Investors are warming up to the economics of rare disease orphan drugs as potentially big moneymakers. As much as we love to bash Wall Street, the financial sector has found gold in orphan drugs for treating rare disease, and that might just fill in a deficit of research capital, which would otherwise be unavailable where and when its needed for orphan disease and disorder treatment drugs.
From The Motley Fool | 5/25/10 :
Orphan drugs don’t have the potential patient numbers that cholesterol or diabetes drugs have, but that doesn’t mean you should ignore them either. What they lack in volume they make up for in price.
Technically speaking, a drug can get orphan drug status if it treats a disease that affects less than 200,000 people in the U.S. A lot of cancers fall into that range — for instance, GlaxoSmithKline’s (NYSE: GSK) Tykerb has orphan drug status for gastric cancer. But the true orphan drugs treat diseases you’ve probably never have heard of.
A little protection goes a long way
There really are some financial incentives to gaining rare disease orphan drug treatment status. The government kicks back up to 50% of the cost of clinical trials in the form of tax credits. And the Food and Drug Administration comps the fee established by the Prescription Drug User Fee Act (PDUFA) that drugmakers pay when submitting their orphan disease marketing application.
But the biggest advantage comes from the exclusive sales of the rare disease orphan drug treatment for seven years in the U.S. and six to 10 years in the EU that governments give orphan drugs. It doesn’t matter whether patents expire during that time, the regulatory agencies will hold off approving generic competition until the rare disease orphan drug treatment exclusivity has expired.
The Motley Fool:
Being the first to treat a disease also offers an indirect lockup of patients from other branded drugs. If the drug works well enough, patients are less likely to enter a clinical trial for a competitor’s experimental drug, making it harder for the competitor to get on the market. Being first doesn’t provide an absolute monopoly — in addition to Genzyme’s (Nasdaq: GENZ) Cerezyme, Shire’s Vpriv is approved for Gaucher disease and Protalix and Pfizer (NYSE: PFE) are also working on a Gaucher disease treatment — but a little protection can go a long way.
On the road to bigger things
Sometimes the orphan disease drug status is just a starting point. Because the proteins that drugs interact with are often involved with other diseases, treating an orphan disease can be a good starting point before launching into another disease that may not be so rare.
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