The FDA (U.S. Food and Drug Administration) has set December 27, 2015, as the PDUFA (Prescription Drug User Fee Act) date for BioMarin Pharmaceutical’s (BMRN) Kyndrisa (drisapersen). Drisapersen is a drug indicated for the treatment of Duchenne Muscular Dystrophy (or DMD) Amenable to Exon 51 Skipping.
A PDUFA date is a deadline set by the FDA to announce its decision on a new drug. It’s considered of significant importance for innovator pharmaceutical companies. A positive FDA decision for a new drug implies access to the US market and a rise in future revenues. The improved earnings prospects are reflected in the company’s share price, which generally increases after FDA approval of the drug.
If the FDA doesn’t approve a drug or requests additional information, it implies wasted or increased research and development (or R&D) expenses. Investor opinions may turn negative in this scenario, resulting in a fall in share prices.
The above diagram shows how DMD, a rare neuromuscular disorder, affects patients. This genetic disease afflicts only male patients and has an incidence rate of about 1 in every 3,500 male births. According to McNeil 2010, there are about 18,000 DMD patients in the United States.
Boys suffering with DMD may start showing disease symptoms by age three, while the average age of diagnosis is about five years of age. DMD results in the weakening of muscles in the arms, legs, and trunk, which subsequently affects mobility.
As the diagram shows, the severity of the symptoms continues to increase with increasing age of the patient. DMD thus leads to early mortality. According to a study by Rall and Grimm in 2012 and another by Eagle M, Baudouin SV, and Chandler C in 2002, the average survival rate for DMD patients has reached 24 years due to the use of ventilation in later stages of the disease.
Use of corticosteroids such as prednisone and deflazacort coupled with cardiac, respiratory, and other interventions are expected to increase survival of DMD patients in developed countries up to 30 years.
Currently, there is no therapy available for treating DMD. So if the FDA approves BioMarin’s Kyndrisa (drisapersen), it will prove to be a major milestone for the company. As DMD is a rare disease, the FDA has granted Kyndrisa an orphan drug status.
Kyndrisa will enjoy greater pricing flexibility, thus leading to higher profit margins for the company. This is similar to other rare disease drugs such as Alexion Pharmaceuticals’ (ALXN) Soliris (eculizumab), Amgen’s (AMGN) Blincyto (blinatumomab), and Gilead Sciences’ (GILD) Zydelig (idelalisib).
Investors can participate in the upside potential of Kyndrisa and still avoid excessive company-specific risks by investing in the iShares Nasdaq Biotechnology ETF (IBB). BioMarin Pharmaceutical accounts for about 2.5% of IBB’s total holdings.
The FDA advisory committee has given an unfavorable opinion to Kyndrisa. But most analysts estimate the probability of FDA approval for the drug to be about 50%.
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