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Down 75%! The FDA Has the Final Say -- Always

Brian Orelli
May 5, 2010

The Food and Drug Administration doesn't call them final-decision committees; they're called advisory committees. And for good reason: They advise, but the FDA always has the final say.

InterMune's (Nasdaq: ITMN  ) investors are learning that the hard way today because the stock is down 75% after the FDA declined to approve the company's idiopathic pulmonary fibrosis (IPF) drug, pirfenidone.

In March, the advisory committee voted 9-3 to recommend approval of pirfenidone. As I wrote at the time, there was still a lot of risk in not getting an approval. The Motley Fool Rule Breakers team came to the same conclusion and recommended that members sell their shares because the risk didn't seem to justify the rewards.

Dendreon's (Nasdaq: DNDN  ) Provenge is the most famous case of the FDA declining to approve a drug that an advisory committee had recommended, but there have been others. Schering-Plough's -- now Merck's (NYSE: MRK  ) -- Bridion and Remoxy from King Pharmaceuticals (NYSE: KG  ) and Pain Therapeutics (Nasdaq: PTIE  </