One of the appeals of producing drugs for rare diseases is that a company often has the market all to itself. Alexion Pharmaceuticals'
But for Gaucher disease, which affects 6,000 patients in the U.S., the competition is getting fierce. There are now three drugs approved after Pfizer
The newest entrant looks like it might have a small window of opportunity. Sanofi's
How large that window is remains to be seen, though. As patients transfer onto Elelyso, it frees up the other drugs to be used on other patients, so it might not take too many patients before the market equalizes and the opportunity dries up.
After that, Pfizer and Protalix plan to compete on price. The duo is pricing Elelyso at a 25% discount to Cerezyme, which might help capture patients, but probably only if insurance companies decide that the discount is worth encouraging -- or, dare I say, forcing -- patients to switch. Given the high cost, very few, if any, patients are actually paying for the drug out of pocket.
Of course, Sanofi could just lower its cost to compete. Pfizer and Protalix should be able to win a price war because Protalix's manufacturing costs are probably cheaper, since it produces the drug in plant cells. Remember, though, there are a limited number of patients, so reducing the cost too much will make it hard to make any money selling the drug.
Short term, I see a lot of challenges for Protalix, so I opened an underperform CAPScall to track my prediction. Longer term, I like the manufacturing technology, and the approval of Elelyso will make the next approval much easier. Unfortunately, the next drug in development is back in phase 1, so it's still years away from approval.
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Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Pfizer. The Motley Fool has a disclosure policy. We Fools don't 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.