Coulter Malignant with Cancer Drug Delay (Fool Plate Special) August 30, 1999

An Investment Opinion

Coulter Malignant with Cancer Drug Delay

By Warren Gump (TMF Gump)
August 30, 1999

Shareholders in developmental-stage biotech firm Coulter Pharmaceuticals (NYSE: CLTR) were hit with some of the negative risk associated with new drug development. The company announced this morning that the Food and Drug Administration (FDA) requested modifications to its application for marketing approval of its leading drug candidate, Bexxar, for non-Hodgkins lymphoma. The company's press release stated that the requested changes were primarily related to reformatting and reorganizing data and seeking additional information on existing data. Nonetheless, the stock fell by almost a third in morning trading.

Coulter President and CEO Mike Bigham said he hopes to resubmit the application in six weeks or so, but the exact timing cannot be pinned down until discussions are held with the FDA. The good news in this announcement is that the drug was not flat-out rejected. In addition, the FDA did not request additional trials, more data from ongoing trials, or information on manufacturing, which could substantially delay the application.

On the other hand, the company will not achieve its objective of getting the drug on the market by the end of the year. It will take a minimum of six months for the drug to be approved once its application is refiled, even though the FDA has put it in the "fast-track" approval process for drugs that could be lifesaving. (It normally takes at least a year to review new drugs.)

This delay potentially weakens Coulter's overall position in the non-Hodgkin's lymphoma market. IDEC Pharmaceuticals (Nasdaq: IDPH) has a competing drug called Zevalin, for which it hopes to seek marketing approval in the first half of 2000. While there can be no guarantees that this timetable will be met, Coulter is losing some of the first-mover advantage with Bexxar's delays.

It's hard to tell what will happen with Coulter. Today's request for modifications to the Bexxar application could simply be modest requests for clarifications on a drug that will ultimately be approved. It also could be a precursor to further delays or the ultimate rejection of the drug for marketing approval. Only time will tell what the FDA decides to do. Fortunately for the company, it has a substantial cash horde of $105 million to help it fund operations until something happens with its application. Based on the $34 million used during the first six months of the year, that cash should last more than 18 months.

Anyone investing in a company whose future is based on medical research should know that they are always subject to setbacks like those received by Coulter. There is no way that everything being explored is going to work or receive government approval. Investing in a company with a limited pipeline subjects you entirely to the ups and downs of this process, since that company's prospects hinge on just one or two drugs. For people interested in the drug sector, but afraid of owning such volatile stocks, it makes much more sense to invest in a larger drug company that has its hands in lots of different drugs. Coulter's marketing partner for Bexxar, U.K. giant Smithkline Beecham PLC (NYSE: SBH) only saw a blip in its trading price this morning.