Why Egalet Shares Are Plummeting After FDA Approval Of ARYMO ER

After initially spiking as much as 20 percent on Monday following FDA approval of ARYMO ER, shares of Egalet Corp EGLT are down more than 16.4 percent in early Tuesday trading. For traders wondering why Egalet shares are selling off after such good news, the devil is in the details.

Opioid Abuse And Abuse-Deterrent Properties

Opioid abuse has become a major problem in the United States in recent years, and the FDA has begun placing heavy emphasis on abuse-deterrent options to the drugs that are already on the market. Egalet was hoping to gain an abuse-deterrent label from the FDA for ARYMO ER; The drug was approved with an abuse-deterrent label for intravenous delivery.

The FDA was clear that ARYMO ER is approved for “the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate.” In other words, doctors should prescribe ARYMO ER as a last resort after all other treatment options are exhausted.

That’s certainly not what Egalet and its shareholders were hoping for from the FDA and does very little to differentiate ARYMO ER from the other opioids already on the market. It’s now up to Egalet to decide whether it wants to pursue more trials to convince the FDA of the drug’s abuse-deterrent properties and/or whether the company wants to launch a marketing campaign to educate physicians directly.

Either way, the market is clearly disappointed with the outcome.

At last check, shares of Egalet were continuing their descent, down 19.21 percent on the day at $6.77.