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How to Spot Biotech Shares with “Blockbuster” Potential

The FDA's Expedited Programs help promising new therapies for seriously ill patients move through the approval process as quickly as possible.

That’s great for patients, but there’s a “side effect,” one that offers a huge advantage to investors.

You see, these programs can serve to spotlight some of the biggest potential money-making drugs in biotech.

And here’s exactly how you find them…

Take These Steps to Spot Your Next Major Winner

bioscience blockbusterFor a drug to be chosen for one of these quick approval programs, it has to meet two criteria:

  • It has to treat a serious condition. "Serious" means the condition interferes with the patient's normal activities on a long-term basis, or is likely to get worse if left on its own, or is lethal. This drug must be intended to save lives or appreciably improve quality of life. In other words, it must have a ready-made market awaiting its arrival.
  • It has to fill an unmet medical need. This means there is no other approved, available therapy that adequately treats the condition. In other words, this new drug will have a monopoly in the market place.

So when choosing a biotech stock for investment, here are your first steps:

  1. Go to the company's website and locate the link to its pipeline (drugs in development).
  2. Locate its leading new drug candidate – often the page will provide a chart showing which drug is furthest along in development.
  3. Click on whatever link takes you to more details about the drug.
  4. Scan the info on the page for one of these phrases: Fast Track designation; Breakthrough Therapy designation; Accelerated Approval; Priority Review.

If you find any of those four phrases, you've hit pay dirt.

Now, here's what they mean:

Blockbuster Sign No. 1: Fast Track Designation

A Fast Track designation facilitates the development and expedites the review of drugs that treat serious conditions and fill an unmet medical need. It gives drug developers the opportunity to meet more frequently with the FDA as their product moves through the regulatory gauntlet and allows them to receive a "rolling review" of portions of their marketing application as the process moves forward, rather than submitting everything at the end.

Blockbuster Sign No. 2: Breakthrough Therapy

A Breakthrough Therapy designation accelerates the development and review of drugs that are intended for serious or life-threatening conditions and demonstrate substantial improvement over available therapies for at least one clinically significant endpoint. This designation offers all of the features of the fast track program and includes even more intensive FDA guidance on development.

Blockbuster Sign No. 3: Accelerated Approval

BiotechThis program speeds up the approval of promising therapies that treat serious or life-threatening conditions and provide a significant benefit over available therapies. This designation allows developers to use "surrogate endpoints," if appropriate, in their research. A surrogate endpoint is a laboratory measure or physical sign that can reasonably substitute for a clinically meaningful endpoint to predict positive outcomes.

For example, improved cholesterol levels have been used in place of actual long-term survival data in assessing drugs that treat atherosclerosis. That's a very helpful shortcut in developing drugs for diseases that take a long time to run their course.

Join the conversation. Click here to jump to comments…

About the Author

Ernie Tremblay has more than 25 years of experience in following and analyzing the latest developments in health, medicine, and related technologies. He understands the FDA approval process, as well as the "hard science" behind new, experimental drugs and the market demand for them - and has a comprehensive grasp of the complex dynamics that determine whether a new drug will be a breakthrough winner, or just another casualty of the FDA approval process.

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  1. Mary | May 23, 2014

    I've been watching and waiting to hear about RNA Interference. I am so excited for this therapy to breakout. I would love to see the fore seeable end to so much pain in our lifetime. I have been slapped with the life sentence of heartache. Over 23 years ago doctors finally labeled my medical problem as M.S.
    Although RNA Interference is not set up for me , I still love the thought many will be ecstatic over this discovery.
    If I could ask the scientist to keep working to help me.
    Thank you , keep up the great work you and they are doing for mankind…
    Mary Johnson

  2. Ernie Tremblay | May 26, 2014

    Thank you for getting in touch, Mary. I'm so sorry to hear you've had to endure such a difficult challenge over all these years. You sound like someone who has a great deal of courage and compassion. While RNAi has not yet found a use in treating MS, scientists are indeed beginning to look in that direction–both for your condition and for other autoimmune reactions that attack cells in the brain.

    As I'm sure you know, there are many new drugs recruiting for clinical trials to treat MS, and some that have already given us hope for an effective treatment. Here's a link to an article you may find interesting:

    I wish you well.

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