Biotech investors know that simply generating some positive clinical trial data for a candidate treatment is no guarantee that the drug will make it to market. The U.S. Food and Drug Administration (FDA) looks deep before giving its approval. And when a company announces that it has received either an FDA approval letter -- or its dreaded counterpart, the complete response letter -- that can dramatically impact its stock price. 

One way or another, these three companies should get that sort of news this month.

FDA Approved stamp in red ink

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Amarin seeks a broader approval

Amarin (NASDAQ:AMRN) spent much of 2019 in the news. Sales of Vascepa, its fish oil extract pill, took off, and the stock price did the same. The drug was initially approved to lower triglycerides in patients whose levels were severely elevated. However, after it released fresh data showing that Vascepa also helps mitigate cardiovascular events, the company presented to an FDA advisory panel that debated the merits of expanding the approved label in a way that would give it millions of potential new users.

Based on data from nearly 8,200 patients, Vascepa resulted in a 25% reduction in first occurrences of major adverse cardiovascular events (MACE).

The FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted 16-0 in favor of expanding Vascepa's label to include its use for reducing cardiovascular risk in patients treated with statins. The FDA does not have to follow its panels' recommendations, but it generally does, especially when the votes are unanimous. The debate now is about how broad or restrictive the FDA will ultimately be. The regulator has until Dec. 28 to make its decision, and Amarin shareholders eagerly await it.

Allergan awaits approval for its migraine drug

The FDA is expected to weigh in any day now on a pending migraine treatment from Allergan (NYSE:AGN). This could potentially be the first orally available small-molecule drug that works by interacting with a specific receptor found in a pathway responsible for pain. The drug targets the calcitonin gene-regulated peptide (CGRP) receptor. 

In 2018, the FDA approved three monoclonal antibodies targeting the CGRP receptor to prevent migraines. These drugs require monthly injections. Allergan hopes the FDA will find that the data from its four studies substantiates the efficacy and safety of ubrogepant as an intervention for acute migraines, as opposed to prevention like the approved antibodies.

However, hard on ubrogepant's heels come Zydis and Vazegapant, a pair of small-molecule CGRP receptor antagonists from rival Biohaven Pharmaceuticals (NYSE:BHVN). Zydis is an orally dissolving formulation that has been submitted for FDA approval to treat acute migraines. Vazegapant is a novel inhaled formulation, and Biohaven expects to present top-line pivotal Phase 3 trial data on it this month, with a potential FDA filing next year. 

Investors can view all this activity surrounding the CGRP receptor as a route for treating migraines as reinforcement of its importance. Arguably, the fact that multiple treatments and companies see the mechanism as so promising means that there's a lower risk of them failing. As a possible blockbuster in the making with millions of potential patients, ubrogepant should be a meaningful future revenue driver, if approved. Allergan shareholders voted in October in favor of the company's previously announced acquisition by AbbVie (NYSE:ABBV). The deal has yet to close, but approval of this drug should only bolster its attractiveness to AbbVie shareholders.

FDA to weigh in on a novel schizophrenia treatment

Intra-Cellular Therapies (NASDAQ:ITCI) expects to hear from the FDA about the fate of its schizophrenia drug lumateperone by Dec. 27. The drug's novel mechanism acts on three different neurotransmitters: dopamine, serotonin, and glutamate. 

The National Institutes of Health says approximately 2.4 million Americans suffer from schizophrenia, and the American Psychiatric Association believes as much as 1% of the global population has this affliction.  Although treatment options exist, many have side effects. Intra-Cellular believes as many as 60% of patients discontinue their treatments or switch therapies within months of starting them. Clearly, patients are seeking better options with fewer, more-manageable side effects.

In two phase 3 trials run in the U.S., lumateperone demonstrated a statistically significant improvement compared to placebo using the Positive and Negative Syndrome Score (PANSS). One trial included risperidone, an approved antipsychotic, which performed in line with Intra-Cellular's drug. 

Now for the big distinction. In those studies, Lumateperone did not negatively impact metabolic and endocrine levels as risperidone does. In fact, in pooled data from three clinical trials lumateperone looked more like a placebo on multiple parameters including total cholesterol, fasting glucose, and body weight. Intra-Cellular believes this will make lumateperone more appealing to patients and their doctors.

Intra-Cellular has begun to build out its team to prepare for the commercial launch of lumateperone. Given that it's the smallest of the companies discussed here, both by market capitalization and number of employees, it's not too farfetched to think Intra-Cellular might look to be acquired. It will likely require substantial investment to achieve commercial success with a treatment for schizophrenia and bipolar disorder, the company's second target for lumateperone. A larger acquirer or partner could provide the extra financial muscle needed.

Catalysts are coming by 2020

Of the three stocks, Allergan is the least risky but has the lowest upside. Amarin's stock jumped from the mid-teens to the low $20 range based on the positive FDA advisory panel vote. With a broad approval, the stock should maintain that upward trajectory, while an overly restrictive approval or a non-approval would likely shave 25% to 50% off the share price.

As an investment, Intra-Cellular carries the most risk as lumateperone has not yet been approved, nor does the company have any other approved drugs. But with the stock trading below $10 a share, the risk-reward equation may look attractive, particularly to speculative investors.