Presentation (CTI)

OBJECTIVES: Only an estimated 5 percent of rare pediatric diseases have a treatment, although more than ten million children in the US are affected. The Rare Pediatric Disease (RPD) Priority Review Voucher (PRV) program was established in 2012 to incentivize biotech company to develop rare pediatric disease drugs. This study investigates the potential of the program to promote a decision making for biotech company to move forward their rare pediatric disease drug development, by analyzing investor responses to the RPD designation announcement.
METHODS: We used the event study to analyze the magnitude of the investor's response to the announcement that biotech company has been awarded a RPD designation during 2020-2024. We choose this study period because the vast majority of RPD designation has been awarded after 2020. The statistical significance of the cumulative abnormal returns (CARs) is assessed by a non-parametric generalized rank t-test with the significance level set at 5%.
RESULTS: A total of 197 announcements were found in the study period. Following the announcement of a RPD designation, a company's stock price statistically significant increased on average by 5.54% (overall CARs) compared to what it would have been without the announcement (p=0.0094).
CONCLUSIONS: These results suggest that the designation has been effective in this area: investors assign positive, statistically significant, value to the RPD designation. The fact that large and positive CARs are found in the analysis implies that investors find value in the development of these drugs, which may lead to continued development. However, our study period was limited to analyze the value of RPD designation which has been terminated by the end of 2024. We believe that further research is needed to evaluate this program and to report future development status of rare pediatric disease drugs.