If Valeant Pharmaceuticals Intl Inc (NYSE:VRX) were any other company, most likely the market would dismiss the whole thing, confident the problem would be readily resolved. When the gaffe is dished out by a beleaguered Valeant, though, every other painful misstep the company has made over the course of the past year is remembered. And VRX stock suffers more than it arguably should simply because of its marred reputation.
The latest batch of bad news? The Valeant Pharmaceuticals’ Tampa, Florida, facility that has been manufacturing an eye drop solution to treat glaucoma and hypertension isn’t quite up to snuff in the FDA’s eyes.
Not So Fast, Valeant
The drug in question is the same one that was touted earlier in the month when it was featured in the American Journal of Ophthalmology due to the strength of its Phase 3 results. The glaucoma-treating eye drops — latanoprostene bunod (LBN) — showed much better efficacy than the current go-to treatment, timolol.
If left untreated, intraocular pressure can cause or exacerbate glaucoma, in some cases leading to blindness.
Latanoprostene bunod was co-developed by Valeant subsidiary Bausch + Lomb and French drugmaker NicOx SA. The end-goal of the trial was proving LBN was just as good as timolol at lowering intraocular pressure (IOP) in patients with open angle glaucoma (OAG) or ocular hypertension (OHT). The trail’s secondary goal was proving latanoprostene bunod performed better than timolol, which is a now-generic beta blocker made by a handful of pharmaceutical companies.
The phase 3 trial verified what NicOx SA, Valeant Pharmaceuticals and most owners of VRX stock suspected all along … LBN works as hoped. Specifically, the study demonstrated that while a timolol 0.5% solution reduced intraocular pressure between 25.2% and 28.7% by the end of the three month study, the latanoprostene bunod 0.024% solution whittled IOP down to by 29.1% to 32.1%.
Unfortunately for VRX shareholders, the path to an FDA approval of LBN isn’t as clear as once believed.
Efficacy isn’t the issue; the Phase 3 trial’s results speak for themselves. The hang-up, according to a press release posted by Valeant on Friday morning, is concerns that its Florida facility that has been making and will make the drug if approved doesn’t satisfy the agency’s so-called Current Good Manufacturing Practice (CGMP) standards.
The complete response letter pointing out the agency specific concerns isn’t an outright “no” to Bausch + Lomb’s latanoprostene bunod. Indeed, such complete response letters are somewhat common. It is a rarity, however, for the manufacturing site and process to be so vulnerable to an explicit FDA critique.
And, if Valeant Pharmaceuticals can’t fix whatever concerns the Food & Drug Administration, it could lead a rejection of the drug.
It would be a shame if LBN wasn’t approvable, too. The glaucoma market is worth nearly $3 billion per year right now, and a preventative treatment like latanoprostene bunod could actually address an even wider base of patients.
Bottom Line for VRX Stock
As was noted, were it any other company, the news might by shrugged off by investors. Valeant, however, is a name that can’t afford even hinting that it’s stumbled; the +2% dip in the value of VRX stock on Friday underscores the fact that the market has little patience left with the company … even when the red flag is a relatively benign complete response letter asking Valeant to overhaul its manufacturing process.
The list of reasons investors have to not give VRX the benefit of the doubt is lengthy, too. Unwieldy debt, government scrutiny into its pricing practices, a questionable relationship with a specialty pharmacy and a technical default on its loans are just some of the stumbling blocks the company has hit in the past that make it easy to up-end now.
Odds are that Valeant will be able to resolve the FDA’s concerns. But, that’s not the point. The point is, the time when owning VRX isn’t a drama-filled adventure still seems well into the future. Until that happens, these kinds of setbacks for the stock will be uncomfortably common.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
