Report: Orphan Drugs Offer Good Return on Investment

EvaluatePharma's first-ever report covering the orphan disease sector predicted that the orphan drug market will reach $127 billion by 2018 and will grow at a rate that is nearly twice that of the overall prescription drug market.

EvaluatePharma’s first-ever report covering the orphan disease sector predicted that the orphan drug market will reach $127 billion by 2018 and will grow at a rate that is nearly twice that of the overall prescription drug market.

Orphan drug development is seen as a profitable strategy for pharmaceutical companies, mostly because research and development costs for “primary care products” have become increasingly excessive. The relatively low cost of running clinical trials for orphan drugs is largely due to the small number of participants required in these trials (528 patients vs. 2234 for non-orphan conditions), noted EvaluatePharma’s Orphan Drug Report 2013, which was released on April 23, 2013, at the 2013 BIO International Conference. Orphan drugs, by definition, are treatments that serve fewer than 200,000 patients in the United States.

The government offers a number of incentives to produce orphan drugs through the Orphan Drug Act of 1983, including a 7-year market exclusivity period, the waiving of drug user fees, R&D grants for Phase I to Phase III clinical trials, and a 50% tax credit on R&D costs. These benefits, coupled with low commercialization costs, make orphan drug development a desirable strategy.

According to EvaluatePharma’s report, by 2018 nearly 16% of total prescription drug sales will be for orphan conditions. In addition, the report noted that the return on investment for drugs to treat rare disease is 10 times the cost of Phase III clinical trials, as opposed to 6 times the cost of these trials for candidates treating non-orphan conditions.

By the time many drugs for rare diseases hit late-stage trials, large pharmaceutical companies tend to license the products or acquire the company that developed them, the report pointed out. There are only 3 orphan drugs that are currently “not claimed” by big names in pharma: Gentium’s hepatic veno-occlusive disease drug defibrotide, NewLink Genetics’ cancer vaccine HyperAcute Pancreas (algenpantucel-L), and Intercept Pharmaceuticals’ primary biliary cirrhosis drug obeticholic acid.

The company poised to benefit most from the development of orphan drugs is Novartis, stated the report, which already has a strong orphan portfolio featuring Gleevec (imatinib mesylate) for gastrointestinal stromal tumors and Tasigna (nilotinib) for Philadelphia chromosome positive chronic myeloid leukemia. Projected annual revenues from Novartis’s orphan products are estimated to reach $11.8 billion by 2018. Roche, Celgene Corp, and Pfizer are projected to follow, with estimated annual revenues of $9.4 billion, $8.6 billion, and $7.2 billion, respectively.

The report predicted that the best-selling orphan drugs by 2018 are slated to be Roche’s Rituxan (rituximab) for non-Hodgkin B-cell lymphoma (which now has other indications), and Celgene’s Revlimid (lenalidomide) for multiple myeloma and myelodysplastic syndromes. Those with the biggest selling potential are Lilly’s gastric and liver cancer drug ramucirumab and AbbVie and Bristol-Myers Squibb’s myeloma drug elotuzumab, which has many other orphan indications in the pipeline and was labeled by the report as “Most Valuable Pure R&D Orphan Drug.” Kyprolis (carfilzomib), approved to treat multiple myeloma, was deemed the “Most Promising New Orphan Drug Approved by FDA in 2012.”

The report also found that FDA approval of orphan drugs occurs on average 1 month earlier than drugs for non-orphan conditions, although the Phase III development time for orphans is “no quicker” than for traditional medications.

Interesting graphs from the report detailed the top 10 orphan new molecular entities (NMEs) approved in 2012 alongside the top 10 non-orphan NMEs approved that year. Notably, 7 of the top 10 non-orphan NMEs approved in 2012 were specialty drugs.

EvaluatePharma’s head of research, Anthony Raeside, pondered in the report foreword whether a “Common Drug Act” would be needed to economically incentivize the release of new traditional drugs. “[T]here is certainly the need for mass market drugs to combat problems such as drug-resistant infections,” Raeside wrote, “but with the development of drugs for large disease populations now costing potentially billions of dollars, will Big Pharma take on the risk?”