FDA rejects Nastech drug

BOTHELL – Nastech Pharmaceutical Co. said Thursday that the Food and Drug Administration has rejected its application for a nasal spray aimed at treating osteoporosis.

The news sent the Bothell-based company’s shares down by nearly 16 percent before the stock markets closed for the day.

The FDA’s letter to Nastech expressed concern that the interaction between the drug, calcitonin-salmon, and a preservative in the nasal spray could produce an immune response or allergic reaction in some people.

Nastech indicated no such reactions were observed during its clinical trials for the drug.

“But we weren’t specifically looking at that,” said Steven Quay, Nastech’s chief executive officer.

Calcitonin is not a new drug. Novartis Pharmaceuticals has sold it in nasal spray form under the Miacalcin brand name since it was approved more than a decade ago.

Because of that history, Nastech’s generic form of the drug was submitted to the FDA with an abbreviated new drug application in early 2004. The abbreviated application usually requires less time and fewer clinical trials than a typical new drug application.

But the shorter application process for a generic drug regulates how much clinical research a company can do.

Quay said Nastech is looking for studies and information that addresses the FDA’s concerns. However, the longer – and more expensive – application process may be required to gain approval for the drug. If that’s the case, Quay said, Nastech has to review its options.

“If we have to go through that, we’d have to think hard about how to proceed,” he said.

At least one analyst, Robert Hazlett of BMO Capital Markets, suggested in a note to investors that the company would end up scuttling the drug. That firm had predicted the calcitonin spray would contribute up to $30 million or so annually to Nastech, even after splitting up revenues to its partner on the drug, Par Pharmaceutical.

Taunya Sell, a senior equity analyst at Seattle’s Ragen MacKenzie, said the drug’s rejection would be worse for Nastech if the validity of the company’s core drug delivery technology was in question.

“But that doesn’t seem to be the issue here,” said Sell, who does not own any stock in Nastech but has a “buy” rating on its shares.

Indeed, Nastech emphasized the calcitonin spray does not use its patented technology. That allows large-molecule drugs to be delivered through the gatelike structures between the body’s cells. It’s key to Nastech’s ability to transform drugs previously given by injection into nasal sprays.

As a result, Sell said, “I’m not seeing it as a big hit to the company.” She said investors seemed to agree. Nastech’s stock got off easy compared to other biotechnology firms that have announced bad news over recent months.

When trading closed Thursday, the company’s shares had lost $2.40, or nearly 16 percent, to close trading at $12.86. More than 2.7 million shares of Nastech changed hands during the day.

Nastech’s other osteoporosis spray under development is unaffected by Thursday’s news.

That hormone spray, PTH1-34, is similar to Eli Lilly &Co.’s injectable drug called Forteo, which generated $389 million in sales last year. Procter &Gamble’s pharmaceutical division has partnered with Nastech on the drug in a deal that could bring more than $577 million to the Bothell company, not including royalties.

Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.

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