Flexion seen benefiting from Anika Therapeutics' failed Cingal study

Shares of Flexion (FLXN) are on the rise after Anika Therapeutics (ANIK) announced that its Cingal Phase 3 trial did not demonstrate statistical significance versus steroid alone. Wells Fargo analyst David Maris believes this removes a potential threat from Flexion's Zilretta, which should have a clear runaway as it progresses through its early launch phase. CINGAL STUDY: Last night, Anika Therapeutics announced results from its CINGAL 16-02 clinical trial, an active-comparator Phase III study being conducted to support U.S. registration. Cingal has previously been evaluated in a placebo-controlled Phase III clinical trial that demonstrated safety and efficacy through 26-weeks. The 16-02 trial compared Cingal, a combination of cross-linked HA and triamcinolone hexacetonide, with TH alone and cross-linked HA in treating patients with osteoarthritis in the knee. The primary endpoint was a comparison of the pain reduction of Cingal compared with TH alone at 26-weeks. While Cingal achieved greater pain reduction numerically at every time point in the study, the difference at 26-weeks did not reach statistical significance. The patient response to Cingal in the study was strong, as significant improvements in pain, function and quality of life were observed at levels consistent with, and in most cases greater than, the results of the 13-01 placebo-controlled Phase III study of Cingal. A strong safety profile was also shown, matching previous clinical studies as well as real-world experience from growing product use globally. The duration of pain reduction was also similar to the previous study as patient improvement after Cingal injection was maintained near peak levels throughout the 26-week duration of the study. Follow-up of patients continues in a prospectively designed extension phase to the study, which will gather data through 39-weeks. MOVING TO THE SIDELINES ON ANIKA: Following the announcement, First Analysis analyst Joseph Munda downgraded Anika Therapeutics to Equal Weight from Overweight given the heightened level of uncertainty he sees for not only Cingal, but also for the other products in the pipeline, including Hyalofast, and the company's future go-direct strategy. The analyst told investors that he now thinks a 2019 approval for Cingal is now off the table. Despite management's comments regarding devising a plan to work with the FDA on the next steps to gain U.S. approval, Munda noted that it is not clear to him what that might entail. Ultimately, he thinks it will involve further clinical work, additional costs, and an extended timeline for approval. The analyst also lowered his price target on the shares to $34 from $45. His peer at Barrington also downgraded Anika Therapeutics to Market Perform from Outperform. Analyst Michael Petusky argued that it is difficult to imagine that the news will not weigh "heavy" on Anika shares, both today and for the foreseeable future. Further, the analyst now believes Cingal's commercial future in the U.S. is in "serious doubt." FLEXION TO BENEFIT: Also commenting on Anika's news, Wells Fargo analyst David Marris told investors in a research note that the failed Phase 3 study by the company's Cingal product in the treatment of knee osteoarthritis removes a potential threat from Flexion's Zilretta. With this competitor out of the way, the analyst believes the runway remains clear for Flexion, which is in the midst of the early phase of its launch of Zilretta. The drug's new unique J-code should become effective January 1 and should lead to "significant higher" sales, he contended. Marris reiterated an Outperform rating on Flexion shares. PRICE ACTION: In morning trading, shares of Flexion have gained almost 4% to $28.40, while Anika's stock has plunged over 35% to $29.68.