Dusa Pharmaceuticals (DUSA) received "orphan drug status" for its for Levulan photodynamic therapy for the treatment of esophageal dysplasia, a disease that occurs in some patients with Barrett’s esophagus, a leading cause of esophageal cancer. Orphan diseases are defined as diseases affecting fewer than 200,000 people in the United States or low prevalence is taken as prevalence of less than 5 per 10,000 in the community. Because it is hard to get back the investment in new drugs, the status may grant longer patent times or outside funding for research.
The news from Dusa pushed its stock up 60% to $4.40. The drug in question can be used in treatment for a disease that may be contracted by about 700,000 people in the US. There are other treatments, but the company indicates that they are more invasive.
Of course, the problem with a stock run-up like this is that it is impossible to justify. Should the stock be up 100%? Or 50%? Last quarter, DUSA had revenue of $6.7 million and a loss of $3.6 million. In the last quarter of 2006, revenue was $8.2 million and the company’s operating loss was $18.5 million.
The bump is nice for the shareholders, but there is no way to tell whether it will last.
Douglas A.McIntyre
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