Why Salix Pharmaceuticals' Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of drug company Salix Pharmaceuticals (NAS: SLXP) were feeling ill today, falling as much as 14% as investors reacted to the news that the U.S. Food and Drug Administration did not approve its Relistor constipation treatment for a wider market.

So what: In a relatively terse press release on Friday, Salix and drug developer Progenics Pharmaceuticals (NAS: PGNX) said that they'd received a response letter from the FDA that "requests additional data." While Relistor is already approved for relieving opioid-induced constipation in patients with "advanced illness," Salix and Progenics were hoping to expand that approval to patients with opioid-induced constipation receiving treatment for non-cancer pain. While the FDA's letter doesn't mean that the expanded use is completely off the table, collecting the additional data will, at best, delay the effort. As they say, time is money, so it's little surprise that investors are upset at the news.


Now what: In some views, the concern over the FDA's response letter goes beyond the expanded-use issue at hand. The companies are also attempting to get an oral version of Relistor -- currently a subcutaneous treatment -- approved. Retuers quoted Cantor Fitzgerald analyst Irina Rivkind, who said, "We believe that the FDA's concerns on the subcutaneous form could also taint oral Relistor."

Of course while Salix investors are feeling some pain today, Progenics shareholders are seriously taking it on the chin as that company's shares were roughly halved in the wake of the news.

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The article Why Salix Pharmaceuticals' Shares Plunged originally appeared on Fool.com.

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