That drop in share price you saw on Friday with Theravance (NASDAQ:THRX) was because investors became wary about its lead drug being approved.

Theravance announced last week that the Food and Drug Administration might hold an advisory panel hearing for its lead drug, an antibiotic named Telavancin. This kind of hearing consists of leading medical experts getting together to discuss the pros and cons of the experimental drug and whether to recommend that the FDA approve it.

An advisory panel hearing is usually convened when an FDA team reviewing a drug has substantial questions about the drug that it wants answered by experts outside the agency. For a drug not expected to win approval, this hearing raises some hope for the drug's odds at the FDA. Likewise, an advisory committee meeting for a drug like Telavancin (which was expected to be approved) should raise a few more doubts about its chances.

In the case of Telavancin, the drug most recently received approvable letters in October from the FDA. Theravance officials believed that no new clinical trials were needed to fix the FDA concerns holding up approval, but did note that the agency had concerns about the manufacturing of Telavancin. Cryptically, they also added that the FDA requested "re-analyses of clinical data or additional clinical data" (emphasis mine), and Theravance did announce results from another phase 3 study of the drug earlier this month.

Theravance gave no date for when the panel hearing may occur, but whenever it does, the FDA will release its briefing documents describing its thoughts on Telavancin a few days before the meeting. Investors should check this FDA page to see these briefing documents beforehand because they are a great indication of which way the FDA is leaning in its decision on a drug.

Overall, the announcement of a panel hearing may turn out to be only marginally bad news for Theravance investors, but bad news for Theravance is good news for competitors like Cubist Pharmaceuticals (NASDAQ:CBST). Wyeth (NYSE:WYE), and ViroPharma (NASDAQ:VPHM), which offer antibiotics that have already been approved.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has an A+ disclosure policy.