[url=https://https://www.stern.nyu.edu/sites/default/files/assets/documents/2016%20Re%20paper.pdf]Stock Market Reaction to FDA Breakthrough Therapy Designation[/url]
Doing some simple internet searches and I came across a few facts and a study published in April 2016 that did some analysis of the impact of BTD on a stocks share price.
Less than 1/3 of approved drugs ever achieve BTD so it's is not something that is easy to achieve.
About 60% of drugs that achieve BTD go on to be approved by the FDA. The major reasons why the 40% fail: drug safety and disappointing results.
The study was published April 2016 and looked at the changes in the share price after BTD was announced. The maximum changes were 42.8% for CPRX and 13.8% for ACAO; not insignificant but not normal either.
What I took from the study had more to do with which stocks did best after the news broke, Specifically:
- The smaller the market cap of the company the greater the change. Most of the stocks studied had market caps in the billions while TLT is less than $60 M
- Companies that don't already have drugs in the market do significantly. BTD conveys a form of validation of the company's drug pipeline.
- The therapeutic area of treatment can influence the impact; cancer drugs in general and those that are in areas of fierce competition with other drugs do better. Sounds like TLT
- The % of institutional ownership; the lower the ownership the more positive the price change. Currently TLT has no institutional ownership.
- Head Office location - the report focused on the US. If there is an area of weakness it is the lacking of a US presence.
I am sure there are more recent articles and examples,of stocks that have done well after a BTD announcement.
No one knows for sure what the impact will be if and when TLT gets BTD but if nothing else it would seem that many of the negatives holding the stock back will potential be catalysts to get a more positive price impact.