Depressing, in More Ways Than One

Food and Drug Administration rejections are depressing to watch. The only thing worse is to watch two companies affected by a rejection. Salix Pharmaceuticals (NAS: SLXP) and Progenics Pharmaceuticals (NAS: PGNX) are down 12% and 50%, respectively after the FDA turned down the companies' request to expand the use of Relistor to patients with constipation caused by pain medications for chronic conditions.

Relistor has languished since it was approved in 2008 to treat opioid-induced constipation in patients with advanced illness who are receiving palliative care. Wyeth, Progenics' original partner, handed back the rights to the drug just before Pfizer took over.

Expanding Relistor's use into less-serious patients could have increased sales substantially. But Progenics and its new partner Salix said the FDA wants more clinical data before it can approve the drug. The companies didn't go into more detail, but I think investors are probably worried there's a safety issue. The FDA is likely to be more concerned about side effects in a population that just has a chronic pain issue than the current indication where patients have serious medical issues and the goal is to make them comfortable.

More depressing for investors who don't even own either company, the rejection came after the FDA extended the review of the drug by three months. Investors generally view extensions as a good sign, because if the FDA had already decided to reject the drug, it seems logical that it would just reject the drug rather than continue with the review. There are certainly a lot of examples of drugs that got approved after an extension, most recentlyVIVUS' (NAS: VVUS) Qsymia.

But Relistor's rejection should serve as a reminder -- as depressing as it is -- that the theory doesn't work all the time. It's not even the first time it's happened. Both Merck KGaA's multiple sclerosis drug cladribine and XenoPort (NAS: XNPT) and GlaxoSmithKline's (NYS: GSK) restless leg syndrome drug, Horizant, failed to gain FDA approval after the agency extended its decision on the drugs.

That's drug development for you. The highs are high, the lows are low. And sometimes it's hard to tell them apart.

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