ASX healthcare stock surges 11% on 'incredibly valuable' FDA news

Some big news is getting investors excited on Tuesday. What's happening?

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Race Oncology Ltd (ASX: RAC) shares are roaring higher on Tuesday morning.

In early trade, the ASX healthcare stock is up 11% to $1.94.

Why is this ASX healthcare stock surging?

Investors have been buying the clinical stage biopharmaceutical company's shares this morning after it received a major boost in the United States.

According to the release, the United States Food and Drug Administration (FDA) has extended Rare Paediatric Disease Designation (RPDD) to RC220 bisantrene for the treatment of childhood (paediatric) subtypes of acute myeloid leukemia (AML).

This isn't the first time the company has been granted this important designation. RPDD was previously granted by the FDA to RC110 bisantrene in 2018.

The company notes that RPDD is granted for new treatments of serious or life-threatening diseases which affect fewer than 200,000 people in the United States and which primarily affect individuals less than 18 years of age.

Approximately 70% of rare diseases are exclusively paediatric in onset, with 95% of rare diseases having no approved treatments.

What are the advantages?

The ASX healthcare stock explains that RPDD qualifies a sponsor eligible to receive a Priority Review Voucher (PRV) from the FDA at the time of marketing approval or authorisation for drug in the paediatric rare disease area.

In addition, the RPDD for paediatric AML may enable Race Oncology to be eligible to receive a PRV that can be redeemed for an accelerated 6-month review of RC220 bisantrene or any other new drug application submitted to the FDA.

Another positive is that granted PRVs may also transferred or sold to other companies for use in the same manner on the secondary market. And these are certainly very valuable.

Management highlights that the reported purchase prices of PRVs to third parties on the open market have averaged more than US$100 million. Two PRVs have been sold in recent times for US$110 million.

'Incredibly valuable'

Race Oncology's CEO, Dr Daniel Tillett, was pleased with the news. He said:

US FDA RPDD is incredibly valuable as not only does it offer eligibility for the award of a PRV, but the ability to work with passionate clinicians and regulators to bring help to children and adolescents facing an enormously challenging disease with few effective treatment options.

The ASX healthcare stock's chief medical officer, Dr Michelle Rashford, adds:

There is a need for new medicines designed to treat these rare childhood cancers which can be devastating for families. The US government has created incentives like the Priority Review Voucher scheme to encourage companies to invest in research and clinical studies in paediatric cancers. To be able to contribute to better treating childhood cancers like paediatric AML by collaboratively working with a dedicated international paediatric cooperative group would be very rewarding.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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