Femasys (NASDAQ: FEMY) stock is down 50% over night from highs. A reasonable bet would be that FEMY stock will continue to fall back to more reasonable levels. For, as far as we can see at least, this is a flurry of speculation producing far too much movement for the objective value of the information.
Yes, it’s true, there was an announcement: “today announced it has received 510(k) Clearance from the United States Food and Drug Administration (FDA) for FemaSeed®, an innovative infertility treatment designed to deliver sperm directly to where conception occurs in a woman’s fallopian tube.” And, well, yes. FDA approval is the vital starting point to being able to market in the US. But a 501 (k) isn’t quite the FDA sort of approval we might think it is. It’s nothing, at all, to do with the FDA having tested and then approved some new and wondrous treatment. In fact, it’s the opposite. It’s much more like a generics approval but for a medical device: “A 510(k) is a premarket submission made to FDA to demonstrate that the device to be marketed is as safe and effective, that is, substantially equivalent, to a legally marketed device (section 513(i)(1)(A) FD&C Act). Submitters must compare their device to one or more similar legally marketed devices and make and support their substantial equivalence claims.” Sure, you need one of these before you go to market. But it’s not - as we say - anything like what we normally think of as FDA approval after Phase III tests and all that.
It’s much more like - but still not the same as - the CE Mark and UKCA mark that we’ve criticised Genedrive and Rhythm Biosciences over. Those stock price rises died soon enough as we’d expect might happen here at Femasys.
Femasys stock price from Google Finance
It’s also possible think that we should be careful about news releases from Femasys: “Femasys (NASDAQ: FEMY) stock jumped 130%. FEMY stock leapt because the company announced that it's likely to gain a patent on its permanent birth control product. The aim here is to provide a permanent - ie, akin to sterilisation - form of birth control that doesn't require surgery, is simply an in-office treatment. Well, OK, yes, a useful goal, something that works and doesn't have the potential complications and costs of tubal ligation would be a good product. We do think the stock price movement is more than a little premature though.”
And we were right too. A patent is a lovely thing. But it comes at the start of the process of proving that it works. There’s usually still 8 or 9 years of work to be done before that full FDA approval. So, once people realised this that 130% jump rather faded away. As we think this one of the 501 k FDA approval is going to. It’s just not the type of approval people think it is. So, the FEMY stock price jump is likely to fade away again.
