Back to School: Grading FDA Divisions on Regulatory Flexibility   

The TD Cowen Insight

Different approval standards across FDA centers, offices, and divisions are an often shifting, sometimes puzzling, black box. These standards pose a unique challenge for biopharma specialists and generalists with biotech exposure. We grade ranked the most relevant divisions on recent reviews, exercising discretion against established guidelines, and based on our proprietary analysis, regulatory, and KOL consults.  

Understanding FDA Review Leadership

FDA approval of a drug is not solely dependent on clinical data generated and how it stacks up against FDA guidance, but also the organizational psychology of the division in which it undergoes review. Understanding review leadership and key players, their training and background, their public opinions and demonstrated discretion for or against the written statute on effectiveness, can reveal striking insights on the fate of drug review and allow investors to make better informed stock calls.   

Ranking FDA Division Flexibility

Our report provides not only an overview of the FDA organization (CDER and CBER), but also combines insights from our consultant conversations and independent analyses of FDA regulatory decisions over recent years. These resources helped us devise our own grading system to rank the flexibility of each division.   

We found several factors influence a division’s willingness to exert flexibility. These include the Office Director’s or Division Director’s training, tenure, familiarity with disease, view on unmet need, risk tolerance for type I error, and sometimes, political pressure. Except for oncology or immediately lethal conditions, the agency almost never gives any flexibility on safety.  

FDA Leadership Influence on Drug Review

FDA leadership influences a drug’s review. The implications of the Agency’s regulatory decisions cannot be overstated as they gate revenues and can influence subsequent uptake and, therefore, valuations. Even before an FDA action, consensus PoS for a program is influenced by FDA’s predicted action.  

FDA continues to depend on key personnel that lead various offices and divisions, while still recruiting heavily to fill critical open roles. As a result, we have observed several members tasked with additional responsibilities. The movement of leadership within the FDA invariably influences the reviews and regulatory decisions. Therefore, ‘who’ the drug applications go to matters just as much as ‘which’ division reviews it. We continue to monitor the sentiment of leaders heading the various offices and divisions pertinent to stocks in our coverage universe.