Jazz Pharmaceuticals (JAZZ) shares sank over 24% in early morning trading Monday after a U.S. Food and Drug Administration advisory panel rejected its fibromyalgia drug, Xyrem, Friday. Jazz shares, which closed Thursday at $10.23, and were halted Friday until the FDA made the announcement, traded recently at $7.72.
Fibromyalgia is a poorly understood condition that causes muscle pain and fatigue. The disorder is believed to affect 2% to 4% of the population, or about 5 million Americans, mostly women. Traditionally, it has been treated with a combination of painkillers and antidepressants, according to the FDA.
JZP-6, or Xyrem, contains sodium oxybate, which is a federally controlled substance more widely known as GHB. The central nervous system depressant is used to treat people with narcolepsy, but it is also often illegally sold and abused in social settings such as nightclubs and is known as one of the date rape drugs. As a sedative, in high doses it can cause death.
FDA panelists said the drug appeared to help some patients with fibromyalgia, but voted 20-2 that the benefit/risk balance did not support the approval of of the drug. Concerns of greater possible abuse also concerned the panelists. The FDA doesn't have to follow the panel's recommendation, although it usually does.
Approval of the drug for fibromyalgia would have increased its sales dramatically, from a few thousands prescriptions to possibly millions. Some analyst estimates put potential sales at $300 million by 2015. Following the FDA panel's rejection, It didn't take long for analysts to update their sales projections: Lazard Capital has already lowered its price target on Jazz to $6.50 from $11.
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