Pharma Foe Speaks Up for Investors

Dr. Steven Nissen is no friend to drug companies (nor, by extension, Foolish drug investors). He sunk GlaxoSmithKline's (NYSE:GSK) Avandia with his meta-analysis, and he's been critical of Merck's (NYSE:MRK) and Schering-Plough's (NYSE:SGP) Zetia.

But the doctor actually has some good ideas for President Obama's new Food and Drug Administration chief -- unlike my satirical take on the matter -- that would benefit investors in drug companies. In a commentary published recently in Nature, Nissen argues that, among other things: "The [FDA] must cease to regard clinical-trial data as proprietary and provide access to all available information on safety and efficacy. This policy should apply to information gathered during approval for drugs, and to post-approval surveillance."

Now that's something I can get behind. Getting more information about why a marketing application is turned down would be an immense help to investors, considering the minute amount of information we get now.

For instance, Pfizer (NYSE:PFE) got a complete response letter from the FDA last week for its osteoporosis drug, lasofoxifene, but the communication from Pfizer to investors was far from complete: "Pfizer is reviewing the letter and will work with FDA to determine the appropriate next steps regarding the company's application." I mean, really, why not say what you actually meant, Pfizer? "We read the letter, but we're not going to share it with you."

Instead, the company's oblique update isn't much help. What is needed to get it approved? When might we begin to see revenue? Investors need this and similar information.

Smaller drug companies are sometimes a little more forthcoming with information contained in rejection letters. At least King Pharmaceuticals (NYSE:KG) and Pain Therapeutics (NASDAQ:PTIE) let investors know that further clinical trials wouldn't be required for their abuse-resistant painkiller, Remoxy. But they, too, failed to say exactly what the FDA required to approve the drug.

I'm willing to bet that investors would have stayed far away from Encysive Pharmaceuticals as it received rejection after rejection of its pulmonary arterial hypertension treatment, Thelin, had they known exactly what was in the first rejection letter.

Hmm. Maybe that's the point.

Sure, there's some competitive advantage to companies not disclosing that information to investors -- and therefore, their competitors. But is that worth lacking more complete information? Dr. Nissen says no. I agree with him.

Further Foolishness:

• Start making some serious dough off of drug companies.
• Will Obama make your portfolio healthy?
• Five stocks for the new administration.