Biotech and Investing Glossary

A–E

ADC (Antibody–Drug Conjugate)

A targeted cancer therapy that links a tumor‑specific monoclonal antibody with a cytotoxic payload via a stable chemical linker. The antibody delivers the drug directly to cancer cells, minimising systemic exposure. ADCs are designed to improve the therapeutic window of highly potent chemotherapeutics.

Example: Daiichi Sankyo/AstraZeneca’s Enhertu (trastuzumab deruxtecan) targets HER2‑positive breast and gastric tumours.

Accelerated Approval

A FDA pathway that allows earlier approval of drugs for serious or life‑threatening illnesses based on a surrogate endpoint – a marker that is reasonably likely to predict clinical benefit. Sponsors must conduct post‑market confirmatory trials to verify the benefit. Failure to do so can lead to withdrawal.

Example: Biogen’s Aduhelm received accelerated approval in 2021 for Alzheimer’s disease based on amyloid‑beta reduction, a controversial surrogate.

Advisory Committee (AdCom)

An independent panel of experts convened by the FDA to provide non‑binding recommendations on drug approvals, particularly when data are complex or uncertain. While not legally binding, the FDA typically follows AdCom advice. A negative vote can derail a filing.

Example: The FDA’s Oncology Drugs Advisory Committee voted unanimously in favour of Novartis’ Pluvicto in PSMA‑positive prostate cancer.

BLA (Biologics License Application)

The request for permission to market a biologic product in the United States, submitted under section 351 of the Public Health Service Act. It contains detailed manufacturing and clinical data. The review clock starts once the FDA accepts the application as complete.

Example: Regeneron’s Eylea (aflibercept) was approved through a BLA because it is a recombinant fusion protein, not a small molecule.

Biosimilar

A biological product that is highly similar to, and has no clinically meaningful differences from, an existing FDA‑approved reference biologic. Biosimilars undergo an abbreviated pathway (351(k)) and are not identical to the originator due to the complexity of biologics. They create price competition after exclusivity expires.

Example: Amgen’s Amjevita is a biosimilar to AbbVie’s Humira (adalimumab), entering the U.S. market in 2023.

Breakthrough Therapy

A designation granted by the FDA to expedite development of a drug that shows substantial improvement over existing therapies for a serious condition, based on preliminary clinical evidence. It provides intensive guidance, senior‑level involvement, and potential rolling review of the application.

Example: Pfizer’s Xalkori (crizotinib) received Breakthrough Therapy status for ALK‑positive lung cancer, significantly shortening time to approval.

Catalyst

In biotech investing, a discrete event that is expected to significantly move a company’s stock price, usually the release of clinical trial data, an FDA decision, or a major partnership announcement. Investors often build positions ahead of catalysts with binary outcomes.

Example: The Phase III topline readout for a competing oncology drug forced market reassessment of the entire KRAS inhibitor space.

Clinical Hold

An order issued by the FDA to suspend an ongoing clinical trial, typically due to safety concerns, manufacturing deficiencies, or inadequate information. A hold can be lifted once the sponsor resolves the issue to the FDA’s satisfaction; prolonged holds can cripple a development programme.

Example: The FDA placed a clinical hold on several CAR‑T trials after cases of secondary T‑cell malignancies were reported, later resolving with revised safety monitoring.

Complete Response Letter (CRL)

A formal communication from the FDA stating that an application cannot be approved in its present form, listing deficiencies that must be addressed. A CRL can delay approval by months or years, often causing sharp stock declines.

Example: In 2022, the FDA issued a CRL to Cytokinetics for omecamtiv mecarbil, requesting an additional clinical trial to confirm efficacy.

CRO (Contract Research Organization)

A company that provides outsourced clinical trial management, data collection, and regulatory support to biotech and pharmaceutical firms. CROs enable smaller companies to run global studies without building extensive internal infrastructure.

Example: IQVIA and Parexel frequently manage multinational Phase III studies for emerging biotech companies.

F–J

Fast Track

A designation that facilitates expedited review of drugs treating serious conditions with unmet medical need. Benefits include more frequent communication with the FDA, eligibility for Accelerated Approval, and rolling review of the NDA/BLA. The bar is lower than Breakthrough Therapy.

Example: Moderna’s mRNA‑1273 (COVID‑19 vaccine) was granted Fast Track status early in the pandemic.

FDA (U.S. Food and Drug Administration)

The federal agency responsible for protecting public health by ensuring the safety, efficacy, and security of human and veterinary drugs, biologics, and medical devices. It governs clinical trial design, manufacturing standards, and marketing authorisation. FDA decisions are often the pivotal event in a biotech’s lifecycle.

Example: The FDA’s approval of CRISPR‑based gene therapy Casgevy in 2023 opened a new therapeutic frontier.

Follow‑on Biologic

See Biosimilar. A term sometimes used interchangeably, though “biosimilar” is the regulatory term. A follow‑on biologic is a product that is similar to a previously approved biologic and relies in part on the reference product’s data for approval.

Example: Samsung Bioepis’ Eticovo (etanercept) is a follow‑on biologic to Amgen’s Enbrel.

Gene Therapy

A technique that modifies a person’s genes to treat or cure disease, often by delivering a healthy copy of a gene using a viral vector (e.g., AAV). Gene therapies aim for a one‑time, durable effect. High manufacturing complexity and immunogenicity are key hurdles.

Example: Novartis’ Zolgensma treats spinal muscular atrophy with a single intravenous infusion of functional SMN1 gene.

GMP (Good Manufacturing Practice)

Regulatory quality standards enforced by the FDA and EMA that govern the production of pharmaceuticals. cGMP (current Good Manufacturing Practice) ensures products are consistently produced and controlled according to quality standards. Violations can lead to clinical holds or rejections.

Example: Emergent BioSolutions’ failure to maintain cGMP at its Bayview facility led to contamination of Johnson & Johnson’s COVID‑19 vaccine doses.

IND (Investigational New Drug)

The application submitted to the FDA before commencing human clinical trials. It includes preclinical data, chemistry, manufacturing information, and the clinical protocol. If the FDA does not issue a clinical hold within 30 days, the trial may proceed.

Example: A small biotech filed its first IND for a novel psychedelic‑assisted therapy, clearing the way for a Phase I study.

M–R

mRNA (Messenger RNA)

A genetic molecule that carries instructions from DNA to ribosomes to produce specific proteins. mRNA‐based therapies deliver synthetic mRNA into cells to produce therapeutic proteins, avoiding the nucleus and eliminating permanent genome changes. The technology enabled record‑speed COVID‑19 vaccine development.

Example: Moderna and BioNTech/Pfizer leveraged mRNA lipid nanoparticle platforms to create highly effective COVID‑19 vaccines.

Market Cap (Market Capitalization)

The total market value of a company’s outstanding shares, calculated as share price multiplied by number of shares outstanding. For pre‑revenue biotechs, market cap often reflects the net present value of pipeline assets, making it volatile around clinical events.

Example: A positive Phase II readout tripled the company’s market cap in a single trading day.

Milestone Payment

A financial payment made from one partner to another (commonly in licensing agreements) upon achievement of specific developmental, regulatory, or commercial objectives. Milestones derisk program execution and align incentives between originators and licensees.

Example: Merck agreed to pay up to $2.5 billion in milestones to Daiichi Sankyo for its ADC portfolio, with payments tied to clinical and regulatory progress.

NDA (New Drug Application)

The comprehensive filing that requests permission to market a new small‑molecule drug in the U.S. It contains all clinical and nonclinical data, chemistry, manufacturing, and proposed labelling. The FDA has 60 days to file the application and typically 10 months for a standard review.

Example: Pfizer’s NDA for Paxlovid (nirmatrelvir/ritonavir) was approved within 5 months under Priority Review for COVID‑19 treatment.

NME (New Molecular Entity)

An active ingredient that has never before been approved or marketed in the United States as a drug. NMEs are often the focus of innovation‑driven biotechs because they represent novel mechanisms. The FDA tracks NME approvals annually as a measure of pipeline productivity.

Example: The decade’s first NME for Alzheimer’s disease was aducanumab, despite controversy over its surrogate endpoint.

Orphan Drug

A designation granted by the FDA to drugs intended to treat rare diseases affecting fewer than 200,000 people in the U.S. It provides incentives including seven years of market exclusivity, tax credits, and waiver of certain fees. The orphan market remains a strategic focus for many biotechs.

Example: Vertex’s Trikafta (elexacaftor/tezacaftor/ivacaftor) received orphan designations for multiple cystic fibrosis mutations.

PDUFA (Prescription Drug User Fee Act)

A law that authorises the FDA to collect fees from drug manufacturers to expedite the review process. PDUFA establishes performance goals, including priority and standard review timelines, and provides the date – the PDUFA date – by which the FDA aims to act on a submission. Investors closely watch these dates as binary risk events.

Example: The PDUFA goal date for the first gene therapy for sickle cell disease was December 8, 2023.

Pharmacovigilance

The practice of monitoring the safety of medicines after they reach the market, involving detection, assessment, and prevention of adverse effects. Robust pharmacovigilance is required by regulators and can uncover rare safety signals not caught in trials.

Example: Post‑market pharmacovigilance identified rare thrombosis events with adenoviral‑vector COVID‑19 vaccines, prompting updated labelling.

S–Z

Phase I, II, III, IV

The sequential stages of clinical trials required for drug approval. Phase I focuses on safety and dosing in a small group; Phase II explores preliminary efficacy and side effects; Phase III provides confirmatory evidence against standard of care in a large population. Phase IV are post‑approval studies to monitor long‑term outcomes.

Example: A KRAS inhibitor moved from a Phase I dose‑escalation study in 15 patients to a registrational Phase III monotherapy trial within three years.

Pipeline

The collection of drug candidates a company is developing, typically structured by stage of development (preclinical, Phase I–III, registration). A diversified pipeline reduces binary risk, while a concentrated pipeline amplifies it. Pipeline depth is a key metric in biotech valuations.

Example: Eli Lilly’s pipeline spans obesity, Alzheimer’s, immunology, and oncology with multiple Phase III assets.

Royalty

A contractual payment a company receives based on a percentage of net sales of a product it licensed out. Royalty streams provide non‑dilutive financing and are often sold or monetised. They typically range from single‑digit to low‑20‑percent rates.

Example: Ionis Pharmaceuticals earns royalties on Spinraza sales by Biogen based on a 5–12% tiered structure depending on volume.

SPA (Special Protocol Assessment)

A binding written agreement between a sponsor and the FDA on the design and size of a clinical trial intended to support a marketing application. A successful SPA de‑risks the registrational pathway by assuring endpoints and statistical analysis are acceptable before the trial starts.

Example: A rare‑disease biotech announced an SPA for its Phase III protocol, significantly reducing regulatory uncertainty for investors.

Target Product Profile

A planning document that describes the intended attributes of a drug under development – efficacy targets, safety tolerability, dosing regimen, and competitive positioning. It guides go/no‑go decisions and aligns R&D with commercial expectations.

Example: The TPP for an obesity asset specified at least 15% placebo‑adjusted weight loss and once‑weekly oral dosing.

Trial Endpoint

A predefined measure used to determine whether a trial meets its objective. Primary endpoints are the most critical for regulatory approval; secondary endpoints add support but alone are rarely sufficient. The choice of endpoint can make or break a study.

Example: The primary endpoint for most cancer trials is overall survival, while progression‑free survival is often a surrogate.