Pfizer Adds to Orphan Drug Momentum

Add yet another to the wave of orphan drugs preparing to hit the market. Pfizer (NYSE: PFE  ) announced that the FDA has approved bosutinib as an orphan drug for chronic myelogenous leukemia, or CML. This rare blood and bone marrow disease typically affects older adults.

Impact
According to FDA estimates, more than 5,400 people in the U.S. will be diagnosed this year with CML. Pfizer cites research that estimates as many as 26,000 Americans live with CML, a number that is expected to increase tenfold by 2040. Around one-third of patients who use imatinib -- one of the main drugs currently used to treat CML -- don't achieve an optimal response.

Despite the relatively low number of potential patients, bosutinib represents a market potentially worth several hundred million dollars annually to the company. A Pfizer spokesperson told FierceBiotech that bosutinib will cost less than $8,200 per month. With that price level, it doesn't take many patients to bring in significant revenue dollars.

Momentum
The bosutinib news follows a May FDA orphan drug approval of Elelyso, a drug used in the treatment of Gaucher disease. Elelyso was developed by Protalix BioTherapeutics (NYSE: PLX  ) and licensed to Pfizer.

The orphan drug market has become an increasingly hot field for many pharmaceutical companies. It's easy to see why.

Thomson Reuters values the global orphan drug market at $50 billion. That reflects a 25.8% annual growth rate between 2001 and 2010, higher than the 20.1% growth rate for non-orphan drugs. And orphan drugs' growth will likely continue to outpace non-orphan drugs' over the next 30 years.

Alexion Pharmaceuticals (Nasdaq: ALXN  ) stands out as a shining example of how small markets can generate big money. The company's Soliris drug is used to treat a rare life-threatening blood disease that affects fewer than 6,000 people in the U.S. However, the drug's price tag of more than $400,000 annually resulted in sales of $783 million for Alexion in 2011.

Another company counting on orphan drugs is Seattle Genetics (Nasdaq: SGEN  ) . The FDA granted orphan drug status to Adcetris (brentuximab vedotin) for treatment of Hodgkin lymphoma and anaplastic large cell lymphoma.

Vertex Pharmaceuticals (Nasdaq: VRTX  ) focuses on a very tiny market with its Kalydeco drug. The drug is used to treat a rare form of cystic fibrosis and is approved for patients ages six and older who carry the G551D gene mutation. Only 1,200 people in the U.S. are believed to have this particular mutation -- and 200 of those are thought to be under the age of six and wouldn't qualify to use Kalydeco.

The company should still make money on the drug, though. Vertex charges $294,000 per year for Kalydeco.

Inertia
It's not always easy in the orphan drug market. Earlier this year, Pfizer encountered a setback when the FDA didn't find enough evidence of efficacy for the company's tafamidis drug in treating patients with transthyretin familial amyloid polyneuropathy.

Getting FDA approval for an orphan drug doesn't necessarily boost a company's right out of the gate, either. Pfizer shares barely moved after the bosutinib announcement. Anticipation of the FDA approval could have been already baked into the price to some extent, though. The stock is up more than 10% in the last three months.

Investors can face their own kind of inertia when considering all of the variables affecting pharmaceutical stocks. The complexities of FDA approvals, mergers and acquisitions, and more can be overwhelming at times.

That's why The Motley Fool created a new premium report on Arena Pharmaceuticals. In this report, you will learn about Arena's key opportunities and risks. It also comes with a full year of analyst updates, so click here to get your copy now!

Fool contributor Keith Speights owns no shares in the stocks mentioned above. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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