It's interesting when a biotech company announces an FDA approval for a new indication, yet its stock price remains flat or even goes down. Either approval was completely expected, as it was for Onyx Pharmaceuticals
Let's see which camp Omrix Biopharmaceuticals'
Evicel is a human-derived product designed to stop bleeding during surgery. It has previously been approved for liver and vascular surgery, but now Omrix's marketing partner, Johnson & Johnson
Omrix doesn't report sales of its individual products, but we can use its breakdown of biosurgical products to get a good idea of whether surgeons are warming up to Evicel. Omrix received FDA approval for vascular surgery in May, and biosurgical product sales doubled from the second to the third quarter of last year. Clearly, vascular surgeons like the product.
It will be interesting to see how Evicel competes in the broader surgical market. Its biggest advantage is that it stops the bleeding fast and, being a clear solution, allows the doctor to see whether the bleeding has stopped.
The biggest disadvantage for doctors is probably that Evicel isn't readily available like cellulose products are. The solution has to be thawed before it can be applied to the patient, although it can be stored in the refrigerator for a month, so only a little foresight is needed.
It appears to me that investors already have additional sales of Evicel built into their models, and the small sell-off probably wasn't due to a lack of a market for the drug. We'll get to see how well investors guessed the additional sales of Evicel, as well as Omrix's new thrombin product, in a few quarters.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a selection of the Income Investor newsletter. The Fool has a disclosure policy.