This is a bonus story from Adam Feuerstein, whose biotech coverage usually runs only on RealMoney . We're offering it today to TheStreet.com readers. To read Adam's commentary every day,
click here for information on a free trial to RealMoney. There are two things that really get biotech stocks moving -- results from phase III clinical studies and approval decisions issued by the Food and Drug Administration. Genentech ( DNA), for example, has been red-hot over the last year because the firm has had unprecedented success on both fronts, leading to FDA marketing approvals for three new products: the psoriasis drug Raptiva, the allergy drug Xolair, and most important of all, the cancer drug Avastin. The FDA's huge influence on biotech stocks is undeniable, but understanding the drug approval process isn't so easy. It shouldn't shock anyone to hear that FDA rules and procedures, like most governmental bureaucracies, aren't necessarily designed to be easily understood. But a solid understanding of the FDA approval process is essential to smart biotech investing. So, this "Biotech 101" column is for investors who are interested in learning the ins and outs of the FDA. (A previous "Biotech 101" column covering the three phases of clinical trials was published in April.) Erbitux . On the flip side, Genta ( GNTA) shares have tumbled because the company was forced to withdraw its cancer drug Genasense from the FDA after the agency's advisory committee voted overwhelmingly to recommend against approval. Filing a drug with the FDA is literally a big job. Genentech's Avastin filing, for instance, was approximately 11 gigabytes in size, which equals 17 CD-ROM discs, or more than 60,000 printed pages. Avastin is a biologic drug, which means that it's manufactured by genetically altering living cells and growing them in large vats so that they produce the drug (a protein), like miniature living drug factories. In accordance with regulatory policy, when Genentech filed Avastin with the FDA, it submitted a Biologic License Application, or BLA.
Traditional pharmaceutical products -- i.e., pills -- are made from relatively simply chemical ingredients. Approval filings for these drugs are known as New Drug Applications, or NDAs. But while products covered under BLAs and NDAs differ, the steps taken by the FDA to review the two kinds of approval applications largely do not.
Last week, the FDA said it granted "priority review" status to Antegren, the multiple sclerosis drug being developed by Biogen Idec ( BIIB) and Elan Pharmaceuticals ( ELN). The companies submitted Antegren to the FDA on May 25; thus the drug's PDUFA date falls on or around Nov. 25. The FDA typically uses a "standard review" to handle drugs for non-life-threatening diseases. Here, the FDA will accept or reject a drug application within 60 days from the filing date, and an approval decision is issued in 10 months. The FDA can request additional time to make a decision, if necessary.
Though the FDA is not required by law to follow the recommendation of its advisory panels, historically it has, albeit with some exceptions. That's why drug stocks react strongly, up or down, based on the recommendations that come out of advisory panel meetings.
The truth eventually came out,
leading to a decimation of Biopure's stock price , the resignation of most of the company's management, including the CEO, and an ongoing Securities and Exchange Commission investigation. Hemopure is nowhere close to being approved. Sometimes, a complete response letter can be a benign event, especially when drug companies prepare investors for their arrival. MedImmune ( MEDI) received such a letter in January 2003 for its nasal flu vaccine FluMist. The company responded to the five remaining questions posed by the FDA one month later, as it had told investors it would do, and the vaccine was approved in June. Likewise, Bristol-Myers Squibb ( BMY) received an approvable letter from the FDA for its schizophrenia drug Abilify in September 2002. The drugmaker quickly resolved the outstanding issues, and the FDA approved the drug in November 2002. When the FDA's approvable letter comes attached to a request for new clinical trials, the delay can be quite lengthy. The FDA made just such a request for Symlin, a diabetes drug from Amylin Pharmaceuticals ( AMLN) in October 2001. It took almost two years -- until June 2003 -- before Amylin could conduct another clinical trial and resubmit Symlin for approval. In December 2003, the FDA sent Amylin another approvable letter, requesting even more information. To date, Amylin has yet to tell investors when it thinks Symlin will be approved, if ever.