5 Companies Awaiting FDA Decisions On July 26, 27, And 30 That I'm Considering

by: Matt Schilling

Its known fact that, among drug companies and those who invest in them, an FDA decision can either make or break the applicant company's entire future moving forward. With that being kept in mind, there are four FDA decisions that could very well make or break the applicants noted in this article. On July 26th there are two such decisions anticipated to be handed down, involving separate companies, and subsequent decisions involving a joint venture on July 27th and another involving an individual company on July 30th.

The Trading Behavior of Recent FDA Approvals

Investors should consider how recent FDA approvals have affected the trading of certain stocks and understand that even though some sound promising, they may not always move a stock as much as one would like. In the past month for example, we've seen the FDA approve applications with regard to weight-loss drugs from both Vivus (NASDAQ:VVUS) and Arena Pharmaceuticals (NASDAQ:ARNA), and as a result of the approvals, both stocks were initially halted and subsequently traded higher when they reopened for trading.

On the other hand, Forest Labs (NYSE:FRX), which received FDA approval on July 23rd for its drug Tudorza Pressair, aimed at helping patients with COPD who are affected by an associated ailment called bronchospasms, actually traded down during both the July 23rd and July 24th trading sessions. FRX's non-movement is also a sign that even though the drug was approved, and is an important one at that, it may not be considered as big of a deal as a weight-loss drug is amongst those trading pharmaceutical stocks.

FDA Decisions Set For July 26th

Thursday, July 26th is going to be a fairly busy day for investors in the pharmaceutical sector as two separate companies await FDA decisions. The first company up is Amarin Corp. (NASDAQ:AMRN) which is awaiting an FDA decision on its drug Vascepa, which is a fish-oil also known as AMR-101. Adam Feuerstien of the TheStreet.com anticipates the drug will be approved, without a hitch, and a short-term pop in the stock could very well follow. That said, there is something with regard to behavior that concerns me here. AMRN may pop out of the gate; however, traders may be concerned about the timeframe between the approval and estimated launch of the drug, which could result in a bit of a sell-off of the stock if that anticipated time frame is longer than 6 months.

The second of the scheduled FDA decisions concerns a company called Horizon Pharmaceuticals (NASDAQ:HZNP), which is awaiting a decision with regard to its drug Lodotra. Lodotra is geared toward patients suffering from Rheumatoid Arthritis, which is can cause serious damage to the joints and bones and result in extreme pain to those affected by the disease. Rheumatoid Arthritis, which has no known cause, is a very big deal in the US and abroad, since it affects nearly 1.8 million people a year. Investors should note that Lodotra has already been approved in Europe and a positive decision by the FDA could in fact enhance the stock as early as the fourth quarter, assuming the company receives approval and plans to launch the drug within 90 days.

If the FDA decision is a favorable one, we could certainly see a short-term pop in the stock (about 10%-15%) which will be followed by the stocks sustainability above the $8.20/share mark between the time of the approval and launch date if that number happens to be less than 90 days. Any period over a 90-day span may result in pockets of profit taking and sustainability near current levels of $7.60/share.

FDA Decisions Set For July 27th

On Friday, July 27th, the FDA will hand down a decision that involves a joint venture of Salix Pharmaceuticals (NASDAQ:SLXP) and Progenics (NASDAQ:PGNX) and their drug Relistor SC which is intended for opioid-induced constipation. Investors should note that this is an additional indication for currently approved Relistor, and this decision will made with regard to its application for patients experiencing non-cancer induced pain. I think that both SLXP and PGNX will fare very well if the drugs additional patient application is approved. We aren't going to see a 20% pop in either stock, although we may see 3%-5% pops and sustainability above current trading levels for both companies.

FDA Decisions Set For July 30th

On Monday, July 30th, the FDA is expected to hand down a decision with regard to the drug Arcalyst. Arcalyst, which is made by Regeneron (NASDAQ:REGN), for the treatment of Cryopyrin-Associated Periodic Syndromes (CAPS), is expected be approved for patients suffering from gout and gout flare-ups. Arcalyst is intended to reduce the magnitude of such flare-ups and subsequently reduce the pain endured by such patients. If REGN receives a favorable decision from the FDA with regard to the additional use of Arcalyst, the behavior of the stock should be the catalyst that will initiate a very nice late-summer rally since the company has two more FDA decision dates closely approaching. The upcoming dates are August 4th, when the company should receive a decision regarding Zaltrap (intended for patients suffering from colon cancer) and September 21st, when the company is expected to receive an additional application decision with regard to its drug Eyela.

Final Analysis

Based on the trading behavior of the five companies mentioned, I think Amarin, Horizon, Salix and Progenics should fare pretty well if the FDA hands down favorable decisions. Do I think any of them will see 20%-30% pops in such a case? No, although positive pops as high as 10%-15% could occur. If the FDA hands down an unfavorable decision for any of the companies, a position at current levels should not be established.

With regard to Regeneron, I think the company is positioned very well; however I think Zaltrap could play a negative role if an unfavorable decision is handed down. Phase III trials of Zaltrap haven't been all that great, since they were unable to meet the primary endpoint of the study, raising a significant concern for myself when considering a position in the company. Even though the upcoming FDA decision is in regard to Arcalyst, the most significant of the three is certainly Zaltrap, and any positivity gained from a possible approval of Arcalyst could be wiped out if Zaltrap is not approved.

Disclosure: I am long ARNA, VVUS, FRX, SLXP, AMRN.