Why Surface Oncology Is Flying Higher After Hours Today | The Motley Fool

What happened

Regulatory approvals are big wins for biotech companies. It is no different for cancer drug specialist Surface Oncology (NASDAQ:SURF), the shares of which were up nearly 13% in early after-hours trading Tuesday following an important nod from the U.S. Food and Drug Administration (FDA).

So what

After market close, Surface Oncology announced that the regulator granted the company’s SRF617 orphan drug designation for the treatment of pancreatic cancer.   

Image source: Getty Images.

Orphan drugs are medicines that treat extremely rare conditions; typically, this means they affect less than 200,000 people in the U.S. Because these afflictions are rare, the government provides incentives to biotechs and others developing products for them. These include tax credits for the costs of clinical trials, marketing exclusivity, and access to grants.

With these in its pocket, a company like Surface Oncology can do extremely well as the monopoly provider of a successful treatment for a rare condition.

SRF617, one of the biotech‘s three wholly owned pipeline drugs, is still undergoing phase 1 clinical study. So far, though, the results have been encouraging enough for the FDA to grant it the new status.

Now what

According to American Cancer Society estimates, around 60,430 people will be diagnosed with pancreatic cancer this year, and the disease will claim roughly 48,220 lives. Those numbers starkly illustrate the need for a cutting-edge, effective therapy to help beat the disease. Investors clearly have high hopes that SRF617 will ultimately prove to be that drug.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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