So you just got a BTD for your top drug? Don't be surprised to see the enthusiasm fizzle fast among investors
We’ve already seen studies spotlighting how the FDA’s breakthrough therapy designation can lead doctors and patients to get unreasonably pumped about a drug — even though that was never the idea. But it seems that investors have become largely immune to the buzz, at best losing interest quickly.
How do we know?
A group of researchers took a list of 218 BTDs, sliced away the ex-US and private companies, and then tracked the stock reaction to the announcement. Dividing the list into commercial and pre-commercial outfits, they found that the more mature companies essentially saw no response in the ticker price. The less mature pre-commercial biotechs got a clear pop on their stock price, but that just lasted a few days and then quickly fizzled.
They reported their findings in Nature Reviews.
In the Pipeline blogger Derek Lowe took a look and offered his astute opinion that if you went back to the early days of the BTD program, you would probably have seen more optimism on Wall Street. Clearly, though, that excitement over a BTD announcement faded long ago. You get 218 press releases on the same thing, people stop jumping so fast.
For Big Pharma, it’s unlikely that the agency’s 6th or 7th BTD for an established product — say Keytruda — would change anyone’s financial forecast. And even where it may have made a difference for a potential blockbuster — let’s call out J&J’s esketamine, which was clearly helped out by the agency’s endorsement in its campaign to overcome more negative than positive pivotal data — it’s hard to influence a mammoth valuation with a single BTD on a single program.
Of course, the FDA wasn’t trying to game the stock market with their BTD program. The FDA has repeatedly held up BTDs, along with fast track designations, etc, as their commitment to speeding up the process to reach a decision — and few people in the industry would doubt their sincerity on that score. Over the last year we’ve also seen FDA commissioner Scott Gottlieb offer various suggestions for further accelerating the process at a time overall new drug approvals are riding an all-time high.
All that does add value in the industry — but it’s a long way from the kind of catalyst investors look for.