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Why Shares of Heron Therapeutics Are Crashing Today

By George Budwell - Feb 29, 2016 at 12:20PM

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The FDA delays Sustol's regulatory decision yet again.

What: Shares of Heron Therapeutics (HRTX 1.19%) dropped by as much as 16.7% in early morning trading today after the company announced that the FDA has still not concluded its regulatory review of Sustol, an experimental drug indicated for chemotherapy-induced nausea.

Image source: Wikimedia Commons

So what: Sustol's review was originally supposed to wrap up by Jan. 17, 2016. However, the FDA informed the company that it needed additional time complete the drug's review last January, initially pushing the target review date back to Feb. 26. Sustol's regulatory decision has thus been delayed twice by the FDA since the start of the year. 

Now what: The market is growing increasingly concerned that these repeated delays might indicate that the FDA is about to issue its third Complete Response Letter for this much-maligned experimental drug -- despite the drug reportedly outperforming GlaxoSmithKline's (GSK 2.20%) former blockbuster Zofran in its latest pivotal-stage trial.

Although it's impossible to know why the FDA is taking so long to complete this particular review, these delays do show that the drug's approval isn't exactly a slam dunk. As such, investors might want to remain on the sidelines with this stock until this significant regulatory risk is off the table. 

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