What happened

Shares of Achillion Pharmaceuticals (NASDAQ:ACHN) were jumping 7.5% higher as of 10:46 a.m. EDT on Wednesday after rising as much as 18% earlier in the day. The nice gain came after the biotech announced that the Food and Drug Administration granted a Breakthrough Therapy designation for danicopan (also known as ACH-4471) in combination with Alexion's Soliris for treating the rare blood disease paroxysmal nocturnal hemoglobinuria (PNH). 

So what

Investors' positive reaction to Achillion's news today reflected their enthusiasm over the potentially smoother pathway to approval that a Breakthrough Therapy designation provides. This designation means that the FDA will essentially hold Achillion's hand through the regulatory approval process by providing guidance on clinical trials. It could also lead to danicopan receiving accelerated approval and priority review by the FDA, which reduces the time required for an approval decision.

Gloved hand holding a test tube

Image source: Getty Images.

Achillion has enjoyed plenty of good news with danicopan so far. At the New Era of Aplastic Anemia and PNH Meeting in May, the biotech reported positive interim results from an ongoing phase 2 clinical study of the drug. In 2017, the FDA granted an orphan drug designation for danicopan in treating PNH, which qualified Achillion for tax credits for clinical testing and other financial incentives.

The company has also had more good news in recent months for another pipeline candidate. In July, it announced positive results from a phase 1 clinical study evaluating experimental oral factor D inhibitor ACH-5228.

Now what

Breakthrough Therapy designation is nice, but it doesn't guarantee that Achillion will ultimately win FDA approval for danicopan. The biotech expects to report top-line data from the phase 2 combination trial of the drug with Soliris in the fourth quarter of 2019. Achillion then hopes to begin a pivotal phase 3 study for danicopan in early 2020.

If this late-stage study goes well, Achillion could have a winner on its hands. But investors in biotech stocks know all too well that clinical testing doesn't always go as smoothly as hoped. It remains to be seen what the future holds for Achillion and its leading pipeline candidate.