Tiny biotech prays for FDA's OK on growth drug

NEW YORK (CNNMoney.com) -- The FDA could decide today whether to approve an experimental drug for a rare growth disorder from the biotech Tercica.

The Food and Drug Administration is scheduled to make its decision on Thursday regarding Somatuline Autogel, an injectable treatment for adult patients with acromegaly. This disorder is caused by too much growth hormone, resulting in enlarged body tissues of the face, jaw, hands, feet and skull, according to the National Institutes of Health.

In anticipation, investors have driven up Tercica Inc.'s (down $0.15 to $6.60, Charts) stock 35 percent this year. Analysts believe that the FDA will probably approve the drug, and that could drive up the stock by at least $1, from its Aug. 29 close of $6.75.

Acromegaly affects no more than a half-dozen adults out of 100,000, according to the NIH. Eric Schmidt, analyst for Cowen and Company, believes that annual sales for the Autogel will peak at slightly more than $100 million in 2012. Matthew Osborne, analyst for Lazard Capital Markets, projects a peak of $120 million in 2011.

While these projections are nowhere near the $1 billion-a-year blockbuster status sought by drugmakers, the drug would have a major impact on Tercica, a small biotech with a market capitalization of about $350 million.

Tercica's net sales barely exceeded $3 million in the first half of 2007, and the company lost $25 million in that same timeframe. Schmidt said that a positive decision from the FDA could drive up Tercica's stock by $1 from its Aug. 29 close of $6.75. The analyst said that impact of a negative decision would depend on whether the FDA rejects the product outright, or delays its approval with requests for more data.

Despite Tercica's stock runup this year in anticipation of the FDA's approval analysts said that the stock still has room to run if the agency green lights the drug because of it's increasingly unpredictable nature.

"These days, investors are more skittish approaching an FDA decision," said Schmidt of Cowen.

"An approval is never a sure thing," said Osborne of Lazard.

Somatuline Autogel would compete directly with the Swiss drugmaker Novartis' (down $0.25 to $52.50, Charts) product Sandostatin LAR.

Tercica also sells Increlex, a drug for children with stunted growth, and has inked a deal to combine the drug with the biotech giant Genentech's (up $0.44 to $74.00, Charts) growth hormone Nutropin.

Tercica, based in Brisbane, Calif., has partnered with a French biotech, Ipsen (down $0.17 to $26.09, Charts), Inc., to sell its drugs overseas.