3 Stocks with FDA Catalysts Incoming

For many companies, FDA decisions represent the hallmark of years of investment. Due to the amount of time and money that was spent developing these drugs, they can also represent significant catalysts for investors.

Jun 16, 2014 at 4:31PM

For biotech investors, no catalyst can match the FDA’s decision on drug approval (known as the Prescription Drug User Fee Act, or PDUFA date). The FDA's decision represents the culmination of years of clinical research (not to mention millions of dollars). The decision will impact the company's growth timeline for years into the future and will often meaningfully impact the company's bottom line. Let’s dive into three that investors should keep a close eye on.

One of the first notable decisions from the FDA will be on MannKind Corporation (NASDAQ:MNKD) and its drug Afrezza, for which it is expecting a decision on July 15. MannKind is developing Afrezza as an inhaled insulin product for type I and type 2 diabetes. Afrezza has previously been turned down twice by the FDA (a rejection is known as a “Complete Response Letter” or CRL).

Management believes they have addressed the FDA’s previous concerns.  With overwhelmingly positive recommendations from the FDA-appointed advisory committee for both type 1 and type 2 diabetes, MannKind may finally get Afrezza through – although it’s important to note that the FDA does not always follow advisory committee recommendations.

MannKind will then need to successfully market Afrezza in order to have any hopes of becoming profitable. MannKind will need to start generating revenue fast, as it lost $52 million last quarter. Peak sales estimates for the drug vary widely, with some analysts having Afrezza being a blockbuster at over $2 billion in revenue, while others do not believe that it will catch on in the market at all. Assuming approval, investors should watch two things closely: Afrezza’s sales and whether MannKind is able to snag a marketing partner on favorable terms.

On the day after MannKind’s PDUFA, Salix Pharmaceuticals (NASDAQ:SLXP) will have a PDUFA date of July 16 for its drug Ruconest. Ruconest is being developed for the treatment of acute angioedema attacks in patients with hereditary angioedema (HAE), and analyst estimates for the drug have hovered around $100 million. That may not seem like a lot, but for a company with under $400 million in revenue last quarter, including a net loss of $44 million, every little bit helps. Investors should also keep an eye out for potential label expansions for Xifaxan, which is currently indicated for a cirrhosis complication called hepatic encephalopathy. Xifaxan brought in over $100 million last quarter, and Salix is testing the drug in a series of new indications and formulations, including Crohn’s disease.

Another FDA decision to watch closely will be The Medicines Company (NASDAQ:MDCO) as it attempts to obtain approval on August 6th for its antibiotic Oritavancin. Oritavancin was granted priority review by the FDA, and Medicines is trying to get the antibiotic approved for use in acute bacterial skin and skin structure infections caused by susceptible gram-positive bacteria. The FDA has recognized the importance of this drug by granting Qualified Infectious Disease Product Status, which will give The Medicines Company additional years of exclusivity on the drug after approval. This antibiotic is clearly important to the FDA, but it is also very important to the long term growth potential of The Medicines Company. Analysts estimate that Oritavancin could bring in peak annual sales as high as $400 million – nowhere near blockbuster potential, but still significant to a company which reported under $200 million in revenue last quarter. Sales of Oritavancin would hopefully help The Medicines Company swing to profitability – net loss last quarter was $5 million, so it’s already on the edge of breaking even.

Bottom line
These FDA decisions will be significant catalysts to each of these three stocks, particularly given how important each of these drugs is to its respective company – particularly MannKind, as Afrezza is its only drug. Of course, if the FDA approves, the next big question for each of these companies will be commercialization.

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Alexander Maxwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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