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What happened

Shares of Abeona Therapeutics (NASDAQ:ABEO), a clinical-stage biotech focused on rare diseases, rose by 16% as of 3:55 p.m. EDT on Tuesday.

So what

The company announced that the European Medicines Agency has granted its lead gene therapy compound, ABO-102, orphan-drug status. ABO-102 is currently in phase 1/2 testing as a hopeful treatment for Sanfilippo syndrome type A, a potentially deadly rare autosomal disease that results in abnormal accumulation of sugars in the body. 

Receiving orphan-drug designation provides the company with a number of potential benefits, including lower regulatory fees, increased guidance from regulatory agencies, and a longer protection period from competition if it wins approval.

The news caused a handful of analysts to reaffirm their "buy" rating on the company, which is why shares are moving higher today.

Now what

Abeona currently has two product candidates in development -- ABO-101 and ABO-102 -- for Sanfilippo syndromes, and the FDA has already granted an orphan-product and rare pediatric disease designation to both. If the company manages to win approval for either, then it could earn pediatric disease priority review vouchers, allowing the company to cut the review time of another one of its drugs to six months from the standard 10-month period. Another option could be to sell the voucher on the open market, which could be a great way to raise capital without diluting shareholders. 

There's no doubt that Abeona's future is looking bright if either one of its product candidates can find its way to market, but it's important to remember that both of them are still in early clinical development. That means there are still plenty of hurdles for the company to clear before it can start to generate product revenue. For that reason, only investors with an extremely high tolerance for risk should consider making an investment today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.