Really? A 59% Share Price Jump for That?

Stock movements are always about expectations. Exceed investors' expectations, even if the results are far from exhilarating, and the stock is likely to go up. When those expectations are on something as subjective as the Food and Drug Administration's opinion of a drug's data, you'll often see wild moves.

Exhibit A: InterMune's (Nasdaq: ITMN) 59% move up on Friday after the FDA posted its briefing documents for tomorrow's advisory committee meeting to review the company's lung drug, pirfenidone.

As you may recall, pirfenidone passed only one of its two clinical trials testing the drug in idiopathic pulmonary fibrosis (IPF) patients. That would normally be a huge roadblock to approval because the FDA generally wants to see the drug work in two well-controlled clinical trials before approval. But IPF is a particularly deleterious disease with no drugs currently approved to treat it, giving investors a little hope that the FDA will bend the rules. For the last 13 months, investors have waited to see how likely that was to occur.

Investors liked what they saw, but I'm still not sure we know how likely an approval is, frankly. The FDA certainly didn't come out and tell the committee of experts to ignore the failed trial. Perhaps investors are excited about what wasn't said -- there was no clear signal that the FDA was unwilling to approve the drug. Essentially the FDA threw up its hands and asked the advisory panel to help it make up its mind.

Doctors on the panel may be more lenient about the data requirements because they're in the field and know patients are clamoring for additional treatment options. An iffy drug may be better than no drug at all.

The committee's vote tomorrow will be important. Very important. But even a positive approval by a wide margin isn't a guarantee that the FDA will follow the advice. All of these drugs were rejected after positive advisory committee meetings.

Source: Company press releases.

If we see a thumbs up from the FDA, I think it'll likely come in the form of an accelerated approval, like Johnson & Johnson's (NYSE: JNJ) HIV drug Intelence and Bristol-Myers Squibb's (NYSE: BMY) cancer drug Sprycel have received. InterMune will be allowed to market the drug, but it'll have to run an additional trial to confirm the drug works. If that trial fails, you can expect the roadblock to turn into a blown up bridge.

Stay tuned Fools. This is going to be one bumpy ride.