FDA reversals leave investors worrying about the fates of other experimental drugs

Investors are concerned about the fates of multiple experimental drugs for hard-to-treat diseases following a string of recent rejections from the U.S. Food and Drug Administration. 

The FDA in the past year has denied or discouraged the applications of at least eight drugs, according to RTW Investments, including a gene therapy for Huntington’s disease from UniQure, a gene therapy for Hunter syndrome from Regenxbio and a drug for a blood condition from Disc Medicine. The agency initially refused to review Moderna‘s flu shot before reversing course. 

In each case, the FDA took issue with the evidence the companies were using to support their applications. Some of the studies didn’t test the drugs against a placebo. Some companies didn’t directly measure the drug’s efficacy, instead relying on other factors like biomarkers to predict how well the treatment might work. 

And in every case, the companies have accused the FDA of reversing its previous guidance. That’s making investors wary that a more unpredictable FDA could jeopardize the future of other treatments for hard-to-treat diseases.

“What investors and key stakeholders are hoping to see from the FDA is consistency, and it does feel that that seems to be lacking at the moment,” said RBC Capital Markets analyst Luca Issi.

In recent years, the FDA appeared willing to accept drugs for rare diseases that showed promise in less rigorous studies than the gold standard randomized, double-blind placebo controlled trials. That meant helping bring treatments more quickly to patients who have conditions where time passing could mean the loss of functions like walking or talking, or even death. It also drew controversy from critics who said that policy brought false hope to patients.

The FDA’s recent decisions has left investors wondering whether the agency’s bar has changed for other drugs in the pipeline. In the case of UniQure, the FDA asked the company to run a new study that directly compares its treatment to placebo. UniQure said that contradicts the agency’s past guidance that the company could seek approval with trial data that compared UniQure’s treatment to an external database of people with Huntington’s disease.

One former FDA official who spoke to CNBC on the condition of anonymity to speak freely called this the worst type of regulatory uncertainty, because companies say they are being told one thing then experiencing another.

In a statement, an FDA spokesperson said there was “no regulatory uncertainty,” adding the agency “makes decisions based on the evidence, but does not make assurances about outcomes.” The spokesperson said the FDA is “conducting rigorous, independent reviews and not rubber-stamping approvals.”

Analysts point to several other companies they’re watching, including Dyne Therapeutics, which is advancing a drug for Duchenne muscular dystrophy; Taysha Gene Therapies, which is developing a gene therapy for Rett syndrome; Wave Life Sciences, which is working on a treatment for a liver condition; and Lexeo Therapeutics, which is developing a gene therapy for Friedreich Ataxia. All of those companies’ stocks are down this year.

A Dyne spokesperson said the company has maintained a frequent, positive and collaborative dialogue with a consistent set of reviewers over the past 18 months, and that it’s confident in its development strategy and path forward based on the strength of its clinical results, rigor of its trial design and continued engagement with the FDA. Taysha, Wave and Lexeo declined to comment.

One looming decision that Stifel analyst Paul Matteis is tracking is a drug candidate from Denali Therapeutics for Hunter syndrome, a rare disease that causes physical defects like hearing loss and joint problems, as well as cognitive issues. The company’s application for accelerated approval relies on a trial that wasn’t randomized and data showing the drug decreases levels of a biomarker associated with the condition.

To Matteis, the dataset is harder to argue with than UniQure’s, and there’s not much risk with the technology used.

“So if they don’t approve that, I don’t know,” Matteis said. “I mean, I already think there’s been a pretty significant change in the regulatory standard of rare disease, but if they don’t approve Denali, if I was at a company I’d almost be saying to myself, ‘Can we really be confident in running an open-label study?'”

In a statement to CNBC, Denali Therapeutics CEO Ryan Watts said the company continues having constructive discussions with the FDA, and it’s confident in the strength of the data package it submitted. The FDA delayed its review of the application by three months and is now expected to decide by April 5.

Some investors feel a clash between the flexibility FDA leaders like Commissioner Marty Makary are pledging publicly and the recent decisions the agency has made, said RBC Capital Markets’ Issi. That’s leading some to discount the probability of success for companies whose paths to the market rely on some level of flexibility in the data the agency will accept, said Stifel’s Matteis.

For companies whose data are straightforward, the path looks clear, said Christiana Bardon, managing partner of MPM BioImpact. The question to her is how much the FDA should accelerate the process to bring drugs to patients as rapidly as possible for diseases with massive unmet needs.

One senior FDA official, speaking to reporters Thursday on the condition of anonymity to speak freely, said the FDA hasn’t changed its position that biomarkers reasonably likely to predict efficacy can and will get accelerated approval, and that non-randomized data can get full approval. To this official, the bar is clear.

“If you make a treatment for Alzheimer’s or Huntington’s, and you take someone who’s severely ill and you give them that therapy, and they start doing better immediately and dramatically,” the official said. “You take someone in a nursing home with Alzheimer’s, and then they walk out of it, or somebody with end-stage Huntington’s, and they suddenly have no symptoms of Huntington’s, you will get a full regulatory approval with two or three patients.

“We only ask for randomized data when a condition is heterogeneous, when the will to believe is strong, when the therapy is invasive or potentially harmful, when the effect size is difficult to detect, and when the possibility you are fooling yourself is high,” the official added.