Now that we have examined the difference between an approval letter and a Complete Response Letter (CRL), we will take a look at why Salix may have announced their suspicion regarding the receiving of a CRL. Although Salix is a publicly-traded company, and they are required by The Securities and Exchange Commission (SEC) to disclose material information, they are only required to do so when they know the information to be factual and documented. Because they only believed they would be receiving a CRL, based on conversations they had with the FDA, but they did not have any documentation in hand, they were not obligated to disclose this information.
So why did they do it? One reason Salix may have announced their anticipation of a CRL could have been an attempt to decrease the impact of the news on their stock price. After Salix announced the anticipation of a CRL, their stock price dropped around 24 percent, a typical drop in price for this type of news. Another reason they may have announced the anticipated CRL ahead of an actual receipt of the letter was with the intention of being upfront with investors and the public. These reasons are speculative but represent the two most likely scenarios that drove Salix towards this strategy.
Whether they disclose the news as anticipated or wait until they actually receive the document, the news content itself should have the same impact – in this case, a significant drop in stock price. In their discussions with the FDA, the agency may have made it clear that there were issues that would have to be resolved before a final decision could be rendered.
When it comes to regulatory news regarding the approval of a new drug, it is clear that when it’s not a clear cut approval, no matter when you deliver, the news the result is ultimately the same.
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