Join        Login             Stock Quote

The FDA Will Reject This Drug… And Take This Stock Down

 February 02, 2011 03:11 PM

by Marc Lichtenfeld, Healthcare Specialist

If you needed evidence that safety is arguably the most critical aspect when it comes to investing in the biotech sector, then look no further than Orexigen Therapeutics (Nasdaq: OREX).

The stock suffered a spectacular implosion on Tuesday after the Food & Drug Administration rejected the company's obesity drug, Contrave. Regulators asked Orexigen to run another clinical trial, due to side-effects concerning the heart.

[Related -Futures Down Ahead Of Service Sector Data; Compugen Ltd. (CGEN) Soars]

It's a stark reminder that the FDA continues to take drug safety issues seriously. How seriously? I'll let this 5-day chart of Orexigen show you.

The FDA's rejection of Contrave came hot on the heels of two other obesity drug rejections in recent months – from Arena Pharmaceuticals (Nasdaq: ARNA) and Vivus (Nasdaq: VVUS).

Investors in those stocks suffered devastating losses, too…

[Related -iShares NASDAQ Biotechnology Index (ETF) (IBB): 3 Biotechs Up 132% In 2013 With Huge Upside Potential]

Prior to the FDA decisions, investors frequently asked me which of the stocks they should buy, assuming that at least one of the drugs would get approved.

But I never recommended any of the companies because I was concerned about safety issues.

Speaking of which, here's another prime drug candidate to get crushed at the hands of the FDA…

The FDA: Masters of Drug Destiny

Make no mistake, the FDA is very conservative when it comes to safety. No matter how effective a drug may be, regulators will not approve it for the mass market if they're concerned about safety issues.

They're essentially stewards for the community, but they're also engaging in that common tactic known as "CYA" – Cover Your… (Well, you know the rest!) You need only look back to drug scandals like Vioxx to understand why the FDA doesn't want to have to respond to an angry public or face multi-million-dollar lawsuits if people start getting sick or dying due to an approved drug.

But despite safety concerns, many investors still put blinders on when it comes to certain drug companies.

Next Page >>12


Comments Closed

rss feed

Latest Stories

article imageOversold Airline Ready For A Quick Rebound

Trading countertrend moves can be profitable but risky, so it pays to line up as many factors as possible read on...

article imageWhat Is Your Sell Criteria?

Every stock market cycle has its darlings—the stocks investors believe can do no wrong.  I remember 1999 read on...

article imageUS Employment Growth Continued To Slow In April

Company payrolls increased by a lower-than-expected 171,000 last month, the US Labor Department reports–the read on...

article imageMake America Great Again

Our weekly commentaries provide Euro Pacific Capital's latest thinking on developments in the global read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.