerate prn antipsychotics or benzodiazepines, in my view, narrows its market potential further. As a result, Igalmi's target patient population is limited, which reduces its chances of becoming a widely adopted treatment option. To increase confidence in its effectiveness and safety, it is necessary to establish comprehensive guidelines and conduct comparative studies. Despite these challenges, it remains unclear whether Igalmi will ever gain widespread acceptance in clinical practice.
My Analysis & Recommendation
In conclusion, BioXcel Therapeutics' Igalmi faces a challenging road ahead due to the drug's lackluster performance following its FDA approval, the disappointing net revenue in 2022, and various concerns related to its market adoption, efficacy, safety, and potential limitations in its target patient population. While the company maintains a cash runway into 2025, thanks to strategic financing, the outlook for Igalmi's success in the market remains uncertain.
Key issues include the barriers to formulary adoption, difficulties with emergency department launches, limitations in the drug's potential for expansion, and the lack of comparative studies with other treatments. Moreover, the VA PBM's final recommendation of using dexmedetomidine for a limited patient population further narrows the market potential of Igalmi. To overcome these challenges, BioXcel may need to invest in additional clinical trials and comparative studies, as well as refine its marketing strategies to gain better traction in the market.
Investors should carefully evaluate the risks and uncertainties surrounding Igalmi and its potential impact on BioXcel's stock value. The current trajectory suggests that the drug may continue to struggle in the market, which could negatively affect the company's overall growth. In light of these concerns, prudent investors may consider diversifying their portfolios or seeking alternative investment opportunities with more promising growth prospects. I maintain a "Sell" recommendation for BioXcel Therapeutics, despite the notable decline in its valuation.
Risks to Thesis
"When the facts change, I change my mind."
Several risk factors could potentially change my bearish outlook on BioXcel Therapeutics:
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Successful market adoption: If Igalmi can overcome the current barriers to formulary adoption and emergency department launches, it could potentially gain a stronger market presence and drive higher revenues for BioXcel.
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Positive clinical trial outcomes: Favorable results from the upcoming Tranquility and Serenity trials or other future studies may improve Igalmi's prospects for expansion into treating dementia and at-home agitation, broadening its market potential.
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Demonstrating long-term effectiveness and safety: If further research establishes Igalmi's long-term effectiveness beyond 24 hours, and confirms its safety profile, it could increase confidence in the drug and boost its adoption by healthcare providers.
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Comparative studies with other treatments: Conducting comparative studies with other treatment options for agitation in schizophrenia or bipolar disorder patients may highlight Igalmi's competitive advantages and lead to increased acceptance in clinical practice.
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Expansion of target patient population: If additional studies or clinical evidence support the use of Igalmi in a broader range of patients, including those who can tolerate prn antipsychotics or benzodiazepines, this could significantly expand its target patient population and market potential.
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New drug developments: BioXcel's pipeline, including BXCL701 and other potential therapies, may yield successful drugs that can offset concerns regarding Igalmi and positively impact the company's valuation.
For further details see:
Slow Adoption: BioXcel's Igalmi Struggles To Gain Traction