Shares of Palatin Technologies (PTN -1.47%) fell over 21% on Tuesday after STAT analyst Adam Feuerstein said that the Food and Drug Administration "made a mistake" by approving the company's new drug, Vyleesi. The drug is intended to treat hypoactive sexual desire disorder (HSDD), or low libido, in women.
Investors didn't take the criticisms lightly, owing to Feuerstein's status and reputation for blunt and honest analysis over the years. Shares of Palatin and AMAG Pharmaceuticals (AMAG), both involved in the drug's manufacture and marketing, sank initially.
As of 3:04 p.m. EDT, Palatin stock had settled to an 8.3% loss, while AMAG had a 3.4% gain.
Whether or not the FDA "erred" as Feuerstein contends, it's all a moot point now that the drug has earned marketing approval. The real issue will be whether or not the drug gains any market traction. Feuerstein is correct that the drug demonstrated little benefit in clinical trials and could prove to be rather inconvenient since it has to be injected.
What's more, nearly 40% of women taking the drug in clinical studies reported nausea, and the FDA recommends no more than eight doses per month. While the drug has yet to be priced, there are plenty of warning signs that it could prove to be a commercial flop.
Palatin Technologies was a risky, small-cap stock at the start of 2019. Although shares gradually climbed to a year-to-date gain of 120% by mid-May, they've receded since the fiscal third-quarter 2019 earnings conference call. The company now sports a market cap of just $225 million. Therefore, even if individual investors aren't fond of Feuerstein, there's no denying that Mr. Market isn't terribly optimistic about the company, either.