Image source: Getty Images.
Cempra (NASDAQ: CEMP) fell 13.9% today after falling 9.3% yesterday. Investors are clearly worried about the likelihood of a Food and Drug Administration approval of Cempra's antibiotic solithromycin.
Last week, the FDA released documents for an advisory committee that highlighted potential liver toxicity of the pneumonia drug, sending shares plummeting.
On Friday, while trading in the shares were halted, the committee of outside experts voted7-to-6 that the efficacy of solithromycin outweighed the potential risks. The committee also voted 12-to-1 that the risk of liver toxicity hadn't been adequately characterized, but it appears those votes ended up being split on whether further characterization was needed before or after the drug is approved.
The FDA isn't bound to take the advice of its outside experts, which makes this a hard binary event to handicap. In its briefing documents, the agency was clearly worried about the potential for liver damage. In the regulatory environment we've had over the last decade, a 7-to-6 vote wouldn't be enough to sway regulators' opinions.
But these aren't ordinary times. Sarepta Therapeutics (NASDAQ: SRPT) got its Duchennemuscular dystrophy drug Exondys 51 approved despite internal FDA dissensionarguing that the drug didn't work.
The difference between Sarepta's Exondys 51 and solithromycin is that Sarepta's drug was relatively safe, but potentially not efficacious, while Cempra's drug is clearly efficacious -- the FDA panel voted unanimously as such -- but might not be safe.
Given the unknowns, the worst that happens with Sarepta's Exondys 51 is that nothing good happens. The worst that happens with Cempra's solithromycin is that something bad happens to patients. In addition to the issues with safety versus efficacy, Duchennemuscular dystrophy is arguably a larger near-term unmet need than pneumonia.
Given the uncertainty, investors are likely in for a wild ride between now and when the FDA is expected to hand down its decision at the end of next month. At some point, the likelihood of an approval, which investors are betting is less than 50%, might be worth the bet, but it isn't clear whether we're there yet.
10 stocks we like better than Cempra When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Cempra wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 7, 2016
Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.