What happened

Shares of Abeona Therapeutics (NASDAQ:ABEO) jumped 18.4% on Tuesday, while shares of Sangamo Therapeutics (NASDAQ:SGMO) ended up 11.3%. The former is clearly because Abeona received a "breakthrough therapy" (BT) designation from the U.S. Food and Drug Administration for its EB-101 gene therapy program, for patients with recessive dystrophic epidermolysis bullosa. Sangamo is developing gene therapies of its own, albeit for different diseases, so it may be riding on Abeona's coattails.

So what

The BT designation can speed up development of a drug a little, although there's nothing to keep the FDA from doing the same thing for drugs without the designation. More importantly, it also serves as an endorsement from the agency that the treatment has promise.

Whether the endorsement is worthy of an 18% gain is debatable, but Abeona is a fairly small company, so the absolute increase in market cap isn't all that much. Abeona's long-term valuation will be determined by the outcome of the phase 3 trial for EB-101, which Abeona plans to start early next year.

Doctor talking to patient in exam room

Image source: Getty Images.

Sangamo is further behind, having recently started a phase 1/2 trial for SB-525, a gene therapy for hemophilia A, in partnership with Pfizer (NYSE:PFE). The biotech has a couple of other clinical programs, but they're also very early in development. Of course, positive phase 1/2 trial data would likely be all that Sangamo needs to get BT designation for one or more of its programs.

Now what

Drug development is a marathon, not a sprint, and long-term investors can ignore these double-digit moves caused by relatively minor factors. In the short term, partnerships with big pharma and clinical trial results will drive the companies' valuations. Long-term value will be determined by the companies' ability to get their therapies approved by regulators, and ultimately, by their revenue from treating patients.

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.