No Approval for You ... Yet

Motley Fool Stock Advisor

Since 2002, David and Tom Gardner have returned 27.05% while the S&P 500 returned -12.35%. Try Stock Advisor free for 30 days.

• Try it Free

Some seven months ago, I called Eli Lilly's (NYSE: LLY) and Daiichi Sankyo's submission of top pipeline drug prasugrel the most interesting FDA review of 2008. Alas, the FDA must not have been reading. Prasgurel's approval has been delayed. Again.

After the markets closed on Friday, Lilly announced that the agency was still reviewing its application. Prasugrel, which will go by the brand name Effient, is Lilly and partner Daiichi Sankyo's attempt to compete with Sanofi-Aventis' (NYSE: SNY) and Bristol-Myers Squibb's (NYSE: BMY) blockbuster compound Plavix in the field of anticoagulant acute coronary syndrome heart drugs.

When the companies submitted prasugrel as a New Drug Application in Dec. 2007, they received a priority review designation from the FDA, reserved for drugs that could represent a "significant therapeutic or public health advance" if approved. The agency set June 26 as its goal for a PDUFA date to make a marketing decision on the drug.

When June rolled around, the FDA issued a three-month extension to its review, which pushed it back to last Friday. And now that Friday's passed the FDA by, Lilly is giving no new timeline for when it expects a decision, except to say that "the review is very far along."

The FDA has been delaying its approval decisions on most drug candidates this year. Many drugmakers have seen delays of several months, with the most extreme case being Cardiome's (Nasdaq: CRME) nearly seven-month delay for a decision on its atrial fibrillation drug Kynapid. A lucky few, like Genentech (NYSE: DNA), have seen no FDA delay in reviewing their marketing applications.

With the FDA's new drug review delays now hitting even priority review drugs like prasugrel, investors should expect all new drugs (perhaps excluding a few indications like cancer or HIV) to be hit with FDA delays. Price this into your estimates.

If prasugrel is eventually approved, it will likely have several months less in which to market it, depending on how used-up its patents are. While the delay is undoubtedly a negative, for a diversified large-cap pharma like Eli Lilly, it shouldn't be a major issue -- unless the FDA pulls another Cardiome.