On August 11, the Center for Drug Evaluation and Research (CDER) put into force a new final rule on the way it respond to New Drug Applications (NDAs) that effectively did away with Approvable Letters and Not Approvable Letters in favor of Complete Response Letters (CRLs). While maintaining that this means greater consistency and transparency, in fact, while it is consistent with what the Center for Biologics Evaluation and Research (CBER) has done for 10 years, it may be less transparent for stakeholders in general, and for investors in particular.
The contents of approvable and not approvable letters were proprietary, but receiving one over the other at least signaled the FDA’s point of view about the NDA to some degree (though products that received not approvable letters sometimes did go on to achieve approval status). The content of CRLs is also going to be proprietary. That means that outside observers are reliant on what the company says about the CRL for insight into the drug product’s future and for investors, there is less certainty as the name of the FDA’s response is much more generic than the previous Approvable/Not Approvable status.
A CRL is supposed to outline a pathway to approval, unless the NDA is thought beyond redemption by the FDA. But what that pathway is will not be apparent to outside observers. What the company says about what the letter says may have a great deal of impact on the company’s stock and on the view of analysts. Saying too much may be discouraging and may give competitors an advantage, but saying too little may indicate that the company is fearful or that there was no pathway outlined because the FDA deemed the NDA to be so insufficient.
For companies associated with drug production rather than biologics production, it is a good idea to begin to formulate a policy and set of standards for how the company is going to communicate about the contents of CRLs. There should be a process in place for assessing and making decisions about a CRL communication before one is received, not after. Perhaps some lessons can be derived from biologics companies that have received them, but in any case, be aware that the way that a company communicates the contents can make all the difference to its stock value on the day of the announcement.
For investors, you will need to develop a way to read the tea leaves of the press releases from companies. According to the excellent RPM report, you may want to consider whether the company mentions site inspections or brand name approval for why would the FDA approve the brand name or bother to inspect a site if it weren’t intent on eventual approval. There will be a great deal of nuance in the letters, and you would do well to look at the press releases of biologics companies who have received CRLs in the past to get a feel for what is communicated.
And speaking of RPM Report, see Tracking Troubled NDAs: New FDA Regs Mean Less Clarity for Investors by Cole Werble for an excellent discussion of CDER’s new final rule.