Orphan drugs: small markets, large rewards
Failure may be an orphan but orphan drugs are a big success. Rare diseases, once ignored, are now vitally important to the pharma sector.
Financial incentives have transformed the economics of niche treatments. Nearly half of all new approvals from the US Food and Drug Administration last year addressed ailments affecting fewer than 200,000 US patients.
Such orphan drugs are expected to account for more than a third of global sales at industry giant Johnson & Johnson in 2028, according to data group Evaluate. The same is expected of rival AstraZeneca. The UK-listed business extended further into rare diseases in late July when it bought Pfizer’s early-stage gene therapy portfolio for up to $1bn.
Biogen’s $7.3bn acquisition of Texas-based Reata in late July illustrates the potential profitability of orphan drugs. Reata has pioneered a treatment for a devastating genetic neuromuscular disorder called Friedreich’s ataxia. There are just 5,000 patients in the US and 22,000 globally. But peak sales could be as much as $2bn, according to Jefferies. If drugs are pricey, even treating small numbers of patients pays off.
Rare diseases used to be neglected because the market was too small to justify costly research. The 1983 Orphan Drug Act introduced financial incentives in the form of a tax credit and extended market exclusivity. The EU introduced similar legislation in 2000.
Strains on health budgets may eventually crimp the generosity of incentives. Yet, for now, the sector is expanding fast. It could grow by 12 per cent to $300bn by 2028, according to Evaluate. That is over two-thirds faster than the wider market.
Drug developers are still searching for blockbusters. Huge revenues — proven or potential — from treating Covid-19, obesity and Alzheimer’s disease underline the importance of mass markets. Yet treatments have so far been approved for just 5 per cent of rare diseases. Given the high prices paid for rarely-prescribed drugs, developers’ sights will stay trained on niche-busters too.
This story originally appeared on: Financial Times - Author:Faqs of Insurances
