A New York hedge fund has filed a petition with the U.S. Food and Drug Administration to request that the agency deny Neoprobe‘s (NYSE Amex:NEOP) application for approval of its radiopharmaceutical Lymphoseek.
In the nine-page (pdf) citizen petition, MSMB Capital says the FDA should deny Neoprobe’s request for a review of Lymphoseek due to what it sees as flaws in clinical trials of the drug candidate, which is used by surgeons to identify lymph nodes in patients with breast cancer or melanoma and to indicate whether cancer has spread to a particular lymph node.
In a brief statement, Dublin, Ohio-based Neoprobe called the MSMB’s petition “flawed” and said it contained “unfounded information.” The company also pointed out that the hedge fund has taken a short position on Neoprobe, which means that MSMB has financial incentive to see the Ohio company’s stock price plummet.
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MSMB General Partner Martin Shkreli sought to tamp down some of that talk by pledging to donate to charity at least half of his profits derived from shorting Neoprobe.
“I’m not trying to raise a stink because it’s in my best financial interests to; it’s just what I think is right,” Shkreli said. “I just think this company is pulling the wool over people’s eyes.”
Shkreli charges that Neoprobe’s clinical trials of Lymphoseek didn’t compare it to the current standard of care for lymph node detection, a combination of radioactive colloid and blue dye. Neoprobe’s studies compared Lymphoseek to blue dye only.
Without including the radioactive colloid, Neoprobe’s studies “reveal no valuable information to clinicians, patients or regulators,” Shkreli wrote in the petition.
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Neoprobe obviously doesn’t see things that way. “We continue to believe in the clinical and scientific validity of our trials including the use of vital blue dye as the appropriate comparator for registration purposes based on discussions with the FDA,” the company said in the statement.
Because the radioactive colloid in the procedure is used “off-label” — meaning the FDA hasn’t approved the product to be marketed for that particular use — Neoprobe has said that it wasn’t appropriate to include the colloid in its study.
Regardless of Neoprobe’s attempts to shoot down Shkreli’s criticism, investors appear to be taking the hedge fund manager’s objections seriously. The company’s stock is down 33 percent since Shkreli first aired his grievances about Neoprobe in a June 1 blog post at Seeking Alpha. The post has generated 100 reader comments.
Of course, the FDA’s opinion is the only one that really matters. Neoprobe plans this quarter to file a New Drug Application (NDA), which if approved, would give it the right to begin marketing Lymphoseek in the U.S. An FDA decision would likely follow early next year.
However, it should be noted that Neoprobe has previously pushed back its estimates on when it would file the NDA, and the company could certainly do so again.
Neoprobe estimates Lymphoseek’s market value at (pdf) $450 million.
