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Changes at the FDA, though not the one we need


If we could only get a good replacement for Dr. McClellan

The FDA recently announced a pair of procedural changes biotech investors should note as they will potentially have some effect on the way we handicap companies.

The first change is not new news as it has been in the pipeline for some time. Because of changes requested by companies developing cancer drugs, the responsibility for nearly all approvals of cancer drugs at the FDA will be centralized.

The so-called "Office of Oncology Drug Products" (ODP) combines three separate areas in the CDER portion of the FDA. The ODP will be divided into three areas, though, so what real effect this has is debatable other than the need to change business cards and letterhead.

Companies whose products are alive (dendritic cell immunotherapy, viral-vector-based gene therapy, etc.) will still be under the purview of CBER, though CBER will have the ability to tap the experts at ODP. This also represents little change.

Those who are invested in oncology companies should hope neither Richard Pazdur nor Robert Temple gains the leadership of ODP or any of the major departments within. Mr. Pazdur is gaining a reputation as a loose cannon within the FDA, still bitter that former FDA chief Dr. Mark McClellan forced him to approve Iressa. Dr. Temple is widely acknowledged as a brilliant fellow and a genuinely nice guy, but his emphasis on biostatistical concerns over patient welfare is a real problem.

Death of the approvable letter

The second bit of news will certainly not help biotech investors. The FDA has bowed to industry demands to eliminate the terms "approvable letter" and "not-approvable letter." I discussed these terms here, but as a reminder these letters are handed out when data from a new drug application is not sufficient for approval.

What we get now is a "complete response letter." This letter will either tell the company they can market the drug now, market it after certain conditions are met, or that the FDA sees no way the drug can be approved. Basically, it wraps up the former approval letter, approvable letter, and not-approvable letter into one euphemistic package. The impetus for this change was from drug companies claiming the approvable and not-approvable terminology had negative connotations.

Of course they had negative connotations because they were both negative results of a new drug application.

What biotech investors will need to ask during conference calls is whether the company has to do any additional work for the FDA to begin marketing the drug. If the answer is no, then the drug got a straight approval. If the answer is yes, then investors will need to ask whether they are subject to a "Class 1" resubmission or a "Class 2" resubmission.

Class 1 resubmissions have a required FDA turn-around time of two months. This suggests there is simply a paperwork problem with the application, some manufacturing details to be worked out, or some simple additional analysis of an existing clinical trial needed before full approval is granted. A caution: simply knowing it is a Class 1 resubmission is not enough. The smart biotech investors will want to verify exactly what is needed - especially if there are new trials to be run.

Class 2 resubmissions are more serious. The FDA has 6 months to review the contents of this type of resubmission. A Class 2 specification makes it almost certain new clinical trials are necessary. New data for a Class 2 may also need to be reviewed by an advisory committee.

Remember that in both situations, the FDA's clock starts only after the resubmission is complete. If a new trial is required and that trial takes two years to enroll and generate data, a biotech investor would not know if the result of the Class 2 resubmission was successful for two years and six months.

This is all so much mumbo jumbo. Drug companies fought hard for this, which shows they don't hold much of an opinion as to the intelligence of their investors. I suspect the worst management teams hope to hide behind the "complete response" letter while saying they don't want to discuss ongoing negotiations with the FDA as a way to avoid their stock tanking.

Here's a hint: If management doesn't say the drug is approved and will begin marketing soon, assume the news is bad (Class 2 resubmission) unless they tell you otherwise. Why? If a company receives a no-strings-attached approval, companies will be eager to communicate that. If it is a Class 1 response, all smart management teams will tell shareholders as that is the lesser evil.

This new rule is up for comment. For what it will be worth, we'll be sending the FDA a comment that they should make certain contents of the complete response letter public. I doubt we'll be taken seriously, but I can't complain if I don't take the time to write the letter.
No positions in stocks mentioned.

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