NEW YORK (AP) -- Shares of Navidea Biopharmaceuticals Inc. skidded Tuesday after regulators refused to approve the company's cancer imaging agent Lymphoseek.
THE SPARK: After the market closed Monday, Navidea said the Food and Drug Administration wanted it to resolve problems with third-party manufacturers before it approves the product. The company said the agency did not express any concerns about the safety or effectiveness of Lymphoseek and said it is attempting to fix the manufacturing problems quickly.
THE BIG PICTURE: Lymphoseek is a radioactive imaging agent that is intended to help determine if breast cancer or melanoma has spread to a patient's lymph nodes. Navidea said Lymphoseek can be used to find the lymph nodes that drain from a primary tumor. Those lymph nodes have the highest probability of harboring cancer.
The company is studying other diagnostic agents but does not have any approved products. Navidea plans to ask European Union regulators to approve Lymphoseek before the end of 2012.
THE ANALYSIS: ThinkEquity analyst Spencer Nam said he was surprised by the FDA's response. He said Lymphoseek could be approved as early as November, but it's not clear how long it will take for Navidea to clear up its manufacturing concerns and for the FDA to finish a new review of the product. Nam cut his rating on the stock to "Hold" from "Buy" and lowered his price target to $2.50 per share from $7.
Ladenburg Thalmann analyst Kevin DeGeeter said there was some good news for Navidea: the FDA did not appear to have any concerns about the safety or effectiveness of Lymphoseek compared to similar products, and the agency did not ask for more clinical data about Lymphoseek. A request for more data or new studies could bring about greater costs or longer delays.
DeGeeter said he now expects Lymphoseek to reach the market in the second quarter of 2013 instead of the fourth quarter of 2012. He said he still thinks sales of Lymphoseek could rise to $450 million per year. He maintained a "Buy" rating on the shares and raised his price target to $7.50 from $6.25.
SHARE ACTION: Navidea shares dropped 88 cents, or 24.9 percent, to $2.64 in afternoon trading. The stock reached a 52-week high of $4.77 on July 23.