Clinical Trials and FDA Calendar for Biotech Stocks
Biotech stock traders benefit from tracking upcoming catalysts on a clinical trials and FDA calendar. Catalysts come in the form of clinical trial results and FDA decisions. Biotech stocks can react favorably to positive clinical trial outcomes with price appreciation of 50% or more. Similarly, the FDA granting a Breakthrough Therapy designation can send a biotech stock higher. While clinical and regulatory events can be positive for biotech stocks, these events can also be sources of negative news sending the shares much lower. Watching stocks react to these events is one way to engage in biotech investing. Another method is to have a calendar in place which looks far into the future so you can anticipate which events will impact a biotech company's stock price. The anticipation of the event can cause biotech stock price swings well in advance of the event. By tracking these events on a calendar you can better prepare for them and make well thought out trades rather than reacting to biotech stock news. This article will detail the catalysts which should become part of your clinical and FDA Calendar for each biotech stock you're trading or looking to invest in. You will also learn a general overview of the FDA approval process and clinical trial phases.
Most nations across the globe have realized the importance of producing quality medications that give the desired benefits without causing unwanted side effects. They have created stringent procedures and protocols for the pharmaceutical industry along with an approval process that ensures the drug is safe and effective. The United States Food and Drug Administration (FDA) is responsible for drug approval in the country. The guidelines issued by the agency are accepted worldwide. In fact, governing bodies from other countries often use FDA recommendations to create their own protocols.
The process of getting a molecule from the lab to an approved drug is long and complicated. This journey is filled with scientific, regulatory and monetary challenges often taking 10 years or more with a 10 percent probability of success. The FDA is involved all along this regulatory journey, from the initial request to test the compound in humans to post approval marketing, manufacturing, and labeling.
The biotechnology stock prices react to news regarding events along this regulatory journey. These reactions are often more amplified than what is seen in other industries. This is especially true for biotech penny stocks because these companies are often waiting for good news in order to justify raising more money to continue developing the potential treatment. Biotechnology stock prices can be cut in half or triple in value based upon a regulatory announcement.
Investing in stocks of small biotech firms waiting for FDA approval can be a lucrative way of diversifying your assets. However, a clear understanding of the approval process is important to analyze your chances of success.
The FDA Approval Process
Creating and marketing a new drug is complicated and long. Every medication follows its own unique path from the lab to your medicine cabinet. Several unplanned changes and accidental discoveries occur along the way. Some companies may discontinue the process due to poor preclinical or animal testing results. Others may not pass the FDA review process. Researchers may also discover another important use of the drug at a later stage and receive approval for that purpose instead of the original one. Small biotech stock investors looking to benefit from FDA approval should be prepared for such eventualities.
The FDA approval process has been created to evaluate every aspect of the drug including the way clinical trials are designed, procedures and protocols followed during manufacturing, effectiveness of the drug, and the severity of the side effects. The process involves many interactions between the company and FDA, the most important are reviewed below. These interactions may result in a newsworthy headline from the company which can cause the stock price to move. The final review also know as the PDUFA date is when the FDA rules whether or not they will approve a drug. This is a very important event for a biotechnology company. Therefore PDUFA dates should be everyones FDA calendar. Clinical trial result are also very important with phase 2 and phase 3 trials results having a bigger impact than phase 1 clinical trials.
- Investigational New Drug (IND) Application – Companies and research institutions involved in the creation of a new drug should develop the compound and conduct preclinical tests on laboratory animals before submitting an IND application to the FDA. The application should include results from these preclinical trials. The FDA will review these results to determine the eligibility and the safety of the drug and then give an approval for clinical trials in humans.
- Clinical Trials – Once the company receives a green light from the FDA and the local Institutional Review Board (IRB), it can go ahead with the clinical trials. The process is complex and involves several steps. It is supervised by a panel of professionals from hospitals and research institutions. The IRB will provide guidelines for the trial. They will describe the type of people eligible for the trial, the schedule for the test, dosage for the medication, length of the study, and the main objective of the entire process. The guidelines ensure the studies are safe for the patients and acceptable to the reviewers. The IRB also makes sure patients are aware of their rights and risks before undergoing the procedure.
- Phase I Testing – Phase I Testing usually involves 20 to 80 healthy volunteers. The goal is to determine how the human body metabolizes and absorbs the medication and the rate at which the drug is excreted from it. Phase I Testing also helps establish the most frequent side effects of the drug.
- Phase II Testing – If the drug passes Phase I testing, it enters the next stage. Unlike the first stage that emphasizes safety, Phase II testing focuses on the effectiveness of the drug in addition to safety. A certain number of patients with the targeted disease receive the new drug, while another set of patients receive either an inactive substance or another approved medication. Apart from comparing safety and side effects, the researchers also evaluate the way patients respond to the medication and the extent of recovery. This trial is usually long and involves anywhere from a few dozen to 300 people.
- Phase III Testing – Phase III testing consists of a large-scale study with several hundred to 3,000 people. The drug enters this stage only after the results from Phase II are reasonable and encouraging. Representatives from the FDA and the company meet to discuss the process before it begins. They focus on safety and effectiveness of the drug at different dosages. The study commonly involves people from different sections of the population.
- New Drug Application (NDA) or Biologic License Application (BLA) – Once the clinical trials are completed, the drug manufacturer submits a formal application for approval to the FDA. The firm will include all the data obtained from animal studies and clinical trials. It should contain information about how the drug is manufactured and how it will be marketed. The company should also inform the agency about the way human body metabolizes and excretes the drug.
- Filing the Application – Once the FDA receives the NDA or BLA, it has 60 days to file the application. The agency will reject applications that are incomplete or inconsistent.
- Final Review - PDUFA Date – If the FDA agrees to the file the NDA or BLA, a panel of experts from the agency’s Center for Drug Evaluation and Research (CDER) or Center for Biologics Evaluation and Research (CBER) will review all aspects of the NDA or BLA before the final approval decision. The Prescription Drug User Fee Act (PDUFA) ensures that the final review is completed within 10 months for all standard drugs. The process is expedited for priority reviews and most of these drugs receive approval within 6 months. Apart from the safety and effectiveness of the drug, the agency will also review the labeling of the final package. Its team will visit the company’s facility and access the manufacturing process as well. Based upon the FDA's findings the company will receive a complete response letter (commonly referred to a rejection letter) or an approval letter.
- Review Meetings – Throughout this entire process representatives from the FDA and the biotechnology company meet to discuss relevant matters. There are three types of meetings that occur: Type A, Type B, and Type C. Each meeting type is subject to different procedures. Meeting agendas include; dispute resolution, discuss clinical holds, special protocol assessment, Pre-IND meetings, end of phase 1 and 2 meetings, pre phase 3 and pre NDA/BLA meetings.
- Phase IV Trial – Once the drug or biologic is approved for sale and on the market additional trails can take place. In some cases the FDA may require these trials as a condition of approval. The FDA will use these trials to monitor the long term effectiveness or safety. Depending on the results, the FDA may pull the treatment from the market or put restrictions on its use.
Possible Obstacles to FDA Approval
FDA approval is a lengthy process and several issues may crop up along the way. Studies may reveal unexpected safety concerns. Researchers may fail to demonstrate the effectiveness of the drug as well. The company may be forced to conduct more studies on different types of people or for a longer period of time. The FDA may not find the amenities at the manufacturing facility acceptable and delay approval. The pharma industry follows a set of standards known as good manufacturing practices, and any deficiency or non-compliance needs to be corrected before the agency grants the consent. Most experts agree that it is often a combination of problems that delay the endorsement process. While close communication with the FDA can help, there is no guarantee.
A delay in the approval process or complete rejection can have a direct impact on the revenue of the drug manufacturer. When compared to pharmaceutical giants with large research wings, microcap biotech firms suffer greater damage. They may not be able to launch the product on time and may not have resources for additional research. Some companies may completely scrap the project and file for bankruptcy.
Investors looking to benefit from small biotech firms should, invest wisely. Learn more about the company and its products. You should also gather information about the firm’s management and its past experience with the FDA approval process. Remember that FDA approval is an important first step. Ultimate success will depend on a variety of other factors as well. The company should develop a credible brand image and market its product effectively. Make sure the company has the resources and the commitment to accomplish such goals. Some small biotech companies fail even after FDA approval because there is no demand for their product among consumers and doctors or insurance will not cover the treatment.
As an investor, it is your responsibility to consider all aspects of the business before investing. Understand the success rate for progressing from one step to another along the approval process is often less than 50%. More information about the success rates for the different steps can be found in this article.