Are Two FDA Approvals in One Week a Positive Sign?

Bristol-Myers Squibb (NYSE: BMY) received Food and Drug Administration approval for its kidney transplant drug Nulojix yesterday, marking the second approval this week from the FDA. On Monday, Valeant Pharmaceuticals (NYSE: VRX) and GlaxoSmithKline's (NYSE: GSK) announced that the FDA had approved their epilepsy drug Potiga.

Before we start giving high-fives and inviting our new best friends at the FDA to sit around the campfire singing "Kum-ba-yah," let's keep this in perspective. These approvals definitely don't mean the FDA is becoming more lenient.

This wasn't Bristol-Myers' first attempt to gain FDA approval for Nulojix. Despite a solid 13-5 endorsement of Nulojix by the FDA advisory panel, the agency ignored the majority of outside experts and asked for additional safety data before it would approve the drug. Sure, the drug got approved eventually, but Bristol-Myers missed out on a year of revenue in the process.

It was Potiga's second attempt at an approval as well, although Valeant and Glaxo didn't have to wait as long to gain approval. The FDA turned down the drug late last year for non-clinical reasons, which helped facilitate the quicker return to the jury room.

Recent FDA endorsements of hepatitis C drugs by Merck (NYSE: MRK) and Vertex Pharmaceuticals (Nasdaq: VRTX) were first-attempt approvals, but they were for unmet needs and their data packages were extensive to say the least. And for every Victrelis and Incivek, there's a Contrave, from Orexigen Therapeutics (Nasdaq: OREX), where it looks as though the FDA has no intention of ever approving the drug.

At this point, unless the drug has solid data and treats a disease with limited treatment options, investors should continue to expect a high probability of a first-approval rejection.

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