BOSTON (TheStreet) -- Last March, Amicus Therapeutics(FOLD) - Get Report emerged from a meeting with the U.S. Food and Drug Administration with great news: A plan to seek accelerated approval for its Fabry disease drug before the end of the year -- much sooner than investors had expected. Naturally, Amicus' stock price soared on the announcement.
On Friday, Amicus backtracked badly. After another meeting with FDA regulators, Amicus now says it cannot seek approval for its Fabry disease drug this year because the FDA wants additional clinical data. How long an FDA approval filing will be delayed is not known, Amicus said.
And with that disappointing regulatory update, Amicus shares sank 38% to $8.48.
There's a valuable, albeit painful, lesson here. Biotech CEOs should shut their mouths about regulatory plans until they receive definitive word from the FDA.
Unfortunately, Amicus isn't an isolated incident. Just last week, shares of Esperion Therapeutics(ESPR) - Get Report were torpedoed after the company offered a more cautious outlook on the path required to get its cholesterol-lowering pill to the FDA based on the minutes it received from a meeting with regulators. In August, Esperion executives assured investors the FDA meeting went really well. And one month later, they were forced to backtrack.
In the rush to deliver stock performance and good news to investors, drug company CEOs are getting too aggressive with regulatory forecasts. They walk out of FDA meetings believing what they want to hear -- and blab happily to investors -- instead of waiting for definitive decisions. FDA officials may not be entirely fault-free here, either. Promises made to companies in these meetings may be pulled or revised. But that's just another reason for biotech companies to be more conservative when it comes to informing investors about FDA interactions.
Amicus CEO John Crowley is considered one of the trustworthy and well-liked executives in biotech, but perhaps not so much after Friday's blowup. It takes a long time to build up credibility with investors, and just seconds to lose it.
These destructive episodes are also another reminder that the regulatory dance companies go through to get their drugs reviewed and approved by the FDA is conducted with too little transparency. The FDA is not allowed to comment publicly on regulatory matters pertaining to unapproved drugs, so investors must rely on companies developing those drugs for information. Too often, what companies tell investors about their dealings with the FDA diverges from the truth.
The solution is relatively simple: Biotech and drug companies should be compelled to disclose publicly all material FDA communications. Investors should get to see copies of FDA meeting minutes, or exactly what's contained in the FDA letter rejecting a drug's approval. More transparency on regulatory matters might not prevent all blowups like Amicus but it would greatly reduce them.
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.