Krystal Biotech (NASDAQ: KRYS) has soared 113% premarket on the company’s announcement of positive results on their drug Vyjuvek. This is what every biotech hopes for, that their treatments show signs of actually working and thus making it into the marketplace.
It’s important to understand the economics of drugs these days. The cost of manufacturing is normally close to nothing. It’s the cost of proving that it works that takes all the money. For proof of it working has to be achieved before the FDA, or anyone else, will authorize it to be used on patients – and, more importantly, charged for. Variations in drug company prices, therefore, tend to be extreme as news comes out about how that testing regime is going.
The announcement today is that Krystal Biotech’s treatment for dystrophic Epidermolysis Bullosa does in fact seem to work and also that there are no notable side effects. This is not enough to prove eventual licensing but it is a necessary stage to that goal.
The other part of the economics here is that the desire is to have a drug or treatment, that must be constantly used. A one-time and cures everything dosage is great for patients but not so much for the provider. The problem under discussion here is a horrible, and genetic, skin problem. Even slight rubbing can cause masses of blisters and pain. The NHS itself tells us that there is, currently, no effective treatment. Care and attention, yes, but no actual treatment.
This makes a new drug for this problem highly desirable from that patient end of the process, of course. But that it’s genetic means that there isn’t – not until we can change entire genomes – a cure. What there can be though is a treatment for specific instances. Instances that are going to recur throughout the afflicted’s lifespan. From the capitalist point of view, this is great, a lifelong patient for this new treatment and or drug.
Which is exactly what Krystal Biotech has under development. It’s a topical – ie, put on the skin – treatment that needs to be applied anew for each and every outbreak of the problem. The cause is genetic, so it’s not going to go away among those who have the problem. This is a continual flow of revenue from a problem that previously had no specific treatment.
Note that the results of this trial do not definitely mean that permission to market will be granted. But given that some call this “the worst disease you’ve never heard of” even a partial treatment and alleviation is likely to be sped to licensing under the orphan diseases regulations.
Note the likely, the probably, the uncertainty, in this process. No one can be certain about FDA approval until it is actually granted. Today’s news is that this becomes more likely, thus the price jump.
Trading on this is a matter of opinion on whether the jump is undercooked, given prospects, or is overdone given the remaining uncertainty. The one thing we do know is that we’ve the price volatility here which makes trading possible.
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