When a regulator hits the brakes on a drug’s advancement, small businesses can buckle under the pressure. This seems to be happening with Veru (NASDAQ:VERU) today as the Food and Drug Administration (FDA) denied an emergency use authorization (EUA) for Veru’s proposed Covid-19 drug. This news item was enough to cause the share price of VERU stock to get cut in half.
Based in Miami, Veru is a biopharmaceutical company that develops medicines for Covid-19 and other viral diseases as well as for oncology. It’s a relatively small business with a $587 million market capitalization.
Veru’s proposed Covid-19 medicine, sabizabulin, is among the company’s most important products in development. That’s why getting an EUA from the FDA for this product could be make-or-break for Veru.
Reportedly, an FDA committee reviewed and rejected sabizabulin for an EUA in hospitalized moderate to severe Covid-19 patients who are at high risk for acute respiratory distress syndrome (ARDS). Furthermore, the committee determined that the benefits of sabizabulin in this application don’t outweigh the risks.
What’s Happening With VERU Stock?
Even as the major stock market indices flew higher this morning, VERU stock lost 50% or more of its value. Yesterday, traders were just getting accustomed to a share price of $15 or more. Now, however, it looks like a sub-$7 print will be the new reality.
Even while traders sold Veru shares, Chairman, President and CEO Mitchell Steiner seemed to take it all in stride. “We look forward to continuing to work with the FDA as we continue our efforts to ensure that this product is available to patients in a timely manner,” he declared.
Exactly how can sabizabulin can get to market “in a timely manner” in the wake of this EUA denial? This is a mystery left unexplained by Steiner. After all, the FDA’s advisory committee voted 8-5 against the EUA, so it wasn’t a close call.
So, Steiner still has to convince the market that there’s hope for a “timely” turnaround with sabizabulin. Until/unless that happens, the short trade against VERU stock could remain powerful and profitable.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.