What happened
A rough day for the broad market is a downright terrible one for Opko Health (OPK 2.46%). Shares of the drug and diagnostics outfit were down by 23% as of 1:22 p.m. ET on Monday following Friday's post-close announcement that a growth-hormone deficiency treatment co-developed with Pfizer (PFE 0.59%) won't be approved by the Food and Drug Administration (FDA), at least not as requested in the initial New Drug Application.
So what
The drug in question, somatrogon, aims to treat growth hormone deficiency in children. Pfizer and Opko have been working together on the treatment since 2014. Although approved in some overseas markets, the FDA has issued what is called a Complete Response Letter (CRL) regarding the drug's potential approval within the all-important U.S. market. While not an outright rejection of somatrogon, a CRL does indicate the regulator doesn't believe the treatment provides enough public benefit as tested, relative to the risk it might pose to patients.
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It's still possible the data from somatrogon's trials could be reviewed and then used to support a request for a different use or a narrower use. Indeed, Pfizer's chief development officer for rare disease, Brenda Cooperstone, said, "We will work closely with the FDA to determine the best path forward to bring this important once-weekly treatment option to pediatric growth hormone deficiency patients and their families." Given how tightly focused drug trials are, however, such a repurposing is a long shot, at best.
Now what
Somatrogon was a more important prospect for Opko Health than for Pfizer, whose stock is only lower by 4.8% today (and much of that weakness can be attributed to the marketwide sell-off). Indeed, Pfizer's portfolio and pipeline remain large enough that today's pullback could be a good entry opportunity for true long-term investors.
As for Opko Health, though, would-be buyers may want to think twice before jumping in. Much of the stock's gain logged in 2020, which had held up through Friday of last week, was based on assumptions that somatrogon would enter the underserved and somewhat fragmented market for growth hormone deficiency. Mordor Intelligence says that market is worth around $5 billion now, but could be worth $7.5 billion by 2026.
Investors may remain shell-shocked for the next several days, during which time Opko shares could continue to suffer from downside volatility. Interested investors will want to wait for a less emotionally-charged environment to assess the company's future.
