The biotech sector receives a lot of investor attention for two reasons: the interesting science involved in drug development, and the possibility that biotech stocks hold for multi-bagger returns in a short time period.
Yesterday, shares of Acorda Therapeutics
Fampridine is being tested to treat neurological problems associated with multiple sclerosis. Acorda reported strongly statistically significant improvement in walking-related neurological functioning in a small phase III clinical trial.
This result is fairly impressive by itself, but what sent investors' hearts aflutter yesterday is that Acorda had negotiated a Special Protocol Assessment (SPA) with the FDA and announced that the Fampridine trial met all endpoints of the SPA.
Companies negotiate SPAs with the FDA to clearly define what endpoints in a clinical trial will have to be achieved in order to for the trial to be deemed a success. When a trial meets the criteria set forth in an SPA, the chances of the drug being approved by the FDA are greatly increased.
Successfully meeting the criteria of an SPA does not guarantee drug approval in and of itself. The FDA has to also be assured that the drug doesn't have any special safety issues. This is the area where Acorda might run into problems, since the Fampridine phase III trial consisted of only 301 patients taking the drug or a placebo over a 14-week period.
The only major adverse events associated with Fampridine were one case of sepsis and another possible death. Investors following Acorda would be smart to get more information about both of these cases when the company releases full results from the trial at a future medical conference.
I'm not entirely convinced that one short clinical trial will provide enough evidence to the FDA to approve Fampridine. Multiple sclerosis is a chronic condition and patients take drugs to treat it for years. Historically, the FDA has required at least a two-year trial for any company hoping for drug approval in this indication.
Despite this fact, the results achieved yesterday by Acorda are impressive and definitely warranted a strong reaction from the market. Potential investors in shares of Acorda would be smart to temper some of their near-term expectations for Fampridine and maintain a longer outlook for any potential approval of the drug.
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