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MELA Sciences (Nasdaq: MELA ) is back from the dead today, but a walking zombie still doesn't have much chance at a Food and Drug Administration approval.
After the FDA released its briefing documents for the advisory committee on Tuesday, shares fell more than 54%. Investors had laid MELA and its melanoma detection device, MelaFind, in the coffin, waiting for the advisory panel to nail it shut.
Instead, the advisory committee pried off the lid, grabbed a defibrillator, and jolted MelaFind back to life. Well, just over half of the members did, anyway. The panel of outside experts voted 8-7 that the overall benefits of the MelaFind outweighed the risk.
Will that narrow vote be enough to sway the FDA's vote? I doubt it. In March, the FDA wasn't able to approve the application for MelaFind, sending MELA Sciences additional questions. I doubt a nearly split decision is going to change its mind, especially considering the negative view the FDA expressed in the briefing documents.
All you have to do is look at Dendreon's (Nasdaq: DNDN ) Provenge -- the first time -- or InterMune's (Nasdaq: ITMN ) pirfenidone to see what happens when the FDA is negative going into an advisory panel event. Even if the panel votes in favor of the drug, the FDA has the final say. Always.
The only example I can think of when the panel seemed to change the FDA's mind was Genentech's Avastin, but in that case, it wasn't so much that the FDA was negative as that it was unsure. The FDA ended up giving the drug a conditional approval -- called an accelerated approval -- which requires the drugmaker to complete more studies to keep the drug on the market. I don't know of a corresponding accelerated approval process available on the medical device side, but even if there were, I'm not sure MelaFind meets an unmet need, which is one of the requirements of an accelerated approval.
Anything is possible, though, and investors are right to be valuing MELA higher today than yesterday. As I see it, the chance of an approval went from very, very, very, very, very slim to just very, very, very slim.
If you've got some money burning a hole in your pocket, speculating on MELA Sciences could bring a rich reward if the company gets lucky with the FDA. At a market cap of $125 million, there's plenty of room to the upside.
But with money you don't want to gamble with, I'd look for a medical devices company with better prospects, such as Intuitive Surgical (Nasdaq: ISRG ) . In my view, MELA Sciences still has one foot in the grave.
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