Aptorum Group Limited (NASDAQ: APM) stock is up 70% premarket this morning following a near 10% rise yesterday. This is the sort of stock price movement associated with some large piece of breaking news but there doesn’t, in fact, seem to be much of that about.
We are, therefore, likely seeing something more unusual, which is the re-evaluation by the market of old news. Aptorum was able to announce back last Thursday that their drug, SACT-1, was granted orphan drug designation by the Food and Drug Administration. As a result Aptorum is able to go into Phase I/II trials to check that it really does work, as hoped, on neuroblastoma.
This is an excellent reminder of two things. One is that the FDA is the most important aspect of research pharmaceutical valuations. The second is that while academic theory tells us that markets are efficient at determining what prices should be they’re not perfectly so. This means that it is possible, sometimes, to beat the market by being better informed than others in it.
The FDA news here is what’s driving Aptorum in the first place and it’s worth walking through what it actually means. The cost of getting an unknown compound out onto the market where patients are treated with it is up in the $1 billion range. Higher if you think about the costs of the ones that don’t make it in fact. This creates a societal problem which is that there are some diseases and treatments that just aren’t worth a billion to develop. Too few people suffer from the problem perhaps. Or the drug is licenced for other uses and so there can be no patent protection for proving its use on this particular problem – any doctor can prescribe off-label after all.
This is a problem for it means that just the costs of getting something through the FDA means that something never is sent through the FDA. At which point there’s an escape hatch through the FDA system, exactly the one that Aptorum has just managed to get through. This is designation as an orphan drug, the very thing that SACT-1 has just received. This lowers the cost of doing the testig process to allow full release and also changes the protections of the drug once tested and licenced.
This is good news for Aptorum, that SACT-1 has gained that orphan status therefore.
The second part of this is, well, why now? Why didn’t this price move happen last Thursday? The truth being that sometimes bits of information just do slip through the net. Which is what we assume has happened here.
Our next question as traders is well, what happens next to the Aptorum stock price? That’s something that only time will tell but it’s entirely possible to think that the momentum of the stock price re-evaluation will continue, equally that it will fall away. Being on the right side of that decision is the trading position in Aptorum.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.