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Why Collegium Pharmaceutical Shares Are Tumbling 12.9% Today

By Todd Campbell - Nov 22, 2017 at 4:18PM

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The FDA is working on ways to encourage the development of abuse-deterrent opioid pain relievers, and that's potentially bad news for this tiny biotech.

What happened

After FDA commissioner Scott Gottlieb issued a statement suggesting an easier path to winning approval for generic opioids that are abuse deterrent, shares in Collegium Pharmaceutical's (COLL 6.03%) were sliding 12.9% at 3:45 p.m. EST Wednesday.

So what

In an effort to boost the prescribing of abuse-deterrent opioid medicines for pain relief, Gottlieb's statement outlines changes that could increase competition and drive down the prices.

A businessman looking on as a giant red arrow crashes downward through a concrete floor.

Image source: Getty Images.

Specifically, the regulator's updating its guidance on how to design trials to demonstrate that generic drugs matchup to their brand-name counterparts. It's also streamlining review practices and processes so that drugmakers have a better chance of getting their drugs through the FDA gauntlet to market.

The move to quicken the development of generic drugs that are abuse deterrent may pose a risk to Collegium Pharmaceutical's Xtampza ER, a fast-growing brand-name option. Despite prices that are north of traditional opioids, Xtampza ER has enjoyed significant growth in the past year as doctors shift away from drugs like Oxycontin.

Xtampza ER sales grew 2,815% to $12 million in the third quarter of 2017 while prescription volume jumped 49% quarter over quarter.

Now what

Xtampza ER combines oxycodone with a fatty acid and wax to create tiny beads that are hard to physically and chemically manipulate for non-prescription use. It's designed and approved for use in patients who require around-the-clock pain control.

Although demand for Xtampza ER is growing rapidly, the FDA appears concerned that premium pricing for Xtampza ER and other abuse-deterrent alternatives is crimping sales. If the new guidance results in new competitors, Collegium Pharmaceuticals could see a drop off in prescription growth or be faced with having to compete on prices to maintain its market share. Neither of those two outcomes would be good news for investors.

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