They may however be laughing (all the way to the bank) today. AVANIR's shares more than doubled today on the good news.
An overnight double is usually a sign that investors were expecting a rejection, but in this case, I think the low price ahead of the FDA decision was simply a product of investors' uncertainty over which way the FDA would rule -- this Fool included.
An earlier version of the drug was rejected by the FDA because of potential heart problems. AVANIR reduced the concentration of the offending component of the drug, which seemed to help alleviate the problem. But given the FDA's propensity towards safety -- Eli Lilly
Nuedexta is the only drug approved to treat PBA, a disease characterized by uncontrolled laughing and/or crying due to underlying neurological disease such as multiple sclerosis or amyotrophic lateral sclerosis (ALS).
Much like Acorda Therapeutics'
How big is the PBA market? Since there aren't any drugs approved to treat PBA and only a subset of patients with neurological diseases get PBA, it's a little hard to know how large the market really is.
Still with a market cap under $500 million, investors still haven't priced many sales into the stock. If the launch goes well next year, there could be another double -- albeit not an overnight one -- in AVANIR's future.
Interested in keeping track of Avanir as it launches Nuedexta? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on AVANIR.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool owns shares of Teva. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is still scared of the tickle monster.