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While failure may be an orphan, orphan drugs have become incredibly successful. Previously neglected, rare diseases now play a vital role in the pharmaceutical sector.
The economics of niche treatments have been transformed with the introduction of financial incentives. Last year, nearly half of all new approvals by the US Food and Drug Administration were for diseases affecting fewer than 200,000 patients in the US.
Data from Evaluate indicates that orphan drugs are expected to contribute to more than one-third of global sales for industry leaders Johnson & Johnson and AstraZeneca by 2028. This trend is evident in AstraZeneca’s recent acquisition of Pfizer’s early-stage gene therapy portfolio for up to $1 billion, expanding its presence in rare diseases.
Biogen’s $7.3 billion acquisition of Reata, a Texas-based company specializing in the treatment of Friedreich’s ataxia, a rare genetic neuromuscular disorder, highlights the potential profitability of orphan drugs. Despite there being only 5,000 patients in the US and 22,000 globally, peak sales could reach $2 billion, as estimated by Jefferies. The high cost of these drugs makes the treatment of small patient populations financially viable.
In the past, rare diseases were overlooked due to the small market size and the lack of financial incentives for research. However, the Orphan Drug Act of 1983 introduced tax credits and extended market exclusivity, leading to a shift in the industry. The EU implemented similar legislation in 2000.
Although strains on healthcare budgets may limit the generosity of incentives in the future, the pharmaceutical sector is currently experiencing rapid expansion. Evaluate predicts a growth rate of 12% to reach $300 billion by 2028, outpacing the wider market by over two-thirds.
While drug developers continue to pursue blockbuster treatments for diseases such as Covid-19, obesity, and Alzheimer’s, it is worth noting that only 5% of rare diseases currently have approved treatments. Given the high prices of these niche drugs, developers will continue to focus on breakthrough therapies for rare diseases.
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