What happened
Shares of Bausch Health Companies (BHC 1.05%) were down by 11.3% on sky-high volume as of 10:56 a.m. ET Tuesday morning. The big loss came after the drugmaker announced that the Food and Drug Administration (FDA) tentatively approved the abbreviated new drug application (ANDA) from Norwich Pharmaceuticals for the irritable bowel syndrome medication Xifaxan on June 2, 2023.
So what
Earlier this year, Bausch won a favorable ruling from the U.S. District Court of Delaware barring the FDA from officially approving an ANDA for Xifaxan until Oct. 2, 2029. In its June 2, 2023 letter, the FDA reportedly reaffirmed this later date as the benchmark for final approval.
Xifaxan has consistently been one of the biggest growth drivers within Bausch's Salix Pharmaceuticals subsidiary over the past few years. As such, the availability of a cheap, generic rival is indeed cause for worry for the drugmaker's shareholders.
Fortunately, today's news doesn't seem to fundamentally change the situation on the ground. As things stand now, Norwich hasn't obtained final approval for a Xifaxan generic.
Now what
Why is Bausch's stock plunging on this bookkeeping news from the FDA? Bausch also noted in its response that Norwich is suing the agency in federal court in an attempt to gain final approval.
This is a long-shot legal maneuver, to be sure. But there is a non-zero chance that Bausch could be dealing with a Xifaxan generic sooner than expected. Given the market's deep aversion to risk, it's not surprising to see the biopharma's shares reacting poorly to this protracted legal battle.
