There is a great concern about opioid abuse and potential overprescription in the United States. However, there is no reason to expect opioids ever will be completely removed from the market. That is why one key analyst firm believes the development of abuse-deterrent formulations (ADF) of opioids creates a risk that older non-ADFs may be removed from the market, and that this creates a huge risk and opportunity in the space.

Janney Montgomery Scott thinks the first removal could be soon, as the U.S. Food and Drug Administration (FDA) has approved five ADFs of extended-release (ER) opioids in the past three years, and may approve as many as five more in the next 12 months. With multiple ADF morphine options, the firm believes the FDA may remove non-ADF ER morphine first.

If this were to happen, it would create a market opportunity estimated to be about $2.5 billion at branded prices. There is significant interest from the pharmaceutical industry in developing ADF opioids (both brand and generic), but Janney’s analysis reveals they are not all equal. While all may benefit from future FDA actions, the firm thinks some are in a better position than others.

Collegium Pharmaceutical Inc. (NASDAQ: COLL) is awaiting final approval of Xtampza (oxycodone), which should enable the drug to be launched in the second quarter of 2016. Xtampza, like Embeda and ALO-02 from Pfizer, can be opened and the contents sprinkled onto applesauce for ingestion. However, unlike Pfizer’s products, Xtampza has no withdrawal risk if accidentally chewed. Janney sees this as an extremely meaningful advantage in a market where roughly 16% patients taking opioids either cut, crush or grind their medication before administration. Collegium has a Buy rating with a $25 price target. Shares were last seen trading at $17.83, with a consensus analyst price target of $28.20 and a 52-week trading range of $11.92 to $30.58.

Egalet Corp. (NASDAQ: EGLT) filed a New Drug Application (NDA) for Arymo and received an Oct. 14, 2016, Prescription Drug User Fee Act (PDUFA) date. Arymo is an ER ADF of morphine that Janney expects will gain FDA approval and receive an AD label, but the firm sees potential headwinds for its launch. Janney thinks Egalet can be successful with Arymo, and it simply expects market adoption to be slow, unless and until the FDA removes non-ADFs of ER morphine. Egalet has a Neutral rating with an $8 price target. Shares were trading at $6.77, with a consensus price target of $18.20 and a 52-week range of $6.01 to $16.59.

Pfizer Inc. (NYSE: PFE) is awaiting FDA final action on its NDA for ALO-02 (oxycodone/naloxone). The FDA’s review has twice gone past it scheduled conclusion. ALO-02 uses the same approach as Embeda (morphine/naloxone). This approach already has demonstrated a risk of withdrawal if the sequestered opioid antagonist naloxone is accidentally released by chewing. Separately, the FDA is already concerned about a possible link between withdrawal and serious cardiovascular adverse events in opioid antagonists approved for treating opioid induced constipation. This potential risk does not exist for other FDA-approved, abuse-deterrent formulations of oxycodone (e.g., OxyContin OP and Xtampza) that rely on a physical/chemical approach. Shares of Pfizer were trading at $30.10, with a consensus price target of $38.81 and a 52-week range of $28.25 to $36.46.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) is awaiting FDA action on Vantrela, an ER ADF, which would compete with other extended-release hydrocodones such as Zohydro ER and Hysingla ER. Like Pfizer’s ALO-02, the FDA review of the NDA for Vantrela has extended beyond its PDUFA date. Shares of Teva were trading at $58.84, with a consensus price target of $75.87 and a 52-week range of $53.78 to $72.31.

Pain Therapeutics Inc. (NASDAQ: PTIE) has followed a long and tortuous road in its effort to support partners that have sought to gain approval of Remoxy (oxycodone) since 2008. Pfizer returned Remoxy rights to Pain Therapeutics and decided instead to go forward with ALO-02, despite its obvious shortcomings. Janney notes that Pain Therapeutics has not managed to get an FDA approval in its nearly 18-year history. If it is able to gain approval for Remoxy, it lacks commercial expertise and capabilities to market the drug itself. Shares of Pain Therapeutics traded at $2.01. The consensus price target is $8.00, and the 52-week range is $1.53 to $3.65.

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