In our last blog entry we discussed the difference between receiving an approval letter and a Complete Response Letter (CRL) from the FDA. Now we will examine what information a publicly traded company must disclose once they receive an approval letter or CRL.
The FDA does not regulate the information a company must disclose regarding approval letters or CRLs sent by the agency. Publically traded companies are however regulated by the Securities and Exchange Commission (SEC) which states that these companies are obligated to disclose information considered to be material, with the potential to impact stock price.
In the case of the FDA and the issuing of an approval letter or CRL, a company would naturally want to announce they had received an approval letter from the FDA since it is positive news which could positively affect their stock price. However, if a company receives a CRL, which could indicate that there may be an issue(s) that need(s) addressing before a final decision can be made, they have to decide what information contained within the CRL is material.
This can be a challenge because omitting material information opens companies up to possible litigation. Since there is not a clear definition of material information, it is left up to the company to decide which information contained within the CRL would be relevant to a reasonable investor.
In our next blog entry, we will examine the potential strategy behind Salix’s timing of their two press releases and examine some of the potential reasons behind their strategy.
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