A Developing "Breakthrough" In Biotechnology that You Should Monitor
Sherrie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For many years, biopharmaceutical companies, physicians, patients, and investors alike, have been seeking a quicker regulatory path for drugs that demonstrate superior clinical evidence and treat life-threatening diseases. In 2012, the FDA showed signs of progress, with the creation of the “Breakthrough Therapy” designation. Now, it’s crunch time, as the FDA must prove that this designation actually means something to patients, physicians, companies, and Wall Street.
A “Breakthrough” Submission
Pharmacyclics (NASDAQ: PCYC) submitted ibrutinib to the FDA on Wednesday for the treatment of two different blood cancers. Ibrutinib is being tested on seven total blood cancer indications, and three of which have been awarded a Breakthrough Therapy. With this being a new indication, it will be interesting to see how quickly the FDA responds with an approval, since it will determine the level of importance that the market places onbreakthrough drugs.
The "orphan drug" designation has become the most sought-after in biotechnology; it is an indication that suggests leading technology in treating rare diseases. It also allows a drug to have significantly more years of exclusivity, depending on the number of indications it treats. Therefore, the market knows what to expect when a drug is awarded an orphan indication in the clinical setting. But the jury’s still out for breakthrough drugs.
Who’s Getting Breakthrough Designations?
So far, 13 total breakthrough indications have been awarded as of May 15, three of which have been awarded to Pharmacyclics’ ibrutinib. Peak sales for this product sit at $3.5 billion; Pharmacyclics is partnered with Johnson & Johnson (NYSE: JNJ) in its development. As noted in a previous article, Pharmacyclics is trading at 4.2 times its peak sales (50% of total sales).
In addition to ibrutinib, Johnson & Johnson also has a Phase 1/2 multiple myeloma drug called Daratumumab. This product treats the most severe cases of myeloma -- those patients who have failed at least three prior treatments. The product works on cancers where the expression CD38 is present; therefore, it has the potential to treat other cancers as well. From its one myeloma indication, analysts project peak sales of $750 million.
The $70 billion company AbbVie (NYSE: ABBV) also has three breakthrough therapy designations awarded to its Phase 3 hepatitis C candidate, known as DAA combination with and without ribavirin. AbbVie’s HCV product has been tested on 571 patients in a trial called “Aviator,” where a high viral response rate was identified after 12 weeks of treatment. What makes this product special is that it treats both patients who have failed prior treatments, and those who are untreated. According to Reuters, this product could produce annual sales north of $3 billion, which would be a nice addition to AbbVie’s $18.3 billion in sales last year.
As you can see, three companies control more than half of all breakthrough therapy designations. So far, Pharmacyclics is the only smaller biotech to have earned these designations. But given the category's newness, it is highly likely that the FDA will award Breakthroughs to smaller companies in the future. Thus, the speed at which the FDA approves ibrutinib will be important in determining the relevance of breakthrough therapies to investors.
What To Expect
Part of the reason that Pharmacyclics rallied 17% in the final three days of last week is because investors expect a very quick approval process. Typically, it takes up to 12 months for an FDA decision after a company submits a drug for approval. Then the FDA can always extend, ask for more information, or ultimately respond to the company’s application with a denial. The breakthrough therapy designation should bypass all of these potential problems, since the FDA essentially holds the hand of companies that are awarded breakthroughs.
For drugs deemed promising, a priority review is often given, which speeds the process to eight months. This typically means that fewer questions from the FDA will be asked about the drug. However, what about for a breakthrough therapy? What should we expect in terms of approval process?
This is the billion-dollar question, since investors expect the FDA to act quickly and with leniency to any potential safety or data concerns. According to industry peers, a four- to five-month wait time should be expected. But according to word on The Street, investors expect three months until an approval. Now, the big question is: If The Street expects three months, yet no approval is heard until five months, does this negatively affect future breakthrough therapy designations?
If the FDA does not show that there is some actual benefit to a breakthrough designation, it will signal to Wall Street that it's making no attempts to really expedite the approval process.
Clearly, this is an important decision for the FDA. If it approves ibrutinib rapidly, future breakthrough designations will be warmly welcomed by Wall Street. If not, future breakthrough designations will be taken with a grain of salt, and the FDA could face political and industry backlash.
As a result, the developments surrounding Pharmacyclics' new drug submission is important to the company's investors, but even more important to the designation’s ultimate meaning, and the overall perception of the FDA.
Sherrie Stone has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!