Happy Rare Disease Day, Fools.
It's a bit gimmicky that the champions of Rare Disease Day put the celebration on the rarest day on the calendar, but diseases like phenylketonuria, Niemann-Pick disease, acromegaly, and others that you've probably never heard of can use all the publicity they can get.
Raising an orphan
To encourage drugmakers to develop medicines for rare diseases, regulatory authorities offer breaks for the drugs. There are discounts on application fees, tax breaks for clinical trials, and exclusivity periods before generics will be approved.
The EU and U.S. have streamlined the process of applying for orphan drug designation, providing a common application procedure on both sides of the pond. And once the drug has the designation, there's a common procedure for updating both agencies on the status of development. It may seem small, but less paperwork means lower development costs and higher profits.
Companies can also get help from nonprofit patient groups that offer financial assistance to help develop drugs for the diseases they champion. The Cystic Fibrosis Foundation, for instance, helped Vertex Pharmaceuticals
Despite the low number of patients, drugmakers can make orphan drugs work financially by charging exorbitant amounts. While cancer drugs top out at about $100,000, treatments for rare diseases can be hundreds of thousands of dollars per year, and most drugs aren't cures and must be taken for the rest of the patients' lives. Alexion Pharmaceuticals
While there's been a push back on drug prices as health reform tries to control costs, orphan drugs tend to largely escape the cuts because the small number of patients means the overall cost to any single payer is fairly minor in the larger scheme of things.
And it's often cheaper to develop drugs that treat rare diseases than it is to develop standard medications, because the rare diseases often have clear measurable deficiencies. When the underlying disease is caused by a single mutation, restoring the function of the mutated protein tends to have dramatic effects, which means the drugmakers only have to test a few patients -- a good thing, since there aren't that many -- to prove the drugs work. The smaller trials reduce both cost and the time it takes to get a drug to market.
Degrees of debilitating
When valuing orphan drugs in development, it's critical to look at the level of needs of the patients. Rare diseases that aren't life-threatening or substantially debilitating should be avoided, because it's a lot harder to convince doctors to treat the patients.
Planting a seed
Gaucher disease has two drugs already approved to treat it -- Sanofi's Cerezyme and Shire's Vpriv -- but Protalix BioTherapeutics
Unfortunately, the novel manufacturing procedure brought additional scrutiny, and the FDA turned down its marketing application for taliglucerase alfa. Assuming that Protalix has taken care of all the issues -- and that can only be an assumption, since manufacturing is a bit of a black box for investors -- taliglucerase alfa will be approved on May 1.
Until next year
If you want to keep up on companies developing drugs for orphan indications on more than just one day a year, add them to My Watchlist, the Fool's free stock-tracking service. You can add all of them in one click, or individually below. Don't have a My Watchlist account? Sign up here for free.
- Add Vertex Pharmaceuticals to My Watchlist.
- Add Sanofi to My Watchlist.
- Add Shire to My Watchlist.
- Add Regeneron Pharmaceuticals to My Watchlist.
- Add Protalix BioTherapeutics to My Watchlist.
- Add Pfizer to My Watchlist.
- Add BioMarin Pharmaceutical to My Watchlist.
- Add Avanir Pharmaceuticals to My Watchlist.
- Add Alexion Pharmaceuticals to My Watchlist.
Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals and Pfizer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.