Titan Pharmaceuticals, Inc. (OTCBB:TTNP) Wiped Out on FDA "No"
Pharmaceutical stocks are a fragile thing. Most companies show long-term potential and impress with a great development story. But in the case of Titan Pharmaceuticals, Inc. (OTCBB:TTNP) it takes a small event to tip the scales- negative news from the FDA.
All of April, TTNP was supported by the hope that the Food and Drugs Administration would in the end approve the anti-addiction therapy of Titan. Before that, a non-binding negative opinion of the treatment made the stock crash, then it recovered for a while and drifted sideways, awaiting the April 30th verdict. But when it turned a no, TTNP was wiped out. The negative comments on March 19th caused TTNP to slide down 40%.
Nearly 18 million shares were sold, and TTNP slid nearly 74% to 43 cents. The FDA rejection had a surprise element, since the pre-approval committee of experts voted for the treatment 10 to 4, although voicing a special opinion. But the game is not entirely over for TTNP, as the company has received recommendations to improve its therapy and present a higher-dosed treatment that according to the FDA experts may be more efficient.
However, this will take time and will turn out a whole new story for the TTNP stock. For one, it may trigger valley buying, as Titan is still considered a company with a long-term potential. The Probuphine treatment was already receiving favorable opinions, as Titan managed to get an upfront payment of $15 million even before approval for the rights to the drug. In case of a positive verdict, Braeburn Pharmaceuticals and its owner, the fund Apple Tree Partners, would have paid $50 million more. Also, TTNP missed on the market for addiction treatments, in which the top two drugs of choice generate around $1.3 billion annual sales in the USA.
Another high-flying pharmaceutical ticker that went significantly up in 2013 was AP Pharma, Inc. (OTCBB:APPA). The graph shows clearly what the FDA rejection did to the stock levels, and what the size of the recovery was.
In case of pharmaceutical stocks, there is attractive long-term potential and the expectation of approval may lead to a high market price. Still, stay away from the most high-flying ones, unless you can afford the loss when a negative event causes a crash.