FDA Regulatory Milestones, Announcement Framing, and Biotechnology Stock Returns: Evidence on the Feasibility of an AI-Native Comparison, 2019-2026
DOI:
https://doi.org/10.54097/n6naqe96Keywords:
Event study; FDA drug approval; textual analysis; announcement tone; artificial intelligence; biotechnology.Abstract
This study measures how equity markets price binding FDA outcomes and the language sponsors use to announce them, and asks whether AI-native biotechnology firms are priced differently from traditional ones. Screening 33 AI-native drug developers against the 29,253 applications in the Drugs@FDA database returns 0 filings, so the intended comparison is infeasible at the approval margin; the comparison is therefore relocated to regulatory and clinical milestones. For 63 approval announcements by 56 listed sponsors, the cumulative average abnormal return over the two-day announcement window is 4.58%, significant under five test statistics with different failure modes. Pairing each sponsor release with the FDA label for the same drug shows that 99.2% of releases are more positive than the regulator's own text, and that sponsor tone is uncorrelated with the drug's regulatory safety profile. Announcement returns show no detectable relation to this excess optimism, although the confidence interval is too wide to exclude economically meaningful effects.
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