The 21st Century Cures Act created the Regenerative Medicine Advanced Therapy (RMAT) designation in recognition of the growing importance of regenerative medical therapies. An RMAT designation conveys significant regulatory benefits. But qualifying for the RMAT designation is not a given; and the benefits associated with an RMAT designation do not guarantee that an investigational drug candidate will receive regulatory approval.

We previously discussed the qualifying requirements for receiving an RMAT designation. Investigational drugs are eligible for an RMAT designation if they:

1. Meet the definition of a regenerative therapy medicine;
2. Are intended to treat, modify, reverse, or cure a serious condition; and if
3. Preliminary clinical evidence indicates that the regenerative medicine therapy has the potential to address an unmet medical need.

In our experience, determining whether the first two requirements above are met is relatively straightforward. In contrast, determining whether the third requirement has been satisfied can require a thorough and nuanced evaluation. For example, how much preliminary clinical evidence is required to show a potential to address an unmet medical need, and what clinical endpoints are needed for such a showing? These questions are likely best addressed with input from counsel, and where appropriate, through constructive dialogue with the Food and Drug Administration (FDA).

An RMAT designation, if granted, conveys significant regulatory benefits, including:

1. Intensive interaction with the FDA on an efficient drug development program—beginning as early as Phase 1;
2. Organizational commitment involving senior managers from the FDA; and
3. Rolling review of an application to commercialize the drug.

These benefits can increase the likelihood of drug candidate approval or licensure, and can promote efficient resource use in clinical development. But these benefits do not guarantee regulatory approval. A recent example is the FDA declining to approve Enzyvant's regenerative tissue therapy.

Enzyvant's investigational therapy is indicated for treating infants born without a thymus. The thymus is the organ where stem cells mature into T cells, a type of white blood cell that is of key importance to the immune system. Without a properly functioning thymus, infants typically die early.

Enzyvant's therapeutic approach involves transplanting processed thymus tissue into an infant's leg. Stem cells mature in the implanted thymus tissue to become functional T cells.

According to a published source, Enzyvant's complete response letter (CRL) did not raise questions of safety or efficacy, and the FDA did not require further clinical or animal testing. Rather, the issues raised were manufacturing and plant inspection related. This is perhaps not unexpected as there is not a well-established method of manufacturing therapies like Enzyvant's.

Receiving good (and bad) news from the FDA can positively (and negatively) impact a company's stock price. For example, and depending on the data, methodologies, and time periods employed:

• A new drug approval, on average, can increase a company's stock price by about 1.5 percent.
• A positive phase III clinical trial result can also increase a company's stock price, on average, by about 1.5 percent.
• A Fast Track designation can result, on average, in about a 6 percent increase in company stock price.
• And receiving an orphan drug designation can increase a company's stock price, on average by more than 3 percent, with the increases being higher in some therapeutic areas like oncology, and also for smaller companies.

As described above, an RMAT designation conveys significant regulatory benefits. And an RMAT designation, like an orphan drug designation, is a designation—albeit with some important differences. For example, an orphan designated drug—if approved—gets seven years of regulatory exclusivity, whereas an RMAT designation is not entitled to additional regulatory exclusivity upon licensing. This is because RMAT designated therapies are typically biologics, or a combination of a biologic and a device, and biologics already receive 12 years of regulatory exclusivity. In view of this difference, we wondered how announcing the granting of an RMAT designation affected stock price for publicly traded companies.

We therefore examined the change in stock price from the business day before and the day of an RMAT designation announcement, on a sample of publicly traded companies. That is to say, we examined what effect, if any, an announcement of the FDA granting an RMAT designation would have on a company's stock price on the day of an RMAT designation announcement.

To date, more than 30 RMAT designations have been publicly announced. We looked at data for companies with publicly available stock prices the business day before, and the day of, an RMAT designation announcement. Historical stock prices were confirmed on MarketWatch, and press releases announcing the date of an RMAT designation were confirmed from individual company websites. The stock price data are presented in the following table:

As demonstrated by the sample table data, there does not appear to be a clear trend when it comes to an RMAT designation announcement effect on stock price. For about half of companies in the table, the announcement of an RMAT designation caused an increase in company stock price per share on the RMAT designation announcement date. In some instances, where the stock price almost doubled, for example with KB103, positive clinical trial data was announced at the same time as the RMAT designation. In other cases, such as with CLBS₁₄, the large increase in price per share appears to be driven significantly by the RMAT designation announcement. But an announcement of an RMAT designation is not a guarantee that a share price will increase on the RMAT designation announcement date, as shown for example, by AminoFix.

Enzyvant's therapeutic approach involves transplanting processed thymus tissue into an infant's leg. Stem cells mature in the implanted thymus tissue to become functional T cells.

To ensure the best possibility of receiving an RMAT designation, pharmaceutical companies should consider concentrating their efforts on showing that their therapy has the potential to address an unmet medical need. Constructive dialogue with the FDA is important.

Once an RMAT designation is granted, companies should take advantage of the associated benefits to maximize the probability of success in clinical trials. Finally, given the newness of regenerative medicine, companies should consider devoting extra focus to manufacturing and adhering to good manufacturing practices, or GMPs, to maximize the probability of approval or licensing.