Ampio Pharmaceuticals: 3 Things to Know Before 2014

It's been a volatile but rewarding year for Ampio Pharmaceuticals , a development-stage biotech best known for Optina, an oral treatment for two eye conditions caused by diabetes, and Ampion, a nonsteroid drug for inflammatory conditions. Both drugs are currently in phase 3 trials.

Ampio stock has rallied more than 100% over the past year on considerable optimism regarding both treatments.

AMPE Chart
AMPE Chart

Source: Ycharts

Let's take a look at three key things investors should know about Ampio going into 2014, and how larger companies like Roche Holding , Novartis , Regeneron Pharmaceuticals , and Sanofi fit into the company's overall outlook.

1. Optina keeps the needles away from the eyes
Ampio's Optina is a low-dose version of danazol, a generic steroid previously used to treat the gynecological condition endometriosis. Danazol was discovered to be able to prevent the leakage of small blood vessels, indicating that it had possible applications in diabetic eye conditions.

Optina attempts to treat damaged blood vessels in the retina (diabetic retinopathy) and blood vessels leaking into the macula (diabetic macular edema, or DME). Both conditions are leading causes of permanent blindness in diabetics.

Diabetic retinopathy and DME respectively affect approximately 60% and 10% of all diabetics. Analysts estimate that if approved, Optina could generate annual peak sales of $500 million on its DME indication alone. Optina is currently near the end of a 450 patient phase 3 trial, which could lead to a NDA (new drug application) being submitted next year. The trial tests patient's visual acuity when administered with Optina versus a placebo.

Optina has game-changing potential since it could be the first oral treatment for DME, compared to current treatment options that require injections into the eye.

Roche/Novartis' Lucentis is the only approved treatment for DME, although Roche's Avastin is also frequently prescribed as a cheaper, off-label alternative. A third treatment, Regeneron's Eylea, is expected to be approved for DME soon as well.

All three treatments are anti-VEGF (anti-vascular endothelial growth factor) drugs, which prevent new blood vessel growth, rather than stop the leakage of existing ones. Eylea and Lucentis are also approved for wet AMD (age macular degeneration), a similar condition to DME that isn't directly caused by diabetes. Avastin is also prescribed as an off-label treatment for wet AMD.

Ampio will have to be very careful with Optina's pricing when it hits the market, due to the vast difference between the costs of Lucentis, Eylea, and Avastin.


DME treatment

DME Status





(FDA and EU)




Off-label use




Phase 3


Source: Industry websites

Therefore, even though Optina will be an attractive, needle-free treatment for early stage DME, Avastin, which is still used in 67% of all intravitreal (IVT) treated DME patients, could force Ampio to lower its price for Optina to break into the market.

But Optina might be prescribed as an accompanying treatment for Lucentis or Avastin instead.

2. Reining in blockbuster expectations for Ampion
Ampion, Ampio's second lead drug candidate, is being tested as a treatment for osteoarthritis of the knee.

Ampion is currently in a phase 3 trial with 329 patients, which tests the drug against Sanofi's Synvisc-One, a commonly used injected treatment. According to interim data, patients on Ampion reported a 40% reduction in pain compared to 37% in the Synvisc-One arm.

While those results are encouraging, it's important to note that Synvisc-One, which was approved in the EU in 2008 and the US in 2009, isn't a blockbuster by any means. For the first nine months of 2013, Sanofi only reported $372 million in Synvisc-One sales -- a mere 3.3% increase from the previous year. That figure seemingly contradicts the peak sales estimate of $1 billion that analysts expect from Ampion.

Ampion could have a tough time achieving blockbuster status as a treatment for osteoarthritis of the knee alone, but I believe that its other possible applications -- for allergic rhinitis, multiple sclerosis, rheumatoid arthritis, and other autoimmune diseases -- could unlock its true growth potential.

In addition, Ampio is developing an oral version of Ampion alongside its injected one. For rheumatoid and psoriatic arthritis, a generic oral drug known as methotrexate is usually administered first, which eventually escalates into an injected version. When injected methotrexate fails, more potent (and expensive) anti-TNF drugs such as Johnson & Johnson/Merck's Remicade, Amgen's Enbrel, and AbbVie's Humira are administered.

This means that oral Ampion could theoretically become a viable first-line treatment for some of these other inflammatory conditions. At this point, however, any other indications are pure speculation and highly dependent on an initial approval for osteoarthritis.

3. Additional offerings could cause volatility
Ampio hasn't generated any significant revenues since being founded in December 2008. Since then, it has incurred net losses of $56.2 million and finished last quarter with $32.1 million in cash and no debt.

Ampio has sold additional common stock over the past three years, raising $19.4 million, $15.4 million, and $29.0 million in 2011, 2012, and 2013, respectively. Those additional offerings caused considerable volatility for the stock over the past three years.

AMPE Cash and Equivalents (Quarterly) Chart
AMPE Cash and Equivalents (Quarterly) Chart


Ampio once had a third major drug, the sexual dysfunction medication Zertane, but spun it off into a stand-alone company called Vyrix Pharmaceuticals earlier this month.

Vyrix is expected to go public in about a year. The IPO could significantly boost Ampio's cash position, since the company intends to retain a 50% to 80% stake in the new venture.

The Foolish bottom line
In closing, Ampio will be a volatile stock in 2014, but there are four major catalysts for investors to look for:

  • The market approval of Optina for DME.

  • The market approval of Ampion for osteoarthritis of the knee.

  • A larger marketing partner for either drug, which would inspire more investor confidence.

  • The Vyrix IPO, which could occur before the end of 2014 and substantially boost Ampio's cash holdings.

If Ampio can achieve all four of these goals, it could be considerably undervalued at current prices. But if the Ampio drops the ball with either Optina or Ampion, investors can expect a very steep drop ahead.

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