What Are New Indications?

“New indications” is a term used by pharmaceutical companies to refer to new evidence signifying that there may be new applications for an existing drug or procedure. This type of news is closely followed by investors, who can access such findings through the press releases issued on companies’ investor relations pages.

Key Takeaways

  • New indications refers to news significating that an existing drug may have a broader range of medical applications.
  • Repurposing existing drugs in this manner can prove less costly than developing new drugs from scratch.
  • Investors often view new indications as a bullish indicator, anticipating that the company in question will have access to new revenue streams at a relatively low cost.

How New Indications Work

New indications are an early sign that a particular drug or procedure may be worth investing in further. For example, a company that has already obtained regulatory approval for a particular drug would report new indications if their research suggests that additional applications for that drug might be possible. New indications are therefore viewed as a positive development by most investors, since they could signify additional revenue-generating opportunities for a company’s existing drugs.

In the United States, companies must go through a rigorous and lengthy process in order to bring new drugs to the market. The Food and Drug Administration (FDA) oversees the development and approval of new drugs through their New Drug Application (NDA) process. The process routinely takes years to complete, with some stretching over a decade. Despite this lengthy process, only about 30% of new applicants have their NDAs approved.

Important

Although repurposing an existing drug can lead to reduced research and development (R&D) costs, there are nevertheless major costs involved in obtaining final FDA approval for such repurposed drugs. Nevertheless, because these drugs have already passed through the FDA’s NDA process, many companies view them as a less risky investment as compared to developing new drugs from scratch.

For these reasons, one of the most efficient ways for pharmaceutical companies to expand into new markets would be to find new or expanded applications for products that have already received FDA approval. In fact, some companies specialize in repurposing already-approved drugs in an effort to reach commercialization of new medicines more quickly.

Real-World Example of a New Indication

New indications are often used in news releases on medical treatments and pharmaceutical companies when referring to their drugs or the equipment involved. For example, on August 16, 2018, the FDA released a new indication approval for the drug Opdivo (nivolumab), which is used for the treatment of cancers such as advanced melanoma, advanced renal cell carcinoma, and advanced squamous cell carcinoma of the head and neck.

When it was first approved in December 2014, this drug had a more narrow intended usage, specializing in patients with advanced melanoma that could not be removed with surgery or that no longer responded to other drugs. The new indication therefore represents an opportunity for the drug to be sold into a larger addressable market than previously anticipated.