As if all the scandals, management fiascos, and ultra bearish calls even after the stock collapsed an astonishing 93% from its 2015 highs weren’t enough, Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) was dealt another blow to the gut on November 8th when the Food and Drug Administration announced that it was delaying its decision on potential blockbuster psoriasis drug brodalumab by three months.
At first glance by any cursory logic, an FDA delay is a bad thing, especially considering that the efficacy of brodalumab over current Johnson & Johnson (NYSE:JNJ) blockbuster Stelara is obvious and understood, even by the FDA panel that reviewed the drug back in July. However, as counterintuitive as it may sound, the delay may actually be a great sign for embattled Valeant, drowning in debt and in desperate need of a blockbuster shot in the arm.
How could it possibly be that a 3-month delay of a drug known to be efficacious is a good thing? While it is not immediately evident, even to big biotech hedge funds, the case can be made considering the special circumstances surrounding Valeant and the nature of brodalumab as a treatment for an acute autoimmune condition.
In short, the question surrounding brodalumab is not whether it will be approved, but how it will be approved. The FDA wants to know if and by how much brodalumab increases the chances of suicide, given that 6 patients out of 6,000 who took the drug in clinical trials committed suicide. The average is 2 per 6,000. Whether the drug had a role to play in this increase or if it was just a fluke or related specifically to psoriasis is the ultimate question. Nobody knows for sure.
Valeant will either be forced to conduct a mandatory registry of all patients who take the drug once approved, or it won’t. At first glance, a delay in approval points to a negative outcome, but go deeper into the transcript of the FDA panel meeting itself, and the import of this delay changes entirely.
In Market Exclusive’s Inside the FDA report on Valeant, you’ll find out exactly why the three-month delay, now scheduled for February 16th, may actually be a major positive for Valeant, and how this could be the light at the end of the tunnel for a partial recovery for the decimated stock. In our report, we go into the statements of the panelists during the crucial meeting on brodalumab, who said what and why, and how many actually came out in favor of a mandatory registry over a voluntary one or even no registry at all.
Brodalumab was tested against and shown to be superior to $2.5 billion Stelara, indicating that if approved relatively unfettered, brodalumab could be a real blockbuster for Valeant at a time when the company needs it most. As most commercial investors simply don’t see this and only see the delay as yet another disaster in a line of disasters, any good news come February 16 could cause the stock to jump very quickly.
