3 Orphan Drugmakers to Watch

Since being signed into law 30 years ago, the Orphan Drug Act, or ODA, has resulted in the approval of more than 400 new drugs and biologic products in the United States. The goal of the ODA is to foster the development of treatments for rare diseases that lack sufficient profit motive.

To incentivize the development of drugs for rare diseases, the ODA provides a host of benefits to drugmakers such as market exclusivity for seven years, tax credits, faster regulatory reviews, waiver of regulatory fees, and others. Orphan drug candidates are also eligible for public grants from the Food and Drug Administration and National Institutes of Health to further help defray the cost of developing drugs for rare diseases.

With all the fiscal incentives provided by the ODA, it's not surprising that the orphan drug industry has grown quickly over the past decade, and some pharmaceutical companies have devoted their entire R&D efforts to treat rare diseases. You should look for this trend to continue, with orphan drug specialists like BioMarin Pharmaceutical  (NASDAQ: BMRN  ) , GlaxoSmithKline (NYSE: GSK  ) , and Sanofi (NYSE: SNY  ) leading the way.

A closer look at 3 leaders in the orphan drug space
BioMarin has four orphan drugs already approved in Europe and the United States with a fifth, Vimizim, set to be reviewed by the FDA in November. Vimizim is indicated for a rare genetic disease called Morquio A syndrome that's believed to afflict 3,000 people worldwide. As such, one has to wonder about the Vimizim's chances for commercial success, or even viability for that matter. With an estimated price tag of $450,000 per year, however, Vimizim could very well become an orphan blockbuster, if approved. BioMarin is also seeking approval for Vimizim in Europe, with a potential approval coming in early 2014.

GlaxoSmithKline currently has four orphan drug candidates in advanced clinical trials, and a handful of commercially available drugs for rare diseases. One of the most exciting developments in terms of GlaxoSmithKline's orphan drug pipeline is the recent FDA approval of its two Melanoma drugs, Tafinlar and Mekinist. With a price tag well over $7,000 for a 30-day supply, each one of these orphan drugs has the potential to reach blockbuster status in short order. GlaxoSmithKline has also been putting their financial muscle behind orphan drug development by funding European research institutes that specialize in rare diseases .

Sanofi's three commercially available orphan drugs are enzyme replacement therapies, all of which were acquired during their merger with Genzyme. Despite these drugs targeting patient populations estimated to be between 5,000-10,000 globally, each drug has gone on to become wildly successful. Last year, sales of Sanofi's Gaucher disease drug Cerezyme, for example, topped $700 million. Myozyme, a treatment for Pompe disease, is estimated to close in on almost $200 million in sales this year.

In fact, treatments for Pompe disease are so promising that BioMarin is racing to develop their own treatment currently in advanced clinical trials. Roche has been rumored to be particularly interested in this indication, and is thought to be raising funds for a buyout of BioMarin if its Pompe disease drug continues to show promise.

Foolish outlook
There are currently more than 25 orphan drugs generating revenue of at least $1 billion a year -- nine of which hit the multibillion-dollar mark in 2012. As the ODA saves biopharma companies hundreds of millions in terms of development costs and generic competition, orphan drugs look to be the future of the industry in many ways. With big pharmas like GlaxoSmithKline jumping in the orphan drug game with both feet, it would be foolish not to take a closer look at some of the companies at the forefront of developing treatments for rare diseases.

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