Expert Financial Analysis and Reporting

Investment Opinion and Overview

For those of you who read my recent reports on Santarus, you will recall that I believe that budesonide MMX has the potential to be a blockbuster for Santarus and is the most important product in its pipeline. I think that it will be the primary driver of significant growth in the 2015 to 2020 period.

The recently reported data from a one year safety study was the gating factor for its NDA submission. The topline data was positive and sets the stage for a potential launch of budesonide MMX in early 2013. I believe that Santarus has the potential to be an excellent long term investment, but I am not actively recommending the stock at this point in time. Please refer to my article "An In-Depth Look at Santarus as it Develops a Promising Pipeline to Offset Patent Challenges to Existing Products" for my detailed investment thinking.

Design of the Budesonide MMX Safety Trial

The company previously concluded two positive phase III trials; please refer to my recent article on budesonide MMX and its potential in the ulcerative colitis market "Budesonide MMX's Potential in Ulcerative Colitis) for more detailed comments. The last remaining hurdle for filing an NDA on budesonide MMX was a safety trial. While past experience with budesonide in the somewhat related Chrohn’s disease (where budesonide is the active ingredient of Entocort) was highly suggestive that there would be no issue with safety, one can never be sure until the data is in.

Santarus announced positive top-line safety data from its twelve month study of the 6 mg dose of budesonide. This was a placebo controlled, double blinded study involving 123 patients. The extended use study evaluated patients with mild or moderate ulcerative colitis who had previously been enrolled in the Phase III clinical studies.

Success in this study was the gating factor for filing an NDA on budesonide MMX. The company announced that it will now make the submission in December, 2011. Santarus will seek approval of the 9 mg dose of budesonide MMX over an eight week period to induce remission in ulcerative colitis patients. I think that the NDA will receive the standard 10 month review indicating approval is likely in September or October of 2012 with a US launch in early 2013.

It requires a little bit of explaining as to why the safety study was done with the 6 mg dose instead of the 9 mg dose that will be the recommended dose if budesonide MMX is approved. This probably resulted from the FDA’s experience with Entocort that also uses budesonide as its active ingredient. Entocort was first granted approval for induction of remission in Chrohn’s disease as a 9 mg daily dose and some three years later was granted a three month maintenance treatment at a 6 mg dose. There has been some speculation that the FDA might have to a safety study at a 9 mg dose, but I think this is highly unlikely. I beleive that both regulators and physicians would be uncomfortable in using this dose for a year.

Data on Lack of Side Effects Looks Positive

In the safety trial, the key topline results were: (1) the frequency of treatment related adverse events for budesonide MMX 6 mg (21.0%) was similar to placebo (21.3%), (2) mean morning plasma cortisol levels remained within normal limits at all visits for both budesonide MMX 6 mg and placebo and (3) there were no clinically meaningful differences in the numbers of patients with abnormal bone mineral density scans at baseline and end-of-study between budesonide MMX 6 mg and placebo. More complete topline data from the extended use study will be presented at an upcoming medical meeting, most like Digestive Disease Week in May of 2012.

Physicians and regulators are acutely aware of the severe side effects that can occur with long term steroid usage, which are sometimes required in the treatment of ulcerative colitis. Budesonide is designed to act locally and minimize systemic absorption although this cannot be eliminated. Increased cortisol levels stemming from long term steroid usage can cause immunosuppression, impede bone growth, cause diabetes and hypertension and a host of other side effects. Budesonide succeeded in keeping mean cortisol levels in the normal range.

Data on Efficacy Looks OK

The extended use study also looked at efficacy measures, but was not powered to show statistical significance. Budesonide MMX 6 mg was not statistically different from placebo for the primary endpoint, which was the percentage of patients achieving clinical remission at 1, 3, 6, 9 and 12 months. There was a positive trend for the secondary endpoint of clinical relapse, which showed a higher percentage of placebo patients (59.4%) experienced clinical relapse vs. the budesonide MMX 6 mg group (30.8%). Also, the median time to clinical relapse was longer in the budesonide MMX group compared to placebo. Santarus did not participate in the design of this trial. I think that they would probably have chosen one of the secondary endpoints as the primary endpoint.