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NPS Pharmaceuticals Rises on Hope for US Approval of Experimental Drug

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FDA staff says Gattex for the disabling condition short bowel syndrome seems to benefit patients despite risks. Investors see next week's panel as a step toward FDA clearance.

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MINYANVILLE ORIGINAL Shares of NPS Pharmaceuticals (NASDAQ:NPSP) are rising as investors see potential approval of a drug for a condition that robs people of the ability to absorb nutrients or fluids.

Investors bid up the stock after briefing documents released ahead of an important government panel next week seemed to support approval of the drug Gattex. Click here for the documents.

Shares of NPS rose almost 19% to $10.85 in morning trading Friday. The stock is up 65% for the year.

NPS faces a panel of expert advisers to the Food and Drug Administration on Tuesday as it seeks US approval of Gattex, a treatment for the disabling disease known as short bowel syndrome. The condition affects about 15,000 people in the US, according to NPS. Documents prepared by FDA staff seem to support the approval despite concerns about safety of the product.

"FDA briefing documents issued this morning contain a very positive overall assessment of Gattex," Leerink Swann analyst Joseph Schwartz says. He recommends buying the stock and has a $14 price target for the shares.

Among the safety concerns is the risk of cancer. As part of its application for approval, NPS proposes a risk-assessment plan that it would carry out if the drug is cleared for sale. The FDA staff reviewers generally supported the NPS risk plan, though they suggested strengthening some of the company's warnings to doctors who may prescribe the treatment. The agency reviewers said they want to make sure doctors understand the risks associated with the drug.

The FDA advisers will discuss the safety and effectiveness of Gattex at their meeting on Tuesday. The draft questions contain three voting topics that consider the drug's effectiveness, the risk-benefit of the treatment, and the NPS risk management plan. Click here for the draft questions.

While the drug appears to have momentum toward approval, the safety issue cannot be discounted. If the drug is approved, the cancer risk may be a deterrent to use and may hamper sales, says biotech industry consultant Michael Becker.

"There is caution not to do more harm than good to the patient," Becker says.

Twitter: @brettchase

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No positions in stocks mentioned.
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