Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

FDA kremlinologists are at it again. 

Investors are interpreting Tuesday's news that the agency is indefinitely delaying its decision (originally due Thursday) on Sarepta's treatment for Duchenne Muscular Dystrophy (DMD) as a sign the controversial drug has a chance. Shares were up 19 percent Wednesday afternoon. 

Some see it as evidence of dissent within the FDA -- between data-oriented reviewers who don't believe Sarepta proved its drug works and higher-up officials pressured by patients, parents, and lawmakers to be flexible about a drug for a fatal condition with no other treatment options.

But reading the tea leaves this way is perilous. A delay doesn't necessarily mean the agency is leaning toward approval. All the FDA's concerns about the weakness of Sarepta's data still hold true, and approval would set a worrying precedent. If the agency bends from its scientific convictions on one drug, then it could create the expectation it may do so again.

Delay May Pay?
Sarepta investors see an indefinite FDA delay of a decision on its drug for a muscle wasting disease as a sign the agency may decide to approve it.
Source: Bloomberg
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This is the latest chapter in an exhausting saga for this drug. It was initially supposed to go in front of an FDA panel of experts in January, but the meeting was delayed by a snow storm. When it finally did get in front of a panel in April, the members voted against approval. It's rare for the FDA to go against a panel's recommendation and approve a drug anyway, but not unprecedented. That's why the market is still hanging onto hope for an approval.

But the FDA panel's concerns about the drug are serious and far-ranging. The reviewers argued its trial results are hard to interpret. Sarepta's clinical trial only contained 12 boys, for example. Rare-disease trials tend to be small, but that's particularly miniscule. The trial was also not the sort of placebo-controlled study the FDA prefers, which creates a bevy of statistical issues.

This would not be the first time the FDA delayed a decision and still rejected a drug. The same thing played out with BioMarin's drug to treat DMD, in fact. That company had a disastrous FDA panel in November, crushing expectations for approval and hitting the company's stock price. Then, on December 18, BioMarin announced the FDA was delaying its decision on the drug, due on December 27, until early January. Shares spiked. But that early-January decision turned out to be a rejection. 

That Looks Familiar...
Some BioMarin investors saw an FDA delay of its approval decision for the company's DMD drug as a positive. They were disappointed.
Source: Bloomberg

The situations aren't exactly comparable. Sarepta's getting an indefinite delay. Investors are seizing on that point to hope the FDA may be succumbing to pressure or is working on a plan to approve the drug.

But that's just guessing. The more concrete evidence -- a negative panel vote and the agency's statistical doubts about the drug's trial -- points to a rejection. An already murky situation is now murkier, but the fundamental facts haven't changed. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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