The Food and Drug Administration is like a box of chocolates; you never know what you're going to get. When GlaxoSmithKline
The rejection was a huge shock to the company and investors alike. XenoPort's stock was riding high going into the expected announcement, but got cut by two-thirds today after the rejection.
Investors had little reason to expect a rejection. In November, the companies said that the FDA was extending Horizant's review so the agency could go over the recently-requested Risk Evaluation and Mitigation Strategy (REMS), which is used to inform doctors about the correct use of a drug. If the drug wasn't going to be approved, why review the REMS? But then again, this is a government agency we're talking about; efficiency isn't always their strong suit.
Investors also had such high hopes for Horizant because the drug is an extended-release version of Pfizer's
Figuring out what side effects the FDA will find acceptable for which indications is a tough job. Clearly, cancer drugs can slide by with fairly severe side effects, while the FDA will often heavily scrutinize the side-effect profile of weight-loss drugs like Abbott Labs'
But there's a grey area in the middle where it's difficult to judge. For instance, Novo Nordisk's
Since the FDA doesn't give many clues about which way it will decide on marketing applications, the only things investors can do are not put all their eggs in one basket and enjoy the ride up when the FDA actually does approve a drug.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Motley Fool Inside Value recommendation. Novo Nordisk is a Global Gains pick. The Fool owns shares of GlaxoSmithKline and has a disclosure policy.