What if they had a war and didn’t tell the attackers?
Beginning with the surprise FDA approval of Fanapt, a schizophrenia drug made by a company called Vanda Pharmaceuticals, which had been rejected by the FDA just one year earlier, a small but intense mania in small biotech companies that also have drugs up for evaluation has arisen. Vanda’s share price increased by an incredible 10 times overnight (and has continued to rise in the subsequent weeks), causing the shares of similarly unregarded companies to rise three and four times in anticipation of another jackpot approval from the FDA.
Now, even though these stock manias invariably end badly for those who stay in them too long (I suspect most of us still have fresh memories of the mania in “dot-com” stocks about a decade ago), they’re really just an inevitable side effect of the free markets and one of those things that makes this little game called capitalism so much fun.
But this particular mania seems to have taken on something of a political bent, which is summed up in one oft-repeated catchphrase: “The war on science is over.”
Now, even though you and I probably never even remotely considered ourselves engaged in a “war on science”, it’s not hard to guess what this is about. The whole kerfluffle over embryonic stem cell research (even though science itself has since basically admitted that specific branch is of dubious value at best), plus the occasional story we see of some family taking their religious views to the extreme in regards to their sick children, not to mention the “fact by consensus” that is global warming, have all been interpreted retrospectively as an eight-year (and of course it is always eight years) “war” against scientific advancement. Specifically, for purposes of investing, this is taken to mean that legions of tiny biotechs had been getting stonewalled by an FDA that has apparently pushing prayer over medicine, if the tale is to be believed, and that now that we have emerged from that dark age into the Obama Era of Enlightenment, all those tiny biotechs will get elevated to their deserved status and it’s wealth and prosperity for all those smart enough to get behind them.
Of course there’s just a few issues with this concept of a “War on Science”. While Viagra may have been a Clinton-era approval, follow-on drugs in the same field such as Cialis passed through the FDA gauntlet just fine, despite the supposedly hostile Bush administration.
And then of course there was the big FDA embarassment known as Vioxx, which was approved in 1999 but still managed to be Bush’s fault somehow when it was pulled from the market in 2004. But the real point there is that if the drug approval standards are somehow radically altered from administration to administration, are we simply trading away some drug safety for more drug availability?
This morning, one of the new biotech darlings touted as one of the companies liberated by the end of the “war on science”, ARCA Biopharma, crashed back to earth on non-approval of their heart failure drug Gencaro. I personally expect more such disappointments in the weeks to come.
I don’t know if there’s really a political lesson to be learned here. The FDA seems to be continuing to do its job, reasonably well if imperfectly, as it had been prior to this year and prior to 2001 for that matter. If politics is involved in the decision making process it is if anything personal politics rather than the national stuff. In general, this is one cog in the wheel that remains relatively unbroken.
But apparently there’s some good money to be made in convincing people, especially those with some latent Bush hatred, otherwise.