Down 12%: Navidea's Post-Approval Plunge


Navidea Biopharmaceuticals is experiencing a case of "sell the news" today.

The company got a mid-day Food and Drug Administration approval for its lymph node diagnostic Lymphoseek. The approval comes a month and a half before the PDUFA date, the goal the FDA sets to complete its review by.

I called Navidea one stock to buy in March, figuring that the stock would run up as investors got excited about the binary event, but I also warned that investors might sell the launch. Half-right, I guess.

In retrospect, the early approval shouldn't have been that big of a surprise. Lymphoseek was rejected last year, but the only thing the FDA seemed to want fixed as an issue at a third-party manufacturer. Apparently it didn't take long to confirm the manufacturer had crossed all its Ts and dotted all its Is in its Good Manufacturing Practices documents.

Lymphoseek is designed to identify lymph nodes that contain tumor cells that have moved away from their primary tumor site. The lymph nodes are then biopsied to determine if the cancer has spread, which determines the cancer treatment. Lymphoseek is currently approved to detect melanoma (skin cancer) and breast cancer, two big cancers that often drain into the lymph nodes.

The diagnostic will be sold by Cardinal Health . How much marketing muscle the distributor puts into Lymphoseek will determine how well the diagnostic sells. Doctors currently use a die called isosulfan blue to map lymph nodes. It isn't really clear that doctors are looking for a new diagnostic, so Cardinal has its work cut out for itself.

Eli Lilly finds itself in a similar situation needing to educate doctors about Amyvid, its diagnostic for identifying Alzheimer's disease. Initial sales are low enough that Lilly didn't bother breaking out sales in its fourth quarter earnings release.

"If you build it, they will come" may work for baseball diamonds in the middle of corn fields, but not for new diagnostics.

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