Flexion Therapeutics Inc's pain drug was found to be effective in a late-stage study, taking the company one step closer to its first ever U.S. marketing approval.
Flexion's shares jumped about 38 percent in extended trading on Tuesday as the announcement revived hopes for the drug, which is touted to rake in peak U.S. sales of at least half a billion dollars.
The drug, Zilretta, was found successful in reducing pain in patients with moderate to severe osteoarthritis knee pain compared with a placebo, months after failing to meet the main goal in a mid-stage trial.
Osteoarthritis is a form of degenerative arthritis that affects 27 million Americans. It is caused by the progressive breakdown and eventual loss of cartilage, and is characterized by pain, swelling and decreased mobility of the affected joint.
Most existing therapies, including opioids, offer limited effectiveness, and can pose the risk of serious side effects.
"Zilretta has the potential to become an important new non-opioid treatment in a therapeutic area that hasn't seen meaningful innovation in many years," Chief Executive Officer Michael Clayman said, adding that the company is now preparing to submit a marketing application for the drug.
The drug has the potential to become the standard of care, analysts said.
"I think this (data) blows a lot of the current therapies out of the water if you just look at efficacy numbers," Cantor Fitzgerald's Chiara Russo told Reuters.
Russo estimates Zilretta to generate adjusted U.S. peak sales of $860 million and worldwide sales of $920 million by 2021.
Laidlaw & Co's Jim Malloy, who forecast peak U.S. sales of $650 million by 2020, said the drug will likely hit the market by the second half of 2017, assuming the FDA does not take issue with the fact that the drug failed a prior study.
Patients in the study received either the drug, Zilretta, or a commonly used treatment called triamcinolone acetonide (TCA) or a placebo. The main goal of the 486-patient study was to assess the magnitude of pain relief induced by Zilretta versus a placebo at 12 weeks.
(Reporting by Natalie Grover in Bengaluru; Editing by Saumyadeb Chakrabarty)