Perhaps thinking ahead to the holidays, the U.S. Food and Drug Administration issued New River Pharmaceuticals (NASDAQ:NRPH) and partner Shire (NASDAQ:SHPGY) another approvable letter on Friday rather than saying it was OK for them to market their new drug for attention deficit hyperactivity disorder, or ADHD.
New River's Vyvanse is supposed to be a more abuse-resistant treatment for the disorder and first received an approvable letter from the FDA back in October. Even though another approvable letter may be disappointing, New River is expecting the FDA to fully approve Vyvanse in the near future and still sets the drug's launch for the second quarter. The FDA is still requesting no additional studies to satisfy the issues listed in the letter.
The company is still negotiating with the Drug Enforcement Administration about the labeling; Vyvanse is considered a derivative of amphetamine, and the issue should be ironed out in the next three months. These negotiations to a large degree will shape the market potential for the drug because the better the label, the easier it will be for patients to get it and for doctors to prescribe it.
The DEA labeling also will affect New River's share price because that is one of the important factors that will determine how profits will be shared with Shire. There is also $300 million on the line in milestone payments if Vyvanse receives a favorable schedule, or label, defined as a level 3 schedule or better.
With New River's $2 billion market cap, no recurring revenues to speak of, and the terms of its partnership with Shire still uncertain, shares are more than a tad too rich for my blood. Since the first approvable letter in October, shares are up 25%. Unless negotiations with the DEA are extremely favorable, considering all the risks still involved with Vyvanse, it might be smarter to sit on the sidelines until the drug's marketing position is better known.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .
