Why the Starpharma share price is tanking on an FDA rejection

The Starpharma Ltd (ASX:SPL) share price is down 15% today.

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The Starpharma Ltd (ASX: SPL) share price is down 15% to $1.19 today after the healthcare researcher shocked the market with the news that the U.S. healthcare regulator the FDA wants confirmatory clinical data before approving VivaGel for the treatment of bacterial vaginosis.

This doesn't mean the FDA won't approve VivaGel BV, but suggests Starpharma will have to invest more in clinical trials before any approval is potentially given.

Another issue is that just a week ago Starpharma announced to the market that it had secured a U.S. pharmaceutical partner to license and sell VivaGel BV with Starpharma entitled to receive up to A$142 million in milestone and royalty payments.

However, the first milestone payment of US$20 million (A$28 million) was due on FDA approval, which today was rejected in an embarrassing outcome likely to rattle investor confidence in the company.

According to Starpharma, VivaGel BV is already approved for use in Australian and the EU, although it's yet to actually be commercialised in these regions.

Starpharma's CEO said she was "extremely disappointed" with the FDA's decision, but would continue to work with the FDA to understand how it can come to provide the necessary clinical data for approval.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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