Two biotech companies had a rough end to the week last week, and it looks as though things aren’t going to get much better for them heading into the US open on Monday. Here’s what happened.

Elite Pharmaceuticals Inc (OTCMKTS:ELTP)

Of the two companies we’re looking at, Elite had the tougher time. On Friday, the FDA issued a complete response letter (CRL) addressing the company’s lead development candidate, SequestOx. The drug is a type of opioid pain management drug designed to be abuse deterrent. Opioid abuse is a huge issue in the US, and a host of companies are trying to push their respective versions of abuse deterrent alternatives through to commercialization. It’s a big potential market, and one that Elite was looking to snap up a portion of. Unfortunately for the company and its shareholders, however, it won’t be doing it with SequestOx; at least, that is, not in its current form.

The FDA CRL stated that the agency wasn’t able to approve SequestOx as things stand, and while this isn’t necessarily the end of the road for the drug, it’s going to draw out the process at a high cost in the best case scenario.

At market close on Friday. Elite traded at $0.31 a share for a market capitalization of just over $226 million. This price is a more than 10% decline on the day’s open.

So what should we expect going forward?

Well, other than stating it was not able/ready to give SequestOx the green light, the FDA hasn’t given much information (at least not made it publicly available). Elite is holding a conference call at market open today, and we’ll probably get some insight into the reasoning behind the CRL during the call. Going forward, the company will meet with the FDA to see what it can do to get the drug back on track. All eyes on the conference call, after which we should have some idea of what the issues are.

Synergy Pharmaceuticals Inc (NASDAQ:SGYP)

This one’s a bit counter intuitive. Synergy announced on Friday that it had reached an FDA mid cycle review milestone. When a company submits a new drug application, the FDA will generally set up a couple of review period milestones, designed to improve communication between the agency and the company seeking approval. As these milestones are reached, it’s sort of hurdle clearing, and means the drug under review is a step closer to commercialization. As a general rule, therefore, when the review clears one of these milestones, a company will pick up a bit of strength on the back of the announcement. Not so in this instance, however.

Synergy kicked off Friday’s session at $3.83 a share. By session close, the company traded for $3.61 – a 5.74% decline throughout the day. After hours, the company’s market capitalization slipped further, and will now open the week at $3.55, or a market capitalization for $648 million. So why the decline? Well, we also saw a bit of data released concerning the company’s ongoing irritable bowel syndrome with constipation (IBS-C) program. The program has been plagued with enrollment issues, and as such, there is going to be a slight delay on topline release from two phase IIIs. The data is now expected during the fourth quarter of this year, with a view to submitting an NDA to the FDA in this indication at some point during the first quarter of next year.

It’s reasonable to assume that the decline came on the back of disappointment over the delays, as markets were hoping for an NDA at some point this year – something that there is now pretty much no chance of happening.

It’s not all bad, however, so there may be something of an opportunity in the decline. With a drug progressing nicely through the review process in one indication, and the same drug in two pivotals with a view to NDA submission within the next eight or so months, there’s plenty of room for a recover medium term. The Friday decline might be a good reason to get in, serving up a discount entry on market sentiment induced volatility.

One to watch, and of the two stocks discussed, very much the frontrunner from a risk profile perspective.