In our last entry, we focused our attention on Salix Pharmaceuticals and the timing of their two press releases, one to announce that they anticipated receiving a Complete Response Letter (CRL) and one to announce they received a CRL from the FDA.
The question is: why did Salix announce the CRL before they received it? In order to determine the strategy behind these announcements, it is important that we understand what a CRL is, versus an approval
When the FDA issues an approval letter, they are informing the applying company that the review cycle for their New Drug Application (NDA) is complete and the drug has been approved and can now be marketed. When the FDA issues a CRL, it is to inform a company that the review cycle for their NDA is complete, but that deficiencies, which the agency has identified in the application or abbreviated application, must be satisfactorily addressed before it can be approved.
The major difference here is that when you receive a CRL from the FDA, your company will have to spend more money to get the drug to market. How much money? This will depend on what is contained in the CRL as it details the areas of the application that need work or clarification. This can refer to additional trials, which are very costly and time consuming, to a less expensive, simple reexamination of the data from the clinical trials in order to evaluate specific signals that the FDA feels are important.
In our next entry later this week we will begin to examine what news publically traded companies have to disclose and how they have to disclose it. We will follow up with some possible reasons behind Salix’s PR strategy and examine whether or not it was effective.
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