When New York-based Ventrus Biosciences went public in December 2010, the promise that the company might have the first FDA-approved prescription drug to treat hemorrhoids sent the stock from $6 to as high as $21 a share, before it settled into a trading range of $10 to $12. So when Ventrus (NASDAQ: VTUS) announced on June 25 that the hemorrhoid drug just didn’t work any better than a placebo did in the pivotal trial necessary for FDA approval, investors bailed out big time—pounding shares from $12.26 to $5.02 in a single day.
Ventrus has two other products in its pipeline, but virtually no one on Wall Street has been paying much attention to them. That’s because hemorrhoids are a rich market opportunity: Since there are no other prescription products on the market, and over-the-counter creams like Preparation H merely mask symptoms, some analysts predicted Ventrus’s drug, called iferanserin, would pull in at least $600 million a year. That opportunity went up in smoke with one sad press release.
With the stock now trading around $4.25 a share, Ventrus CEO Russell Ellison is in the unenviable position of having to persuade analysts of the value in the company’s two remaining drugs. We here at Xconomy initially followed Wall Street’s lead and only focused on the hemorrhoid product when we first profiled Ventrus last summer. So we were eager to hear Ellison’s take on his small company’s harrowing fall. “When we got the data, we were shocked and very disappointed,” he says. “But we’re moving on.”
Ellison is primarily banking on a topical cream, diltiazem, which Ventrus is developing to treat a painful condition called anal fissures. In May, Ventrus announced that the drug performed well against placebo in a late-stage trial. Ellison says the company will soon meet with the FDA to determine whether it can file for approval based on the single study. If the agency is on board with that idea, Ellison says, Ventrus could file for approval in the first quarter of next year and would likely have a verdict in early 2014.
But diltiazem is far from a sure bet. Ellison says the regulatory history for drugs in this class has been “arduous.” So Ventrus will go ahead and start a second study of the drug soon, even if the FDA says the first study is enough. That way, if the agency comes back and … Next Page »