All Approvals Are Not Created Equal
MELA Sciences' (NAS: MELA) stock was up more than 55% yesterday as the company announced that it had been granted approval to market its skin cancer detector MelaFind in Europe. Whoop-de-do.
Whoop-de-do because the company was only a $56 million company on Tuesday. A 55% increase isn't adding that much value. MELA is still valued nowhere near where it was in the fall of last year.
Whoop-de-do because a CE Mark approval just isn't that big of a deal. While the drug divisions of the U.S. and EU regulators have fairly similar requirements, that's not the case for medical devices. Rigorous clinical trial data isn't required for the EU to sign off on the approval. For that reason, medical device companies like Medtronic (NYS: MDT) and Boston Scientific (NYS: BSX) almost always gain EU approval before heading before the FDA.
The EU system puts the onus for deciding whether the device should be used on the doctor. Frankly I'd rather see the market decide the fate of a drug or medical device than regulators, but either way the sales will ultimately be based on the clinical trial data.
So while the approval is nice, MELA will have to market the devices with the same data that it had when the Food and Drug Administration rejected the device the first time. A panel of outside experts was only slightly positive about the device's usefulness.
MELA plans to start selling the MelaFind in Germany, where there's a high rate of melanoma. Whether doctors will be convinced that the device is better than their eye at determining whether a biopsy should be done is still unknown.
Like Delcath Systems (NAS: DCTH) , which sits in the same EU-but-not-US-approved boat, an FDA approval is necessary for the survival of the company. An FDA endorsement will open up the largest market and could theoretically influence EU doctors to buy the machine. No whoop-de-do about it.
At the time this article was published Fool contributorBrian Orelliholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Medtronic. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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