The Food and Drug Administration (FDA) made a groundbreaking policy change last year that is having a large impact on the biotech industry and creating a big opportunity for investors.
To create a faster path to commercialization for potentially life-saving drugs and medicine, the FDA in July introduced a new "breakthrough" status for drugs that show "substantial improvement on existing therapies for clinically significant endpoints."
For an industry that is accustomed to a costly 10-year commercialization process, the breakthrough status is a welcome shift. An accelerated channel to commercialization could enable drug companies to shave years and billions of dollars from the cumbersome process.
But the FDA's new breakthrough status isn't just a win for drug companies and the health care industry -- it's also creating an opportunity to invest in the most innovative companies in the world. The companies winning breakthrough status for their drugs are in the hunt for the next billion-dollar blockbuster, something that can send both earnings and shares soaring.
And now, just six months after kicking off, the program is accelerating, with the FDA unleashing a wave of breakthrough designations in the past few months that has the industry buzzing.
That includes Novartis AG (ADR) (NYSE:NVS) LDK378, a next-generation ALK inhibitor that was awarded breakthrough status in March amid Phase II trials. The company said it plans to seek FDA approval next year after only three years of development. That could mean huge savings in time and capital for Novartis AG (ADR) (NYSE:NVS).
The FDA's oncology chief, Richard Pazdur, recently emphasized the agency's commitment to the program, stressing that any drug development team working on a breakthrough drug won't have any problem getting steady feedback from the agency and his oncology division.
Looking forward, the FDA's breakthrough program is a great place to find the best companies in health care that are developing the most innovative and commercially viable drugs.
Here are two leading health care companies that are gaining on recent breakthrough designations.
Pfizer Inc. (NYSE:PFE) Pfizer Inc. (NYSE:PFE) is one of the largest health care companies in the world, with a market cap of $201 billion.
The company is using its massive scale to produce some of the most innovative medical technology in the world, recently earning breakthrough status for a breast-cancer drug called palbociclib. Analysts from JPMorgan Chase & Co. (NYSE:JPM) and Leerink Swann speculate the drug could generate annual sales of more than $5 billion if approved for use against breast cancer. Pfizer Inc. (NYSE:PFE) said the special status was awarded based on impressive results in midstage trials. Looking forward, palbociclib will still be subjected to rigorous testing, but its breakthrough status makes the path to commercialization much quicker and less expensive.