Keryx Biopharmaceuticals (Nasdaq: KERX) shares jumped as much as 30% today, after the company announced that its colon cancer drug perifosine had received a fast-track designation from the Food and Drug Administration.

April Fools is over, folks; that's not a joke. Seems we need another lesson in what a company gains from a fast-track designation.

The FDA gives fast-track designations to drugs designed to treat serious diseases that have unmet need. Colon cancer certainly counts as serious, and while there are plenty of approved treatments for it-- including Bristol-Myers Squibb (NYSE: BMY) and Eli Lilly's (NYSE: LLY) Erbitux, Amgen's (Nasdaq: AMGN) Vectibix, and Roche's Xeloda -- none of them are cures. Was a fast-track designation for perifosine really all that surprising?

Here's what a company can get with its fast-track designation:

  • Increased interaction with the FDA to discuss the drug's development, including clinical trial design.
  • Eligiblility for accelerated approval using surrogate endpoints, like progression-free survival instead of overall survival.
  • A rolling review, where the FDA starts reviewing sections of the New Drug Application (NDA) as they're available, rather than waiting until the entire application is complete.

You'll notice that "increased chance of approval" isn't listed. Nor is "a guarantee of higher sales." A fast-track designation may make for nice press releases, but its value is fairly limited for drugmakers.

Keryx already has a Special Protocol Assessment (SPA) with the FDA for the phase 3 trial it will begin shortly, so the first two advantages aren't too valuable at this point. The rolling review sounds good, but a fast-track designation never seems to speed up the approval process too much. Dendreon's (Nasdaq: DNDN) Provenge had fast-track designation, and it only got an answer for its first-approval attempt about a week ahead of the FDA's PDUFA goal. For its second attempt, we're less than a month away from the goal, and there's still no decision in hand.

The bigger influence on the timing of an approval comes from whether a drug gets a standard 10-month review or a priority six-month review time frame. That decision is separate from the fast-track designation, and it isn't decided until the marketing application gets turned in. Most drugs given fast-track designation receive priority reviews, since both designations are based on the needs of patients. But the timing of the review is ultimately decided by the data in the clinical trials. Cell Therapeutics (Nasdaq: CTIC) received a fast-track for pixantrone, but the FDA gave it a standard review time period, for example.

If you agree with me that Keryx doesn't deserve a double-digit increase for gaining fast-track designation, join me in marking it as an underperform in Motley Fool CAPS. I'm hoping to ride Keryx's coattails down, if only to increase my All-Star ranking a little more.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.