Biotech Investors Shouldn't Cheer an Easier FDA Too Much
(Bloomberg Gadfly) -- Tuesday's FDA approval of the Rigel Pharmaceuticals Inc. drug Tavalisse wasn't exactly a surprise. The San Francisco company had already jumped the gun on its website on April 12, prematurely calling the medicine "its first FDA approved product."
But the relatively easy path Tavalisse took to approval is still surprising after several bumpy years for the drug. It's further evidence the FDA is loosening its drug-approval standards under new commissioner Scott Gottlieb. That may sound like heaven to biotech investors, but the reality is far more complicated.
It hasn't always been smooth sailing for Tavalisse, which was approved to treat thrombocytopenia, a blood disorder. The medicine failed a Phase 2 trial in treating kidney disease just a few weeks ago. And its efficacy in thrombocytopenia patients has not always measured up to what analysts hoped, even in successful trials.
But that hasn't stopped the FDA from welcoming Tavalisse with relatively open arms. The agency decided last year the drug didn't need to go before a panel of experts for evaluation, tossing aside common procedure for potentially borderline drugs. It then approved the drug without delay, and in a fairly broad patient population.
While Tavalisse investors may cheer an easygoing FDA, it's no guarantee of commercial success. Insurers may be particularly hostile to drugs that aren't backed by home-run data if they think the FDA is going too easy. A positive panel review might have given payers and physicians more confidence in the drug. For now, lots of questions about the drug's prospects remain, and analyst sales expectations remain low and highly variable.
This isn't the first time the FDA has acted in a way that suggests its standards are more fluid -- sometimes jarringly so -- under Gottlieb, who took charge last May.
Earlier this month, the agency took Alkermes PLC investors on an especially dizzying roller coaster ride. On April 2, it rejected that company's attempt to file a depression drug for approval and demanded additional tests. Two weeks later, on April 16, the FDA reversed course and accepted Alkermes's application. Similarly, last year, the agency accepted previously rejected applications for an Eli Lilly & Co. arthritis pill and an Amicus Therapeutics Inc. rare-disease drug.
Such reversals generally suggest the FDA has gotten more inclined to give drugmakers the benefit of the doubt -- but this shouldn't necessarily make pharma investors feel too comfortable. It's easy to conflate FDA approval with guaranteed sales success, or an application acceptance with a certain approval -- and easy to get burned when doing so.
If the FDA truly is loosening its standards, then investors should keep some ointment handy.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
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