Reasons To Stay Interested in SNWV
Brian Marckx, CFA
We met with SANUWAVE's (SNWV) management at the J.P. Morgan Healthcare conference in San Francisco earlier this month and were encouraged by their steadfast belief in the ultimate success of dermaPACE. This is despite the disappointing announcement in December that the FDA issued a major deficiency letter, rejecting approval of the device. As a reminder, the FDA letter cites the failure of dermaPACE to meet the primary endpoint of statistically significant superiority in 100% wound closure compared to sham-control (i.e. – standard of care) as one of the deficiencies. While the FDA action by no means dooms dermaPACE's chances of eventually gaining FDA approval, it does mean the journey towards that end will now be longer and likely more costly. Among the agency's recommendations to potentially remedy the deficiencies is for SANUWAVE to conduct another clinical trial – the design, size, duration, etc. of which would be decided upon after further discussions between the two parties – a meeting is expected to take place within the next 90 days. At that point we hope to have a better idea of what management's strategy will be with getting their technology commercialized.
As we have outlined in our reports (and include below) since initiating coverage of SANUWAVE in May 2011, we feel the compilation of clinical evidence supports that dermaPACE is significantly more effective than standard of care in healing diabetic foot ulcers. And while the DFU indication is where we believe the majority of the near-term opportunity lies, SANUWAVE's PACE technology may also have utility for derivative applications – most notably in healing of other types of chronic wounds such as pressure and venous ulcers and in orthopedic therapy for bone healing and treatment of osteoarthritis.
While there is certainly no guarantee that SANUWAVE's device will gain FDA approval for any of these applications, we think there are a number of reasons that should keep investors very interested in the name. This includes their experienced (and based on our numerous conversations with them, very capable and trustworthy) management team, a regular stream of published clinical data showing the efficacy of their technology, a business model that makes sense (which is definitely not always the case, especially with new technologies), very large and potentially very receptive target markets, and a healthcare system quickly moving towards a "pay-for-performance" model which should increase demand for efficacious yet less expensive therapy (such as what dermaPACE aims to provide) at the expense of costlier treatments.
Below is from our May 2011 initiation report on SANUWAVE in which we make a comparison of the dermaPACE DFU pivotal clinical trial to that of already established and FDA approved DFU treatments. Dermagraft is now owned by Shire Pharmaceuticals (SHPGY) while Kinetic Concepts (taken private in 2011) dominates the V.A.C. market. Apligraf, previously marketed by Novartis (NVS), is now manufactured and marketed by privately-held Organogenesis.
dermaPACE VS. COMPETITION
While clinical trial data of head-to-head comparison between the various advanced DFU therapies is not available, insight into differences in efficacy may be gleamed through comparison of studies which used standard of care as the control cohort. Differences among these trials including size, location and severity of wounds, background of trial participants, and the studies' protocol, size, duration and endpoints makes the comparison of results not necessarily apples-to-apples. Despite this, we think comparison of the different trial results suggests that dermaPACE, at the very least, is an effective therapy – and perhaps, may be a more effective therapy than currently available advanced DFU treatments. We also note that dermaPACE will not compete on efficacy alone and has other (potentially just as compelling) benefits that, combined with the clinical data, provides a persuasive case that the instrument can be a be a formidable competitor in the advanced DFU treatment space.
CLINICAL DATA COMPARISON
Efficacy of DFU treatment in clinical trials is typically measured by rate of closure and wound recurrence. Aside from efficacy, other metrics that are commonly included as endpoints are safety and patient comfort. We summarize data from a select number of clinical studies of the leading advanced DFU therapies and compare those to results from dermaPACE's IDE study. Some of the competitor therapy data is taken from more than one study as not all metrics were included in a single study. As there have been several other studies done aside from the ones we highlight, our comparison does not cover the totality of study data on advanced DFU therapy. We also note that we have only included dermaPACE 12-week data as 12-week follow-up was the protocol for studies used to gain FDA approval of Apligraf and Dermagraft. While we have excluded the 24-week follow-up data (which showed statistical significance in complete wound closure) from our direct comparison, we think it does add further support for use of dermaPACE in DFU.
The data in the table are from clinical studies of each therapy versus standard of care.
…our take on the data
Keeping in mind that it can be misleading to make an apples-to-apples comparison of the data, we offer some potential points of interest in the trial protocols and data sets;
• Closure endpoint: dermaPACE data is from the composite analysis (endpoint of > 90%). As noted earlier, dermaPACE failed to show significance in the primary endpoint of 100% closure in the IDE trial through 12 weeks. All three competing devices showed significance in their primary endpoint of 100% closure. The difference, in clinical practice, may be largely meaningless, however (although FDA, based on its recent major deficiency letter, apparently believes that it is). Median closure in dermaPACE treated ulcers achieving > 90% closure was over 99% and anything greater than 70% indicates that the wound is well on its way to being completely healed. In addition, ulcers treated with dermaPACE were almost 60% larger than those in the control group (making achieving significance that much more difficult). Also noteworthy is that trial protocol in the V.A.C. study allowed full closure of ulcers to be completed with surgery – this was not allowed in the dermaPACE study – had it and it's conceivable that dermaPACE would have shown statistical significance in 100% closure over standard of care.
• Blinding: dermaPACE was the only trial where both the physician and patient were blinded to which treatment (experimental or control) was being used – in none of the trials of the other therapies was the physician blinded. As the physician must make a (somewhat subjective) determination relative to efficacy (i.e. – closure rates, change in size of ulcers, etc), not blinding the physician potentially introduces bias in favor of the experimental treatment. Not blinding the physician can impact clinical trial results and has been cited as a deficiency in the robustness of trial data for both Apligraf and Dermagraft by insurance providers in determining reimbursement policy. dermaPACE's double-blind trial protocol eliminated any physician bias which further supports the strength of the data.
• Treatment duration: dermaPACE's closure and recurrence rates versus the competing treatments are especially compelling given that dermaPACE requires the lowest treatment burden with patients receiving only four 20-minute procedures over a two-week period. Dermagraft patients received up to eight applications (one per week for eight weeks) while Apligraf was applied up to five times (once per week). The V.A.C. treated patients received treatment for up to 16 weeks. V.A.C. treatment requires that suction is constantly applied to the wound (i.e. – the patient is hooked up to the device for the entire 16 weeks) and dressing is changed at least three times per week.
• Closure rate: dermaPACE's 48% closure rate stacks up better than both Dermagraft and V.A.C. We acknowledge dermaPACE's lower endpoint threshold could have benefitted its closure rate – but this could potentially have been more than offset by not allowing surgical closure or other differences among the trial protocols. While Apligraf's 56% closure rate slightly bested that of dermaPACE, this appears to be significantly more than offset by the difference in rates of recurrence (40% with Apligraf versus only 4.5% with dermaPACE).
• Recurrence rate: only 4.5% of dermaPACE treated wounds reopened after achieving complete closure, compared with 18% and 40% of the Dermagraft and Apligraf treated wounds, respectively. The V.A.C. study did not report rates of recurrence as this study allowed surgical closure. The results, again, are not necessarily directly comparable for the reasons already stated.
• Safety: while none of the therapies was associated with a higher rate of adverse events compared to standard of care, we note that dermaPACE is the least invasive of the four therapies. While only speculation at this point, given its non-invasive nature, over time, dermaPACE may prove to be a safer treatment.
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