Investors Display Allergic Reaction to Sepracor
Adam Feuerstein
03/07/02 - 07:42 PM EST
Now that shares of
Sepracor have been crushed because U.S. drug
regulators rejected its highly anticipated allergy drug Soltara on Thursday,
shell-shocked investors and analysts are trying to figure out whom to
blame.
Is the Soltara fiasco the fault of a way-too-cautious Food and Drug
Administration? Or has Sepracor been misleading investors all along
about potential safety problems with its drug?
Shares of Sepracor plummeted $27.63, or 58%, on Thursday, closing at $19.64.
On a conference call, Sepracor executives expressed
shock and disappointment over the FDA's decision, suggesting that the
agency's concerns came out of left field.
"We were anticipating an approvable letter coming over our fax machine
on Friday afternoon," said Sepracor CEO Timothy Barberich. "But instead, at
4:30 p.m. yesterday, we received an urgent message from the FDA asking to set
up a conference call. We were then told that they would be issuing a
nonapprovable letter for Soltara."
The FDA rejected Soltara because it said Sepracor's application didn't
contain sufficient safety data to warrant approval. As a result, the drug
will be delayed for at least a year, the company said. Investors fled the
stock because the company expected Soltara sales to make up a large part of
2002 revenue, as much as $100 million.
Sepracor Slugged
Expensive one-day tumble |
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Soltara is actually a re-engineered version of an older drug, Hismanal, from
Johnson & Johnson. But Hismanal was yanked off the market because some
people experienced an irregular heartbeat, a condition known as QTc
prolongation.
The FDA rejected Soltara mainly because it said Sepracor didn't test
the drug's safety for a long enough period of time. Specifically, the
agency is concerned that small amounts of the drug can accumulate in a
person's tissues and cause potential heart problems.
But Sepracor executives said the safety tests they did conduct
indicated that QTc prolongation was not an issue with Soltara. They
conceded that they could have done the lengthier safety testing, but that
at no point during the approval process did the FDA express enough concerns
to warrant it.
"The first time we heard about this issue was during our [Wednesday]
conference call," said Barberich.
One analyst at a large Wall Street asset management firm says he's
inclined to believe Sepracor management, and sees the whole flare-up as
another example of the FDA getting overobsessed with safety concerns. This
analyst's firm holds long positions in Sepracor.
"The nature of this issue is pretty damn obscure," he says. "The safety
data compiled by Sepracor was pretty clean, but the FDA is rejecting this
drug because they're concerned about a theoretical problem."
Still other analysts suggest that the FDA, stung by the recall of
several drugs in the last few years, is not inclined to look past any
safety risks -- real or potential -- for a drug that treats a rather
pedestrian health problem like seasonal allergies. Hay fever sufferers
already have a slew of prescription drugs to choose from, including
Claritin, Allegra and Zyrtec.
By comparison, last year, the FDA approved
Pfizer's new schizophrenia
drug, Geodon, despite the fact that it, too, causes QTc prolongation. Some
FDA regulators recommended against Geodon's approval, but the agency gave
it the green light because schizophrenia is a serious disease with
relatively few treatment options.
But other fund managers suggest that Sepracor is not blameless here
because there is ample precedent that could have led the company to conduct
more stringent safety testing. French drug firm Aventis did exactly this
before getting Allegra approved by the FDA. The reason: Allegra is also a
reworked version of an older allergy drug, Seldane, which was pulled from
the market for the same irregular heartbeat concerns.
The FDA rejection letter today also mentioned safety concerns that
cropped up in two clinical studies conducted on animals, but Sepracor has
never made these studies public.
It seems certain that Thursday's Soltara setback will further feed the
debate over the FDA's performance. Industry critics of the agency believe
regulators have become too timid -- obsessed with drug safety to the point
that the review process has slowed to a crawl, or worse, worthy drugs are
being unfairly rejected.
But FDA supporters argue that recent drug recalls bolster the need for
even more safety reviews. Drug companies are the real culprits because they
insist on filing sloppy or incomplete drug applications, they say.
But this is no comfort to Sepracor investors, who watched, helpless, as
more than $2 billion in market value vanished in one trading session.
