A Single FDA Decision Could Make or Break a Company. Here’s How


The Food and Drug Administration (FDA) is one of those government agencies that does so much, yet we never really hear from them. They’re in charge of making sure that we’re not being poisoned by the food and medication sold in stores, which I suppose is pretty important. When something needs to be recalled because it’s making people sick and/or die, the FDA leads the recall and often deals out any appropriate penalties.

If drug companies had their way, the FDA wouldn’t exist. Since the FDA heavily researches and schedules tests of drugs before they make it to market, they’re responsible for finding anything wrong with the drug and approving or denying the ability for companies to sell it. If this wasn’t the case, companies would simply make new medications, push them out to consumers, and hope for the best, which sounds like a fairly grim scenario.

Luckily, the FDA does exist, and they usually do a fairly decent job of regulating medications. Their decisions, however, do more than just keep people safe. They also make or break entire companies.

The FDA is super strict with what they approve, and for good reason.

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Wikimedia Commons

Since there are thousands of drug companies pushing numerous drugs, and the FDA only has the capacity to do so much, companies might have to wait years just for the slight chance of getting a drug through the FDA.

When companies do get a drug through the FDA, they have a reason to celebrate.

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Flickr/David K

Getting approval for a medication means the company will soon be able to market and sell their drug through pharmacies and online prescription networks.

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Flickr/Mike Mozart

This often means that the company is the only one selling this specific kind of medication.

Since the company is often the only one selling a drug, they’re in the position to set the market value of the drug — and rake in giant piles of cash.

Flickr/Ryan Shea

If the company is publicly traded on the stock market, just the news that their drug was approved by the FDA will send their stock soaring.

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Pixabay

This is because investors know that the drug will soon be on the market, and the company will receive income it never had before — and lots of it, too!

This happened recently with Sarepta Therapeutics, who saw their drug, Exondys 51, get through the FDA’s approval process.

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Sarepta

Since Sarepta is the only maker of Exondys 51 — a drug for the rare disease known as Duchenne muscular dystrophy — they’re in a position to profit immensely from sales of the drug.

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FDA

The drug’s passing was partially due to the lobbying of patients with Duchenne muscular dystrophy, who would greatly benefit from this drug.

That’s why their stock sharply increased in value after the FDA’s announcement.

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StockTwits

Earlier this year, drug company Biomarin tried to pass their own Duchenne drug through the FDA. Unfortunately, it wasn’t approved at the time, and their stock sharply decreased because of the ruling.

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StockTwits

Again, the FDA doesn’t approve every medication sent their way, and when they make it known that they won’t allow something through, the petitioning company’s stock tends to take a nosedive. When they do approve a drug, however, that stock performs well on the sheer prospect of bringing an approved new drug to market.

The pharmaceutical industry is a trillion-dollar business worldwide, with a sizable chunk of revenue coming from the United States. An FDA approval means making millions — if not billions — of new revenue, and pharma companies — and their shareholders — really like the sound of that. Now if they’ll just stop making their drugs so unaffordable…

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