Investors looking to do business in the pharmaceutical industry should beware that drug development is an uncertain process that could take a long time before becoming profitable, according to The Wall Street Journal.
The FDA rejected Gilead's application to sell filgotinib as a rheumatoid arthritis treatment Aug. 18, halting the drugmaker's forward-thinking plans for the therapy it had purported to be a future cash cow. The following day, the agency also rejected approval of BioMarin's highly anticipated hemophilia A gene therapy drug, Roctavian, a move that shocked the industry.
The FDA told both drugmakers it needed to review additional data before it could grant approval, and producing that clinical data is a process that greatly delays sales and revenue. The two major rejections have left some investors worried that regulations in the industry may be becoming tighter.
BioMarin's shares dropped 33 percent on the day the rejection was announced, WSJ reported. Gilead's shares fell by just 3 percent, but those who invested with the drugmaker earlier in the year amid the remdesivir frenzy have lost more than a fifth of their money since April, according to WSJ.
Biotech stocks are near record highs, and most investors who are new to the sector joined hoping to gain profits from an experimental COVID-19 treatment or vaccine. However, it is important they remember that drugmakers developing COVID-19 treatments and vaccines are subject to the same development delays and rejections that hindered the profit timelines of Gilead and BioMarin, WSJ notes.