Nature, online article titled: US drug agency approves potent painkiller the first non-opioid in decades. The FDA's nod for suzetrigine bolsters confidence in the pharmaceutical industry's strategy to target sodium channels.
Vertex Pharmaceuticals Inc. (NASDAQ:VRTX) has recently achieved a significant milestone with the FDA's approval of JOURNAVX(suzetrigine), a novel non-opioid pain medication. This approval marks the introduction of the first new class of pain treatment in over two decades.
Specifically the new drug will target moderate to Severe Pain, in the Acute phase as an alternative to opioid medication.
The FDA approval announcement came in on January 30, 2025 as part of particular status granted to the molecule (the application received breakthrough therapy, fast track and priority review designations by the FDA). This is a clear signal of how much the agency is looking for opioid alternatives. Tailwind for the US community and the biotech firm.
In this article you can find a quick yet informative medical review of the evidence for the medication and a financial valuation. Moreover you can read about two strategies adopted by writer to capitalize on the breakthrough discovery.
Medical part
If you are not interested in the details you can skip this part and just read the TL;DR (too long; didn't read) 3 points presented below.
1-Mechanism of Action JOURNAVAX (suzetrigine) is a non-opioid pain medication. It works by blocking NaV1.8 sodium channels selectively, preventing pain signals from reaching the brain (where those channels are absent). All this is done without addictive effects, contrary to opioids.
2-Efficacy & Safety Clinical trials in abdominoplasty and bunionectomy patients showed significant pain reduction compared to a placebo, with fewer opioid-related side effects like nausea and dizziness. No potential for addiction was documented.
3- Future Research While suzetrigine was not effective for lower back and hip pain in a previous trial, Vertex is continuing Phase 3 studies to explore its use in conditions like diabetic neuropathy.
Mechanism of Action
Pain is a complex matter. It has a chain of transmission that is mainly based on electrical signal going from periphery to the center. Among the signals involved there are some related to sodium channels (NaV).
Suzetrigine operates by selectively inhibiting a type of these channels (the NaV1.8 sodium channels) in the peripheral nervous system (PNS). Indeed these channels are absent in the central nervous system (CNS). By blocking these channels, it prevents the transmission of pain signals to the brain, offering pain relief without the documented addictive potential associated with opioids.
Previous efforts to inhibit sodium channels failed because the target were other subtypes like NaV1.7 (involved in the first phase of pain signal), and NaV1.9 (that modulates the signal's intensity and duration).
The power of suzetrigine lies in its selectiveness. It is it blocks its target (NaV1.8) more than 30,000 times more potently than other sodium channels.
Clinical Trials and Efficacy
The FDA's approval was based on two clinical trials focusing on patients with acute surgical pain.
In particular the patients were undergoing bunionectomy (trial named NAVIGATE-1) and abdominoplasty (also know as tummy tuck, trial named NAVIGATE-2) surgeries.
The trials were randomized, double-blind, placebo- and active-controlled.
In both studies, suzetrigine demonstrated a statistically significant reduction in pain compared to a placebo. Patients reported effective pain relief without common opioid-related side effects such as nausea and dizziness.
Digging deeper, the trials has as first outcome, a pain scale.
In particular, Sum of the Pain Intensity Difference (SPID) was used. SPID is a measure derived from the Numerica Pain Rating Scale (NPRS) that summarizes
treatment response over a clinically relevant period (in this case, SPID-48 hours). Higher SPID values represent greater reduction in pain. NPRS is a self-reported pain scale going from 0 no pain, to 10 the worst pain imaginable.
Moderate pain was indicated by a 5-6 NPRS value, severe by 7-9.
The Rescue Therapy Complexity
What's more, both the trials were structured in a as close as possible to real-world setting. Indeed in addition to receiving the randomized treatment, all participants in the trials with inadequate pain control were permitted to use ibuprofen as needed for rescue pain medication. All this was then accounted for in two sub-analysis.
So, patients in the trial were given the possibility to take extra medication for pain relief, namely ibuprofen. That practice was referred as patient taking rescue medication.
If patients took rescue medication, their SPID48 scores were imputed for six hours afterward. using the last observation carried forward approach. Practically, it means that if a trial participant took ibuprofen, their most recent pain score was used as a placeholder for the next six hours of data collection, assuming no change in pain levels.
Data was then sorted in two ways:
one including the pain-relieving effects of ibuprofen (without imputation - representative of multimodal therapy in real-world setting),
the other was computed as a mono therapy, meaning with rescue imputation (aka the SPID48 level carried forward, like the 6 hours under the effect of ibuprofen never existed).
Trial Results
Suzetrigine was given orally at a first dose of 100mg, followed by 50mg every 12 hours. Placebo was a a similar oral pill. The opioid alternative was HB/APAP orally (5mg/325 mg every six hours) - HB/APAP = hydrocodone bitartarate/acetaminophen, also known as Vicodin.
These are the population data: NAVIGATE-1 for bunionectomy (n=1073, 48 mean yoa, 85% F, 67% VRS moderate). NAVIGATE-2 for abdominoplasty (n=1118, 42 mean yoa, 98% F, 59% VRS moderate). Across the two trials, 873 patients received suzetrigine, 879 patients received HB5/APAP325, and 439 patients received placebo.
The efficacy results were as follows.
VS. PLACEBO
In both trials, suzetrigine had a more rapid onset of pain relief via decrease in the NPRS of two points or greater, a threshold considered to be clinically meaningful. The time it took suzetrigine to achieve a ?2 decrease in NPRS (clinically significant), was half that of placebo (i.e. 2 vs 4 hours and 4 vs 8 hours for bunionectomy and abdominoplasty, respectively).
VS. OPIOID (Vicodin)
The secondary outcome of both studies was the efficacy compared to HB5/APAP325. No statistically significant differences were seen in the abdominoplasty trial (meaning suzetrigine was equally effective, good news).
HB5/APAP325 was superior to suzetrigine in the bunionectomy trial in the imputed analysis of monotherapy but this difference was not statistically significant when analyzed data included rescue therapy with ibuprofen (meaning the more real-world setting).
Suzetrigine versus Higher Dose Opioids - Independent Network Meta-Analysis.
An independent agency performed a much needed analysis as well (an independent network meta-analysis). The agency name is ICER (Institute for Clinical and Economic Review). This is a non-profit research institute that conducts evidence-based reviews of health care interventions, including prescription drugs, other treatments, and diagnostic tests. In collaboration with patients, clinical experts, and other key stakeholders, ICER analyzes the available evidence on the benefits and risks of these interventions to measure their value and suggest fair prices.
Data presented below and regarding the total addressable market is taken from their magnificent report.
In day-to-day clinical practice doctors may chose to treat patients with higher doses of opioids than what was studied in the aforementioned clinical trials. The comparative efficacy of suzetrigine to those doses was studied via a network meta-analysis. The higher dose opioids in the network were pooled using SPID48 values from their respective trials and included study arms such as oxycodone 15 mg/acetaminophen 650 mg every 12 hours and HB/APAP 7.5/325 mg every four to six hours. All this additional work lead to a reinvigorated positive conclusion: Suzetrigine showed similar effectiveness to opioids in treating moderate to severe acute pain, with no statistically significant differences between treatments, however confidence intervals were wide.
Adverse Effects: Mild.
The most common adverse reactions in study participants who received Journavx were itching, muscle spasms, increased blood level of creatine phosphokinase, and rash.
Now, the science is sound, even if not definite.
Further research will be conducted to see potential side effect in the longer term. Post-marketing surveillance/non-interventional study is sometimes called Phase IV of drug development. This permits the study of true safety profile of the compound.
Competition may also arise and make this compound obsolete for low selectivity or effectiveness. More on this on a paragraph below.
Let's now switch to the financial side of the story.
Financial part
Pricing and Market Potential
Priced at $15.50 per 50 mg pill, suzetrigine is positioned as a cost-effective alternative for managing moderate to severe acute pain.
The pill is now recommended as a two-times daily regimen (aka every 12 hours and $31/day cost).
Total addressable market (TAM) can be estimated to be around 7 million patents per year in the U.S.
Indeed, pain that requires treatment for less than 3 months (hence acute pain), affected 80 million patients annually in the U.S. as per a retrospective cross-sectional study with datasets from 2019. Suzetrigine would be prescribed to only 35 million people per year in the U.S. (perhaps more label expansion will come). Assuming a market penetration of 1 in 5 patients, the number is 7 million patients per year.
Cost-effective is there even from an economic analysis conducted by the ICER:
We conducted an economic analysis that modeled the long-term cost-effectiveness of one week of treatment with suzetrigine compared with HB5/APAP325 using a wholesale acquisition cost (WAC) for suzetrigine of $15.50 per tablet or $232.50 for a one-week course. The model was primarily driven by risks of OUD from this short course of an opioid analgesic. Due to the lifetime costs and harms of OUD, and assuming a wide range of estimates of OUD risk, treating with suzetrigine would be slightly cost-saving relative to opioid therapy while producing greater health benefits (dominant). We estimate that suzetrigine, at its WAC price, would meet commonly used cost-effectiveness thresholds if a one-week course of treatment with opioids results in an excess of at least two in 10,000 cases of OUD over the subsequent three years.
Hence the drug coverage should not be an issue.
All this can translate to a revenue increase of around $ 1.52 billion to $ 1.63 billion, for a one-week course of medication.
The math is $ 15,5*2*7*7000000 = $ 1.519.000.000, or $ 232,50*7000000 = $ 1.627.500.000.
Considering a trailing twelve months net revenue of the Company of $ 10.62 billion, this represents a 14.3 to 15.3 % increase in revenue. Not bad.
Let's remember that all this was done assuming a market penetration of 20%. If the market penetration increases year-over-year, the net impact of this additional revenue stream would be much higher discounted to today's dollar.
Nonetheless, to account for possible slower adoption, supply problems, and market competition, it is more reasonable to keep the number found above.
Some guesswork can be made to determine the profitability of the newly-approved compound, yet a more reasonable estimate can be drawn from the 5-y average profit margin (i.e. 32%). The ripple effect of a $1.52 to $1.63 billion in additional revenue, to the bottom line would be $486 million $522 million in increasing net income.
The company remains well positioned to thrive in the medium term, with good profitability (a 5-year average Return on Common Equity of 25%), growth (3-year average in the low double digits) and patent protection (80% of patent portfolio set to expiration not earlier than end of this decade).
A solid capital structure also distinguish the company from its peers, sporting an enterprise value of $111.4 billion made up of just $1.8 billion in total debt and more than 2,5-times that amount in cash ($6.5 billion).
Cash is crucial also relative to the possibility of acquisition.
Competition
Indeed the newly discovered drug has some potential competitors. In particular there is a California-based biotech named Latino Biotherapeutics that is testing a NaV1.8 inhibitor with faster action time than Vertex's Suzetrigine. The compound (LTG-001) is currently being investigated for wisdom-tooth removal. Latigo Biotherapeutics is not public. Its latest funding round was a Series A of $135M one year ago as per Cbinsights https://www.cbinsights.com/company/latigo-biotherapeutics/financials, making it an easy acquisition target for Vertex. The cash powder is there, probably the management is watching it closely.
Future Prospects for Suzetrigine
Vertex is working on expanding the label indications for the newly-approved compound also to other medical conditions. Despite a previous setback in December, where suzetrigine did not show a statistically significant improvement over placebo in treating lower back and hip pain, the company remains committed to advancing its research. A Phase 3 testing is expected to start with the aim of exploring suzetrigine's efficacy in other pain-related conditions, including diabetic neuropathy.
Failure to meet primary and secondary endpoints in one of those trials could put the company at a discount. It happened already in the past, lastly in December when VRTX stock tanked 11% to a 52-week low after suzetrigine failed to beast a placebo in treating lower back and hip pain.
How to Capitalize, Two Strategies
In a previous article [CITA] three strategies were outlined. Two were implanted since the start of 2024, the other being described yet considered too risky to pursue.
The founding knowledge is that price movements are big when talking about biotech (aka high volatility), hence good buying opportunities.
Long Equity - Dollar-Cost Averaging (DCA)
Investors who adopted a DCA approach early in 2024 and accumulated shares of Vertex Pharmaceuticals benefited from the FDA approval news. By consistently purchasing shares over time, these investors mitigated short-term volatility while positioning themselves for potential upside. The strategy proved effective, as the stock's rally following approval rewarded those who had steadily built their position at lower price points. This approach aligns well with long-term investing in biotech stocks, where regulatory approvals and clinical developments can lead to substantial price movements.
Here's the breakdown of the five buying points the writer did, in chronological order:
Buy (January 8, 2024): 0.19% at $416.50
Buy (April 5, 2024): 0.10% at $403.65
Buy (April 11, 2024): 0.05% at $402.19
Buy (April 24, 2024): 0.58% at $400.39
Buy (September 30, 2024): 1.05% at $464.91
Total exposure remained modest on the overall portfolio, yet it was magnified by a derivate exposure.
The second strategy was implemented later on, consisting in a long straddle option.
Long Straddle Options Play
To capitalize on uncertainty surrounding regulatory approvals, a long straddle strategy was used. It consisted in buying both call and put options at close strike price, before the FDA decision. This trade was non-directional, meaning it would result in profit either in case of approval or in case of refusal, thanks to large price swing.
If the approval had been denied, the put option would have provided downside protection, while the call option ensured gains if the stock surged following a positive decision. This strategy requires higher risk tolerance but can yield significant returns in event-driven biotech trading.
In particular, 1 day before FDA target date, a Feb07'25 442.5 Call ( priced @ 13.00 $ ), and a Feb07'25 440 Put ( priced @ 9.70 $ ) were bought. For a total of $ 2270, an exposure that would have yielded a 100 % + return in case of a a price movement of plus or minus ten percent the then-current stock market price. (The gain would have been 300% in case of a movement of twenty percent in either upside or downside direction).
Below a table and two graph for better visualization of the payoff of the above mentioned straddle. At the closing price at expiration date (Feb07'25) of $ 470, the P/L was around 20% on the invested amount (aka the total price paid for both the put and the call). Not bad for a 7 day return.
Beware to consider this strategy a once/twice per year opportunity and not a predictable recurrent circumstance.
Vertex's FDA Win: A Billion-Dollar Bet on Safer Pain Treatment
Vertex's FDA Win: A Billion-Dollar Bet on Safer Pain Treatment
Source: Author's representation.
We detailed the three strategies, including the same straddle option play (with different strike prices and time horizon) also in December. The total expense for the straddle was $ 4317 with break-even prices of 346.50 and 443.50 for the Feb21'25 400 Put and Feb21'25 390 Call. Those options were European style and not yet exercisable, so the real payout can still vary, yet at the current market price the return is in triple digit.
Stock Valuation Update
The recent FDA approval of Suzetrigine was a great step forward for the healthcare industry and the company alike. More competition is expected in the field. Our opinion is that this adds a 5 to 10% premium to the valuation of the company, expanding its already powerful portfolio. Currently the stock is fairly valued. Adding exposure can be done in case negative volatility affects the stock or the market at a whole. The rationale behind the current valuation is 90%-related to its first-in-class drug portfolio for Cystic Fibrosis as detailed in dedicated articles of April 2024 and December 2024.
Conclusion
In summary, the FDA's approval of suzetrigine represents a promising development in non-opioid pain management, offering an effective alternative for patients seeking relief from moderate to severe acute pain without the risks associated with opioid therapies. The company remains attractive to hold. This article explains that along with a direct long equity exposure, the investor can capitalize with short-term option play, too.
