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Betting on the FDA: Another Round of Approval Decisions Coming for Drug Companies


Two drug rejections this week should have been expected. Reading the tea leaves on possible market approvals later this month is more difficult.

The Food and Drug Administration's rejection of a pair of drugs this week followed a familiar script.

The companies developing the products -- Astex Pharmaceuticals (ASTX) and Neurogesx (NGSX) -- both appeared before committees of expert advisers to the FDA weeks before the decisions. In both cases, the advisers cast negative votes -- virtually guaranteeing that the products would be turned down by the FDA, which makes the final decisions on approvals. A third company, Discovery Laboratories (DSCO) won approval of its treatment Surfaxin to prevent respiratory problems in babies after being rejected four times by the FDA.

So what are the chances of other companies trying to win approval of their products this month?

Three companies at the end of the month are expected to hear decisions from the agency, beginning with Map Pharmaceuticals (MAPP) on March 26.

Map and partner Allergan (AGN) are trying to win approval for the inhaled treatment Levadex for migraine headaches. Some analysts expected the product would get a review panel but it didn't. The last inhaled drug -- not designed for respiratory conditions -- to win approval from the FDA was Pfizer's (PFE) inhaled insulin product Exubera, according to Leerink Swann analyst Joseph Schwartz.

Exubera carried the risk of lung problems and was withdrawn from the market in 2007 because of lack of demand, rather than safety issues.

Schwartz said in a note late last year that a positive vote at a December advisory panel for Alexza Pharmaceuticals' (ALXA) inhaled drug Adasuve for schizophrenia would be a positive sign for Map. That drug previously was rejected by the FDA due to concerns about respiratory side effects. Indeed, the December advisory panel voted 9-8 to approve the drug on the condition that the company would come up with a plan to mitigate safety issues. The FDA was to make a decision on Adasuve February 4 but, instead, delayed its decision until May 4.

A key concern with that drug is that respiratory problems may be harder to detect in psychiatric patients.

Map's shares are up by a third this year. Without a panel decision, it's difficult to gauge the FDA's thinking on Levadex, however. The stock traded at $17.48 Friday morning.

But positive panels sometimes give investor false hope. According to a study by MD Becker Partners last year, navigating the FDA approval process can be tricky even after agency advisers give a thumbs up to a new product or expanded use of an existing treatment.

Becker's conclusion on panel votes: No always means no but yes can mean maybe. (See Betting Wrong on the FDA.)

By March 27, Affymax (AFFY) is expected to hear from the FDA on the possible market approval of peginesatide, an anemia treatment for people with kidney failure. The drug would go up against Amgen's (AMGN) Epogen. FDA staff noted concerns about peginesatide's safety profile before the panel but added that the drug appeared to work. Affymax designed the drug to be taken once a month, which is less frequent than Epogen.

FDA advisers voted 15-1 to recommend the Affymax drug, saying the benefits outweighed the risks. (See Affymax's Stock Soars on Hope for Anemia Drug Approval.) Affymax's stock is up almost 70% this year on hopes the drug will be approved. The shares traded at $11.12 Friday morning.

While the Affymax drug would seem able to sail through the approval process with such an overwhelmingly positive vote, Becker's report cites the case of Valeant Pharmaceuticals' (VRX) drug Potiga. A secondary treatment for seizures in epilepsy patients, Potiga was endorsed 13-0 by an advisory panel in August of 2010 only to be rejected by the FDA four months later. The drug was ultimately approved by the FDA in June of last year.

Finally, Chelsea Therapeutics (CHTP) has the advantage of a positive advisory panel vote but the count wasn't unanimous. Advisers voted 7-4 to recommend the company's Northera for treatment of low blood pressure in patients with Parkinson's disease and similar disorders. The positive vote came despite earlier questions in a report from FDA staff over the drug's effectiveness and safety. While the shares have recovered since the negative FDA staff report, the stock is still down by almost a third this year.

Leerink Swann analyst Jonathan Eckard says the report clearly spooked investors but he points to positive comments made by FDA officials at the panel meeting.

"The favorable FDA advisory committee outcome and supportive commentary by ... senior FDA officials in this meeting solidify our comfort around a potential approval on March 28," Eckard says in a note this week.

More importantly, Eckard says he believes Northera proved its effectiveness. He recommends buying the stock and sets an $11 price target. The shares traded at $3.50 in morning trading Friday.

Twitter: @brettchase

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