These 2 Companies Are the Biggest Winners of the FDA's Breakthrough Designation

Designed as a way to bring potentially life-changing drugs to pharmacy shelves faster than ever, the Food and Drug Administration Safety and Innovation Act, which passed last year, came with a clause allowing the FDA to place a special designation, known as "breakthrough therapy," on clinical-stage drugs.

Source: Food and Drug Administration, Wikimedia Commons.

For a drug to be classified as a breakthrough therapy, it has to "treat a serious or life-threatening condition, and [have] preliminary clinical evidence [indicating] that the drug [or combination of drugs] may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints." Naturally, this phrase leaves a little bit to interpretation, and not all biotech companies have had success in getting the FDA to label their experimental drug or combo as a breakthrough therapy.

Since the inception of the breakthrough therapy designation through August 23, 2013, the FDA received 82 requests for a breakthrough therapy designation review and granted only 25 breakthrough designations. An additional 25 applications are still under review, with 32 reviews being denied the breakthrough designation.

The breakdown of the breakthrough designation
As you might expect, cancer treatments account for roughly half of all breakthrough therapy designations, but the diversity among the companies producing these potentially game-changing drugs is encouraging. Following are the designations that the FDA has issued through early July.

Drug name

Company

Treatment designation

Kalydeco & Kalydeco with VX-809 

Vertex Pharmaceuticals 

Both for cystic fibrosis

ibrutinib

Pharmacyclics (NASDAQ: PCYC  )

Mantle cell lymphoma; chronic lymphocytic leukemia; small lymphocytic lymphoma; Waldenstrom's macroglobulinemia.

LDK378 

Novartis (NYSE: NVS  )

Anaplastic lymphoma kinase-positive metastatic non-small cell lung cancer

palbociclib 

Pfizer (NYSE: PFE  )

Metastatic breast cancer

lambrolizumab

Merck

Advanced melanoma

Hep-C combo daclatasvir, asunaprevir, and BMS-791325 

Bristol-Myers Squibb 

Chronic hepatitis-C virus

SD-101 

Scioderm

Epidermolysis Bullosa

daratamumab 

Genmab/ Johnson & Johnson (NYSE: JNJ  )

Double refractory multiple myeloma

Hep-C combo ABT-450/r, ABT-267, and ABT-333 

AbbVie (NYSE: ABBV  )

Chronic hepatitis-C virus

obinutuzumab  

Roche

Chronic lymphocytic leukemia

sebelipase alfa 

Synageva BioPharma 

Early onset lysosomal acid lipase deficiency

asfotase alfa 

Alexion Pharmaceuticals 

Perinatal-, infantile-, and juvenile-onset hypophosphatasia

serelaxin

Novartis

Acute heart failure

drisapersen 

GlaxoSmithKline 

Duchenne muscular dystrophy

Source: Individual company press releases.

Everyone's a winner
There's a lot of diversity here. The real winner of FDASIA's passing, of course, are the patients afflicted by these chronic diseases who are likely to benefit from a swifter approval process. But ultimately, we're going to see quite a few of these companies benefit as well -- with the assumption that every drug listed here is approved, which is probably a utopian expectation.

One of the more obvious beneficiaries of the breakthrough designation is Pharmacyclics, which just this week had ibrutinib accepted for FDA priority review. Ibrutinib absolutely wowed researchers and investors in a midstage chronic lymphocytic leukemia study in which a complete or partial response was demonstrated in 71% of patients -- the highest such response ever recorded in a clinical-stage CLL trial.

AbbVie's direct-acting antiviral drug combo is another big highlight, even though it's currently going through late-stage clinical trials and isn't likely to file for an NDA until next year. AbbVie's combo was effective in delivering a sustained virologic response (i.e., no detectable level of the hepatitis-C virus) after 12 weeks in 97% of a 79-patient study in midstage trials. That's a phenomenal success rate for an oral hep-c drug and will almost assuredly make intravenous treatments obsolete.

Two companies that will benefit the most
Despite the variety of designations, two companies are more deeply engrained than their peers because of the breakthrough therapy designation and could be poised for gigantic gains.

Johnson & Johnson is one such company, being the licensing partner for Pharmacylics' ibrutinib and also for Genmab's daratumumab, which is a human CD38 monoclonal antibody currently in midstage development for the treatment of double-refractory multiple myeloma. With ibrutinib's peak sales estimates of $5 billion and daratumumab's peak sales estimate of $750 million, J&J could be staring down some monstrous pipeline gains in the coming years.

The other big winner here, which came as a big surprise to me, is Novartis. To start with, Novartis has two drugs -- LDK378 and serelaxin -- with the breakthrough therapy designation. LDK378 demonstrated an incredible overall response rate of 60% in a 78-patient midstage study for ALK+ non-small-cell lung cancer and should serve as enough of a basis to file for an NDA in early 2014. Serelaxin is equally exciting, with the drug reducing mortality rates in a late-stage trial by 37%. If approved, it would become the first new acute heart failure drug to come to market in more than two decades.

But Novartis is also a crucial component to Pfizer's breast cancer drug palbociclib, which has been touted as a potential $5 billion-per-year drug. The reason is that Novartis' Femara is given in conjunction with palbociclib to produce its desired results. In a midstage metastatic breast cancer trial, patients given just Femara demonstrated 7.5 months of progression-free survival, compared with the combination of palbociclib and Femara, which delivered a whopping PFS of 26.1 months!

Adding these together -- peak sales estimates of $5 billion for palbociclib, anywhere from $1.5 billion to $6 billion for serelaxin, and no published estimates for LDK378 (but I'd venture a guess of around $2 billion) -- and you'll see that Novartis offers one of the most intriguing pipelines right now among the companies which have received the breakthrough designation for one of their drugs.

This is working
The FDA doesn't hand out the breakthrough designation lightly by the FDA, but it also can help us identify biopharmaceutical companies that are likely to show long-term gains. Let's just say that if I was a shareholder in J&J or Novartis right now, I'd be very pleased with the expedited review process that the breakthrough designation offers.

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