The specialty pharma sector has a well-deserved reputation for volatility. Last week, Ligand Pharmaceuticals (NASDAQ:LGND) saw its shares fall 36% one day,  then rise 49% two days later, amid shifting perceptions about the prospects for its lead drug, Promacta.

Why the yo-yoing stock? Look no further than last week's FDA advisory panel hearing for Promacta. The drug candidate is under FDA review as a short-term treatment for a blood-clotting disorder, idiopathic thrombocytopenic purpura (ITP). Marketing partner GlaxoSmithKline (NYSE:GSK) is handling the Promacta New Drug Application.

Early in the week, the FDA released a position paper on the compound that seemed to indicate that it might not approve the drug this month -- its PDUFA date is June 19. Then an independent advisory panel voted 16 to 0 that the drug shows a benefit with short-term use, even though the FDA had concerns about the strength of the statistical efficacy data in the Promacta marketing application.

Interestingly, the advisory panel abstained from voting on whether to recommend that the FDA delay its Promacta approval decision until more data from other studies come in. Last week, I predicted that the FDA would delay approval of Promacta until this data was available and a marketing application for Promacta's long-term use in ITP was completed this year.

There's always a lot of guesswork involved in whether the FDA will approve a compound or not, and a positive advisory-panel recommendation surely helps Promacta's odds of approval.

As I said last week, the FDA never calls an advisory panel hearing unless it is on the fence about whether or not to approve a drug. Some sort of accelerated approval decision is possible, which would require more data and research requirements. But in the meantime, such a decision would also allow Promacta it on the market -- a la Genentech's (NYSE:DNA) Avastin. I still think an approvable letter for the compound is the most likely outcome if an FDA decision comes out later month.

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