This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Clinical Data: The FDA Bear Thesis Explained

Stocks in this article: CLDAGSK

NEWTON, Mass. ( TheStreet) -- A Wall Street hedge fund source who happens to be one of the smartest neuro-pyschiatric drug analysts I know is shorting Clinical Data (CLDA) on the belief that U.S. regulators will reject the company's antidepressant vilazodone on or before a key Jan. 22, 2011 approval decision date.

"Vilazodone is a marginally effective antidepressant that is trying to gain approval into a crowded, genericized class of drugs in which many of the generics are, in fact, better," said the analyst, who works for a fund that doesn't allow its employees to be quoted by name in the media.

Clinical Data conducted two, phase III studies of vilazodone, both of which successfully met their primary endpoints. Isn't that enough to get the drug approved by FDA?

"Clinical Data did the bare minimum clinical work necessary to get vilazodone approved," the analyst says, adding that the lack of a robust data package including marginal efficacy data and no studies comparing vilazodone to active, currently marketed antidepressants will give FDA reviewers the clinical justification needed to reject the drug and request at least one additional pre-approval study.

"I give vilazodone a 35-40% chance for first-pass approval," the analyst says. His short position is predicated on the low probability of a vilazodone approval as well as a fully diluted market value for Clinical Data of around $750 million when convertible debt and stock warrants are included.

Sell-side analysts are taking a much more optimistic view of vilazodone's chances with FDA. Wedbush's Greg Wade advised clients in a Nov. 10 research note that, "Based upon the strong trial data, promising safety/tolerability profile, precedent for the two mechanisms of action, and the fact that vilazodone is the first drug for depression to have success in its first 2 Phase III trials, we believe the drug has an excellent likelihood of approval, and the stock at $18.85 a share has a favorable risk-reward profile to our $28 price target."

The U.S. antidepressant market is worth about $12 billion in annual sales, so the stakes are high for vilazodone.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs