Is Esperion's Good News Actually Bad?

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FDA regulators met with Esperion Therapeutics to discuss phase 2 results for the cholesterol-busting drug ETC-1002, and the company reported that the FDA won't require a long-and-costly cardiovascular-outcome trial prior to an eventual approval.

That's good news, right? Well, maybe not. Here's why some investors are throwing cold water on Esperion's news.

A new paradigmSince the 1980s, the mainstay in battling heart disease has been reducing bad cholesterol levels with diet, exercise, and statins.

Statins are proven to be incredibly effective at cutting bad cholesterol levels and it's been shown that they can reduce the likelihood of major cardiac events and strokes, but there's still a big problem: Statins fall short of controlling bad cholesterol in millions of patients, leading to heart disease claiming the lives of 600,000 Americans every year.

Because heart disease remains the most common cause of death among Americans, there's a massive need for new approaches to complement statins.

Fortunately, new approaches are fast-approaching.

In fact, the first of these next generation cholesterol-busting drugs are PCSK9 inhibitors including Regeneron Pharmaceuticals' recently approved Praluent and Amgen's likely soon-to-be approved Repatha.

Unlike statins that reduce cholesterol production in the liver, PCSK9's increase the number of bad cholesterol receptors in the liver to improve the body's ability to clear cholesterol from the bloodstream.

In clinical trials, pairing up PCSK9 drugs with statins reduced bad cholesterol levels by as much as 60% versus statins alone -- a major improvement that could have big implications on patient treatment.

However, PCSK9 drugs are costly, injection-based biologics and they're only approved -- at least for now -- for use in those at the most risk of heart disease.

Because of that, an opportunity exists for another less-costly drug, such as ETC-1002, to get prescribed alongside statins in patients who are at mild to moderate risk of developing heart disease

That unmet need for this larger population should be good news for ETC-1002, especially since midstage trials show that ETC-1002 can lower cholesterol by roughly an additional 20% when used with statins.

However, regulators are increasingly shying away from approving cholesterol-busting drugs for mainstream America until they've proven that they actually lower cardiovascular risk, which is a big difference from the past when lowering cholesterol was seen to be akin to lowering the risk of heart attack and stroke. Unfortunately for Esperion investors, the FDA's cardiovascular outcome guidance only applies to its use in tough-to-treat cases in which doctors would most likely embrace PCSK9s, rather than ETC-1002.

In other cases, such as mild- to moderate-risk patients, the FDA will likely require such a trial prior to approval.

Although that's not a deal-breaker for Esperion because it was planning to run a cardiovascular outcome trial anyway, it could mean it takes longer to win approval for use in the broader patient pool and that the company burns through more cash than some investors previously thought.

Looking forwardEsperion's ETC-1002's ability to curb cholesterol isn't as robust as the PCSK9 inhibitors, but even if it does win approval for use only in high-risk patients, it still could carve out a niche. Since Praluent has been priced at $14,600 annually, ETC-1002 wouldn't have to grab a ton of market share to make it a big seller.

Regardless, the much bigger and profit-friendly market is the tens of millions of patients at mild to moderate risk of heart disease, and for that reason the likely need for a trial means Esperion's news isn't as good as it might have seemed to be at first blush.

The article Is Esperion's Good News Actually Bad? originally appeared on

Todd Campbell owns shares of ESPERION THERAPEUTICS INC. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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