Don't let it get away!
Help yourself with the Fool's FREE and easy new watchlist service today.
Talk about selling the news. The Food and Drug Administration announced the approval of Optimer Pharmaceuticals' (Nasdaq: OPTR ) antibiotic Dificid late on Friday, and the share price dropped 7%.
There was little doubt that the drug would be approved; an advisory panel unanimously recommended approval of the drug. But the label, including how the drug would be described in comparison to ViroPharma's (Nasdaq: VPHM ) Vancocin was still in doubt.
From the looks of the drop, you'd think Optimer got a poor label, but it sure doesn't look that way. The label says, "The results for sustained clinical response at the end of the follow-up period, also shown in Table 5, indicate that Dificid is superior to [Vancocin] on this endpoint."
Superior to a drug that sold more than $250 million last year isn't too shabby. Dificid isn't likely to become a blockbuster, but it doesn't really need to hit the $1 billion mark to justify Otimer's $600 million market cap.
Today investors seem to have realized the overreaction. Shares are up substantially from Friday's close, although they're still lower than they were before the approval came over the wire.
While the label looks fine, investors may be justified in worrying about whether Optimer and marketing partner Cubist Pharmaceuticals (Nasdaq: CBST ) will be able to sell Dificid. Launching a new antibiotic isn't easy; Astellas and Theravance's (Nasdaq: THRX ) Vibativ managed just $3.5 million in the first quarter of the year.
Despite the superior rate of recurrent infection, some doctors might initially continue using Vancocin and reserve Dificid as a backup for the 43% or so that continue to see their infection present 25 days after the treatment.
In the long term, though, doctors will likely see the benefit of Dificid, and investors will be buying the earnings (or buyout) rumor soon enough.
Interested in keeping track of Optimer as it launches Dificid? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Optimer.