Kythera Biopharmaceuticals Inc. received the Food and Drug Administration’s blessing for its double-chin reducing drug last week. But investors didn’t seem to get the memo.
The Westlake Village company got the FDA’s go-ahead for the drug, Kybella, on April 29, but its shares fell 4 percent the following day, closing at $43.69. Typically, biotech stocks jump on that kind of news, a green light for companies to take their product to market.
The issue may be Kybella’s drug label, which will say the product is approved only for reducing fat below the chin. In an interview last week with Bloomberg News, Kythera Chief Executive Keith Leonard said investors might have expected the FDA label to indicate the drug could be used elsewhere.
Drugs are often more valuable if they can be used for more treatments. Botox is a prime example: The hugely valuable drug can be used for everything from reducing wrinkles to uncrossing eyes and reducing underarm sweat.
But Leonard said the FDA wouldn’t have approved Kybella for anything other treating chin fat, because that’s the only use for which Kythera submitted clinical trial data.
In a statement to the Business Journal, Leonard blamed the stock slump on a market that was generally sour for biotech stocks.
“The markets in general were down,” he said on April 30. “The biotech sector was especially hurt today. We are focused on building long-term shareholder value and remain confident in the potential of our newly approved and novel treatment.”
In an April 29 research note, Seamus Fernandez, an analyst with Boston investment bank Leerink Partners who follows Kythera, said he found the FDA’s labeling language unsurprising and doesn’t expect it will affect Kybella’s chances of ultimately being used for other treatments.
For now, he wrote, the biggest question about Kybella is its price, which he expects will be announced next month.
Kythera, which went public in 2012, closed a secondary public offering in March, raising about $144 million. The proceeds were intended to fund Kybella’s ongoing development and preparation for commercialization. The firm has spent a decade and more than $307 million to bring the drug to market.
