Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA) is a development-stage biopharmaceutical company focused on the acute treatment of migraine. The company's lead product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate (DHE) designed for quick and easy self-administration via a proprietary pre-filled, single-use, nasal delivery device.

Business Overview

Satsuma Pharmaceuticals was founded in 2016 with the goal of developing innovative solutions to address the unmet needs of migraine patients. The company's primary focus has been on advancing STS101 through clinical development and regulatory approval. STS101 is specifically designed to deliver the clinical advantages of DHE, a well-established migraine treatment, while overcoming the limitations of existing injectable and liquid nasal spray DHE products.

The company has invested substantial efforts and resources into the development of STS101. This includes conducting multiple Phase 1 clinical trials, two Phase 3 placebo-controlled efficacy trials (the EMERGE and SUMMIT trials), and a long-term, open-label safety trial (the ASCEND trial). In total, more than 1,600 subjects have treated over 10,000 migraine attacks with STS101 in these clinical studies.

In November 2022, Satsuma announced topline results from the SUMMIT Phase 3 efficacy trial. Although STS101 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom at the two-hour post-administration timepoint, these differences did not achieve statistical significance. Following these results, the company announced that it does not plan to invest in commercializing STS101 and would instead explore alternatives to maximize value for shareholders while minimizing cash expenditures.

In January 2023, Satsuma completed the ASCEND Phase 3 long-term, open-label safety trial. During this trial, more than 446 subjects treated over 9,000 attacks with more than 10,500 doses of STS101, with some subjects treating their migraines with STS101 for up to 18 months. STS101 demonstrated a favorable safety and tolerability profile in the ASCEND trial, consistent with clinical experience to date.

Financial Overview

Satsuma Pharmaceuticals has incurred significant losses since its inception in 2016. For the fiscal year ended December 31, 2022, the company reported a net loss of $69,163,000, with no revenue generated. The company's annual operating cash flow and free cash flow for the same period were -$51,516,000 and -$51,988,000, respectively.

For the first quarter of 2023, Satsuma reported a net loss of $10,294,000. Research and development expenses for the quarter were $7,459,000, while general and administrative expenses were $3,309,000. The company's cash, cash equivalents, and marketable securities as of March 31, 2023, were $41,370,000.

Liquidity and Capital Resources

Satsuma's financial condition raises substantial doubt about its ability to continue as a going concern. The company believes its cash, cash equivalents, and marketable securities would be insufficient to enable it to fund current operations for a period of one year or more from the issuance date of its latest quarterly report.

In November 2022, the company entered into an At-the-Market Sales Agreement with Virtu Americas LLC to sell shares of its common stock, from time to time, through an at-the-market equity offering program. As of March 31, 2023, no shares of common stock have been sold pursuant to this agreement.

Satsuma does not plan to raise additional funding, as it believes such funding, if available at all, would likely not be on terms that would be acceptable or favorable to the company. Instead, the company is seeking to complete a merger agreement with Shin Nippon Biomedical Laboratories, Ltd. (SNBL), announced on April 16, 2023, under which SNBL would acquire Satsuma and assume responsibility for completing the development and commercialization of STS101.

Regulatory and Development Pathway

Satsuma has submitted a New Drug Application (NDA) for STS101 to the U.S. Food and Drug Administration (FDA) in March 2023. The company believes the results of its completed Phase 1 pharmacokinetic (PK) clinical trials and its ASCEND Phase 3 long-term safety trial, in combination with information referenced from studies not conducted by Satsuma, are sufficient to support FDA approval of STS101 under the 505(b)(2) regulatory pathway.

The FDA has communicated to Satsuma that a pivotal efficacy trial, such as the SUMMIT trial, is not required for approval of STS101, as the efficacy of STS101 may be established via a "pharmacokinetic bridge" to the 505(b)(2) DHE reference products. The company believes the SUMMIT trial results, if included in the STS101 prescribing information, would provide important treatment information to physicians and patients, despite the trial not achieving statistical significance on the co-primary endpoints.

Risks and Challenges

Satsuma faces several risks and challenges in its pursuit of STS101's development and potential commercialization. These include the ability to timely complete the proposed merger with SNBL, the uncertainty around regulatory approval, the potential for undesirable side effects, and significant competition in the migraine treatment market.

The success of the Offer and Merger with SNBL is subject to several conditions, including the company's stockholders tendering a minimum number of shares, the absence of any governmental order or law preventing the consummation of the transaction, and Satsuma maintaining a minimum net cash balance. Failure to complete the Offer and Merger within the expected timeframe, or at all, could have a material adverse effect on the company's business, operating results, financial condition, and share price.

Additionally, there is no assurance that the FDA will approve STS101, as the agency may require additional clinical trials or have concerns about the safety or efficacy of the product. STS101 may also cause undesirable side effects that could delay or prevent its regulatory approval or limit its commercial potential.

Satsuma also faces significant competition in the migraine treatment market, including from other DHE products, newer oral migraine-specific acute treatments, and preventive treatments. Many of Satsuma's competitors have significantly greater resources than the company, which may make it challenging for the Commercializing Party to effectively compete.

Outlook and Conclusion

Satsuma Pharmaceuticals' future is closely tied to the successful completion of the proposed merger with SNBL and the subsequent development and commercialization of STS101 by the combined entity. While the company has made progress in advancing STS101 through clinical trials and regulatory submissions, the failure to achieve statistical significance on the co-primary endpoints in the SUMMIT trial has led Satsuma to explore strategic alternatives to maximize shareholder value.

The proposed merger with SNBL represents a potential path forward for STS101, as the Japanese pharmaceutical company would assume responsibility for completing the development and commercialization of the product. However, the successful execution of this transaction and the ultimate commercial success of STS101 remain subject to significant risks and uncertainties.

Investors in Satsuma Pharmaceuticals should closely monitor the progress of the Offer and Merger with SNBL, as well as any future developments related to the regulatory approval and commercialization of STS101. The company's ability to navigate the challenges it faces and deliver on the potential of its novel migraine treatment will be crucial in determining the long-term value for shareholders.