Is Orphan saving Biotech?

Orphan drugs have been en vogue for a while. However, in the last quarter there has been a record financing that has put drugs for small patient populations on the map even more. In Q1 2014, over 60% of the financing in European Biotech has gone to companies that have a lead orphan drug product. Over USD 170 m of the recorded USD 269 m in European Biotech financing has been done by orphan focused companies. Dutch UNIQURE raised USD 91 m and French Txcell raised USD 22 m in an IPO, but also Swedish Wilson Therapeutics raised USD 40 m last quarter from VCs.
 
So is orphan saving the Biotech industry? It does certainly look like an interesting investment possibility for Venture Capital investors. Even though the (initial) target patient population is very small, orphan is very attractive due to the following reasons:

  • High price of up to EUR 400’000
  • Less competition, fast-tracked, lower-cost late-stage development and marketing
  • Market size: USD 127bn by 2018 (16% of total prescription)
  • Gross profit margins of over 80% (industry average 16%)

 
Of the current 43 brand blockbusters, 18 were approved solely for orphan so this shows the big potential. As an example Novartis Gleevec originally targeted 9,000 patients for chronic myelogenous leukemia which was later approved for non-orphan gastrointestinal stromal tumors with over 120,000 patients. This seems to be the strategy of many companies – developing the drug for an orphan indication and later expanding it into non-orphan. Also, orphan markets are more suited for biotech companies, as they are based on small communities around patient organizations. Big Pharma has to be very careful in working with such organizations and showing the required commitment and interest. For a Biotech company with its full focus just on one orphan indication, this is much easier.
 
Never the less, orphan drugs provide great opportunities for Biotechs in terms of raising capital / IPOs, by out-licensing to Big Pharma but also for M&A exits. If you are interested in learning about deal terms in orphan drugs, please have a look at Biotechgate Deal Report on this topic
 here.

One thought on “Is Orphan saving Biotech?”

  1. Just a word of appreciation for the excellent presentations and publications readily accessible on the site. I have innumerable interactions with small to midsize companies, and the information which your organization provides is a terrific backdrop for those discussions.
    Michael F Murphy, M.D., PhD
    Chief Medical and Scientific Ofc.
    Worldwide Clinical Trials
    King of Prussia, Pennsylvania, USA

Comments are closed.