Hot to trot with Zilretta, Flexion rolls $100M-plus stock offering to fund the launch

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Flexion's injectable drug Zilretta could hit blockbuster sales by 2023, RBC analyst Randall Stanicky figures.

Less than a week after winning FDA approval for its knee arthritis injection Zilretta, Flexion says it's floating a $100 million-plus stock offering to raise cash for the drug's rollout.

Flexion is in the "final stages" of prepping that launch, its first ever, executives said Monday. With plans for 103 reps in the field, targeting 9,000 rheumatologists and orthopedists, Flexion believes it can reach three-fourths of its target market.

Priced at $570 per injection, Zilretta is a nonopioid pain reliever that can work for 12 weeks, the drug's key clinical trial showed. About 5 million Americans with osteoarthritis receive knee injections each year, Wells Fargo analyst David Maris said in a note to investors, pegging Zilretta as the new "standard of care" for those patients. RBC Capital Markets analyst Randall Stanicky expects the med to break the blockbuster barrier by 2023.

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To make that happen, Flexion needs to work the launch, and the stock offering could bring $106 million or more to help fund it, based on recent closing prices of Flexion shares, the company said in a prospectus filed Tuesday with the Securities and Exchange Commission. The Zilretta launch, plus manufacturing costs, are the first things on the company's list for spending that money.

The offering would boost Flexion's cash by about one-third; the company now has $335 million in cash on hand, the prospectus says. Flexion also hopes to use the proceeds to push its follow-up osteoarthritis injection, FX101, into clinical testing.

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Flexion expects Zilretta to be available by the end of October, but the full rollout won't happen until late November, because sales reps were offered jobs conditional on approval, and they'll need to give notice to their current employers and complete their Zilretta training. Flexion sees Zilretta sales growth kicking in by 2019.

Doctors are enthusiastic about Zilretta, Maris wrote in his investor note. In a recent physician survery, Wells Fargo found that "they will use it in a large number of patients, and even use it off-label in hips and shoulders," Maris wrote. On Monday's conference call, executives said the company plans to test Zilretta against osteoarthritic hip and shoulder pain; new approvals in those joints would expand Zilretta's market considerably.