Early on Monday, shares of Lpath, Inc (Nasdaq:LPTN) are trading at four times the daily average as speculators are taking positions in the firm ahead of pending catalaysts.

In January 2012, the San Diego based firm temporarily suspended dosing patients in two Phase II clinical trials looking at the use of bioactive lipids as a novel therapeutic mechanism to improve wet-AMD and Pigmented Epithelial Detachment. Lpath's unique technology platform, the ImmuneY2(TM) approach caught the attention of Pfizer (NYSE:PFE). As partners in the trial, both firms are targeting the wet AMD and a related complication called Pigmented Epithelial Detachment market, which is slated to undergo rapid expansion due to the aging demographics of the U.S. population.

The drug candidate, iSONEP(TM), had been well tolerated by all patients and had shown signs of efficacy during a Phase 1 trial,but investors were caught by surprise when the FDA determined that the a third-party fill-and-finish contractor, Formatech, Inc., was not in compliance with FDA's current Good Manufacturing Practice ("cGMP") requirements during a period in which iSONEP(TM) clinical vials were filled.
Since then, the company has manufactured the additional drug substance required to complete the trials, and are nearing completion of the fill/finish process with an alternate contractor. The firm is reportedly preparing to resume dosing patients.

Pfizer, which continues to support the drug candidate development, took particular interest in iSONEP(TM), not only because it attenuates the permeability of the retina, but because it also blocks inflammation and fibrosis; potentially enabling the treatment to impact parameters that currently available drugs cannot ameliorate.

Some cost increases related to manufacturing additional the clinical drug supply and the cost of activities required to restart the clinical trials had prompted Pfizer to request that Lpath consider potential alternatives, including the possibility of rolling in additional clinical examinations under the key studies.  No formal have been announced publicly, but if the alternative approach is taken, Lpath would recommence only the larger wet-AMD trial and would deprioritize the Pigmented Epithelial Detachment trial pending additional funding.
Lpath's wet-AMD drug could be priced extremely highly in a market where the current standard-of-care agent, Lucentis®, is priced at $1,950 per monthly injection. Post-approval, peak sales of iSONEP(TM) could reach roughly $3.6b, according to Morgan Joseph analyst Raghuram Selvaraju, Ph.D.

For now, Pfizer has the right to exercise its option for exclusive worldwide rights to iSONEP(TM). If Pfizer exercises its option, LPath will receive an option fee as well as potential development, regulatory and commercial milestone payments. In addition, if iSONEP eventually becomes a commercial product, LPath will be entitled to receive double-digit royalties, tiered based on annual sales of iSONEP(TM).

Industry observers believe Pfizer may simply acquire Lpath (whose market cap is currently trading at just under $50 million) if pending clinical trials continue to show that the bioactive lipids approach is a legitimate option for creating a further pipeline of monoclonal antibody-based drug candidates. Said technology could offer additional therapeutic options and in some cases, better treatments for diseases in multi-billion dollar markets.

Already as part of the Pfizer Agreement, LPath has also granted to Pfizer a time-limited right of first refusal for a different drug candidate, ASONEP(TM), another formulation of the same S1P-targeted antibody which is slated for several anticipated Phase II trials. LPath successfully completed a Phase 1 clinical trial for ASONEP(TM) in 2010, and scientists believe that it holds promise for the treatment of Cancer, Multiple Sclerosis, Colitis and other diseases.

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