FDA Uncertainty Takes Its Toll On Bioshares

FDA Uncertainty Takes Its Toll On Bioshares

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The surprising announcement by Commissioner of Food and Drug Administration of US that he will be stepping down from his role next month has created chaos in the biotech sector forcing the industry to face its worst ever decline in share markets. Biotech analysts say that this was due to shock in the industry about how his exit will affect small innovation driven biotech firms. The Nasdaq Biotech Index which is traded heavily fell by 5% within three days of the announcement by FDA commissioner Scott Gottlieb. The NYSE Arca Biotech Index for large caps fell by 4% during the same period.

Analysts say that biotech investors are concerned that without the expert leadership of Gottlieb the agency is likely to lose its momentum on the efforts being made to pressurize pharma companies to open up their processes for creation of biosimilar drugs that are in reality the generic equivalent of novel drugs. Under the leadership of Gottlieb FDA had managed to get around 59 drugs approved in one year along with obtaining clearances for introduction of 971 generic drugs including launch of generic versions of critical medical tools like EpiPen and asthma treatment inhaler Advair.

Though there is hope that introduction of drugs in the line of gene therapy and cell therapy may get approved with the same speed as now but generic approvals for drugs might slow down. The fast pace of drug approval under the outgoing commissioner had also been a cause for concern as it was leading to underperformance in generic drug sector and significant erosion in prices and margins as per a recent research note submitted by S&P analysts. According to experts two generic drug making companies namely Teva pharmaceuticals and Mylan could benefit from the slowdown in generic drug approvals after the departure of FDA commissioner.