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.

Here's a sentence to excavate from the vaults and give a good dusting: Valeant might have done something right.

A panel of FDA experts on Tuesday voted unanimously that Valeant's plaque psoriasis drug, brodalumab, deserved approval. The troubled pharmaceutical firm's shares rose more than 4 percent Wednesday morning as Valeant investor Bill Ackman talked it up on a call with investors. (The company also had a drug for opioid-induced constipation approved on Tuesday)

But it's a small and complicated win for Valeant. Brodalumab, once thought to be a potential blockbuster, was originally developed by Amgen and AstraZeneca. Amgen bailed after trial data suggested the drug might raise the risk of patient suicide, and AstraZeneca sold it to Valeant for a comparatively meager $100 million in cash, plus potential future milestone payments and royalties. Most of the FDA panel on Tuesday voted to restrict the drug's use and suggested Valeant needed a plan to control its risks. 

The FDA may still decide not to approve the drug; it's not bound by the panel's vote. And if the FDA does approve the drug, it may saddle it with restrictions and conditions that could scare off doctors and weigh on sales. The drug has a path to success, but it's a narrow one. And if any company can screw it up, it's Valeant. 

Valeant stock saw a rare upward spike on positive news from the FDA.
Source: Bloomberg
Intraday times are displayed in ET.

Restrictions are an even bigger risk given how competitive this drug class is. Johnson & Johnson's Stelara is a $2.4 billion blockbuster. Novartis' Cosentyx was approved in early 2015. And Eli Lilly's Taltz, approved earlier this year, is potentially more effective than both. That would be a formidable array of wealthy competitors and effective drugs even if Valeant's drug weren't so risky. 

And then there are the issues specific to Valeant, which has a nose for landmines.

The company has a history of promising blockbuster drugs that don't deliver. Flat or declining sales from some of its biggest drugs have led it to substantially cut revenue forecasts for 2016. Brodalumab won't be immune to the issues that hurt those drugs -- bad relationships with payers, soured by Valeant's past pricing excess; the collapse of the company's specialty pharmacy partner Philidor; and the possible failure of the Walgreens partnership intended to replace Philidor.  

Some of Valeant's top-selling drugs have seen sales flatten or decline in the past year
Source: Bloomberg

Valeant has a large dermatology business in the U.S., so the drug is a potential fit. But that unit is in a state of collapse; revenue fell 43 percent year-over-year in the first quarter. It's tough to tell how much of the dermatology business' prior growth resulted from Valeant actually being good at picking and selling drugs, and how much was just the result of serial acquisitions and price hikes.

And brodalumab is a whole new animal. This is the company's first biologic drug -- a more complex type of medicine made by living cells -- and it will be far more complicated to prescribe and sell than most.

Launching a (late) new drug in a competitive class is not cheap. Valeant had $1.3 billion in cash and marketable securities on hand as of its last SEC filing. But it also has $32 billion in total debt.  

When markets and creditors are concerned about your ability to keep up with debt payments and you're considering fire sales of marginal assets as a result, it's tough to build the sort of expert sales force, manufacturing capacity, and marketing budget required for such a launch. 

The potential saving grace? The drug does look genuinely effective, potentially more so than some of its competitors, and there's unmet need among patients who don't respond to other therapies. The suicide risk found in trials seems so small that it may prove to be noise. Valeant has won the panel's approval and has already presented a plan to mitigate risk.

But this victory will be a hollow one if the drug doesn't sell. 

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

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Max Nisen in New York at

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