A lucrative niche in orphan diseases?

The number of potential blockbuster drugs is in decline so many Big Pharma companies are looking to rare diseases to fill their pipelines because low sales volumes can be balanced out by premium prices.

Smaller trial sizes can pose logistical challenges but make funding go further

As high volume drugs become harder and more expensive to create and generics continue to put a squeeze on those margins, more companies are turning to less mainstream targets. Dr Sarah Houlton looks at the challenges and potential gains from orphan drugs.

With the decline in the number of potential blockbuster drugs reaching the market in recent years, pharmaceutical companies are looking for alternative strategies to refill their pipelines, including drugs for rare diseases. While products to treat these conditions will not – by definition – ever be able to create the sales volumes of blockbusters that pharma has relied on for its profits, they still offer a great deal of potential to offer a significant contribution to the bottom line as part of a broader portfolio. They can command a premium price, and there may even be assistance from governments or charities that will smooth the development process and contribute to research costs.

An orphan condition is defined by the US Food and Drug Administration (FDA) as one that affects up 200,000 patients in the US, but many are much rarer than that and there may be only a handful of sufferers around the world. The European Organisation for Rare Diseases and the US National Institutes of Health have already identified about 7,000 rare diseases and the total continues to rise by approximately 250 a year.

Efforts to find drugs for these diseases have their roots in the US Orphan Drug Act, which was passed in 1983. This was brought in to encourage the development of drugs for diseases that affect people in the developed world, but which are sufficiently rare for there to be little commercial drive for that research. Europe followed suit in 2000, and various other countries have similar legislation in place. Essentially, these schemes offer incentives to those who are prepared to invest in finding treatments for diseases whose patient populations are so small that those treatments may never turn a profit – or even get close to it.

Of course, there are exceptions – rituximab (Genentech and Biogen Idec’s Rituxan/ MabThera) is currently the world’s second-biggest seller, thanks to its ability to treat a range of different cancers that are deemed orphan and the premium price it commands. But rituximab is definitely the exception, not the rule.

Rituximab is currently the world’s second-biggest seller, thanks to its ability to treat a range of different cancers that are deemed orphan and the premium price it commands. But rituximab is definitely the exception, not the rule

A recent report from Thomson Reuters, ‘The economic power of orphan drugs’, highlights the potential profitability of these products to industry. According to its analysis, the overall market for orphan drugs was US$50bn in 2011, and the sector makes up about 6% of total sales. In the decade 2001–2010, the report states that the compound annual growth rate (CAGR) for orphan drugs was almost 26%, compared with a shade over 20% for a matched control group of non-orphan medications.

Higher growth

‘[These] data, combined with the increasing number of orphan drug approvals, suggest that the CAGR of launched orphan drugs will outshine that of the non-orphan control drugs over the next 30 years,’ the report says. ‘This growth is partially due to the high number of biological orphan drugs, which are currently less susceptible to biosimilar erosion as compared to small molecules.’ In other words, their potential to bring in big revenues is likely to continue for some time after their patent protection expires.

Those premium prices can be huge. Currently, the most expensive drug available, Alexion’s eculizumab (Soliris) to treat the life-threatening condition paroxysysmal nocturnal haemo-globinuria, costs more than $400,000 a year. This may be an eyewatering sum, but to those patients who are affected, the drug is a life saver – and it has already generated more than half a billion dollars in sales for the company. This is no mean feat, as there are only somewhere between 4,000 and 6,000 sufferers in the US.

Repositioning into other rare diseases also increases the potential revenue, as has been the case with rituximab. A significant number of the diseases classified as rare are cancers, presenting a particularly rich vein of potential indication expansions, to the benefit of both companies and patients. Many of the orphan drugs on the market are designed to treat various rare forms of cancer, and the number is likely to rise.

However, just because the will to help patients and generate income from orphan drugs is there, it does not mean they are any easier to develop than treatments for more common conditions. As the Thomson Reuters report explains, such therapies throw up additional challenges. These include finding and recruiting patients into clinical trials when the population is so low, and the logistical problems resulting from the inevitable wide geographical spread of those patients.

Just because the will to help patients and generate income from orphan drugs is there, it does not mean they are any easier to develop than treatments for more common conditions

However, there are up sides – the trials are usually shorter and they tend to be reviewed by the regulatory authorities more quickly. And there are significant r&d incentives on offer for companies willing to work on these diseases – from tax credits and r&d grants to waived fees to the regulators. The drugs are likely to reach patients more quickly – and the marketing costs will be much lower.

Growing interest

Many Big Pharma companies are actively looking towards orphan diseases as revenue drivers for the future, including GSK, Novartis, Eli Lilly, Pfizer and Sanofi – not to mention many biotechs, whether they are more established or a start-up looking to exploit an idea. Speaking at an orphan diseases seminar at the BIO convention held in Boston in June, Mike Diem, director of business development for the rare diseases unit at GSK, explained that his company’s tactics have included franchising drugs in XSCID (‘bubble boy’ disease) and Duchenne muscular dystrophy.

‘The rare diseases business at GSK is not meant to be a replacement [for drugs in more mainstream areas],’ he said. ‘It’s a small piece of a much bigger pie, developing a nice set of products that won’t be billion dollar ones but will provide stability of revenue. If you have 10 or 15 orphan diseases in the portfolio, you can weather the business cycle quite well. We see significant opportunities in the emerging market of orphan diseases around the world.’

But are we heading towards a market dominated by orphan medicines for narrow indications? It would seem unlikely – despite the hype, approvals of orphan drugs remain relatively flat, according to venture capitalist Art Peppas of Peppas Ventures, which funds early stage pharma research. ‘But designations continue to increase, so we should see an increase in approvals in the future,’ he said.

Developing an orphan drug can often remain something of a leap of faith

Despite the incentives, finding the money to pay for the research is challenging, particularly because the majority of these projects have their roots in small start-up and spin-out companies. Overall, healthcare venture capital has been tough to come by recently, according to Ed Mathers, a partner at venture capital firm NEA, because the investing companies are concerned about the lack of an IPO market, and the length of time it will take for them to recoup their investment.

There are also concerns about the amount of capital that will be required to get to the exit point, because of the sheer cost and size of the late stage clinical trials required by the regulators in diseases that affect large numbers of people. Small wonder that the funders of early stage research increasingly look to sell the business on to Big Pharma, which has the deep pockets and sheer scale required to drive late stage trials.

However, for an orphan disease, this ‘exit’ becomes less crucial. ‘Patient advocacy organisations have really driven the way the FDA and government thinks, creating a headwind in terms of making changes [to clinical trial design],’ Mathers says. ‘Trial sizes are smaller so they are perfect for a venture capital firm to fund through to the end.’ This also benefits patients, as the drug’s development is less likely to grind to a halt while additional funding for later stage trials is raised, as is so often the case for discovery projects in the biotech sector.

Developing an orphan drug can often remain something of a leap of faith, as the actual numbers of patients with the disease can be difficult to establish

Developing an orphan drug can often remain something of a leap of faith, as the actual numbers of patients with the disease can be difficult to establish. At the start of Biomarin’s project to develop a treatment for mucopolysaccharidosis VI, for example, only about 50 patients with the condition were known; by the time the resulting drug, galsulfase (Naglazyme), was launched, around 600 had been identified.

So once an orphan drug is approved it is not a classical sales and marketing job, explains Mike Grey, chief executive of Lumena Pharmaceuticals, which is developing treatments for metabolic disease. It is more a case of finding patients who might benefit. But if an effective treatment is available for a rare disease, he believes, then there will be a market. ‘It’s all about identifying the patients, ensuring the payers will pay for it, and managing access,’ he says. ‘There is a complex set of considerations that need to be addressed, and it is very challenging. But the ability to interact with patients and caregivers is very rewarding.’

The role of patient advocacy groups is vital here – not only are they pushing for treatments to be developed and raising funds to assist with this, but they also make vocal demands that governments and health insurance companies should pay for them once they exist. And, of course, they provide that vital link to patients, facilitating trial recruitment.

For example, Parent Project Muscular Dystrophy (PPMD) in the US funds a wide range of projects, many small and some much more significant, researching the causes and treatment of the disease. When it started out, there was almost no research into the disease; now, there is a lot of promising research in the pipeline, a fair amount of it catalysed by the money PPMD has put in.

‘We introduced our “Gifted” programme – global investment for therapies to end Duchenne – to increase the quality of new drug candidates, and move faster to the time that they are approved,’ says Pat Furlong, the organisation’s founder and president. She describes it as ‘venture philanthropy’ – funding that ‘valley of death’ where researchers would otherwise not go.

Risk sharing

As with all drug discovery projects, orphan disease investigations remain a risky business, albeit those risks are often slightly different from those for mainstream drugs. GSK’s Diem asked whether too much of this risk is being passed back to the drug developers. ‘We see sharing of risks as important as we do deals and collaborations, but it is usually not simple,’ he said. And those risks can be unexpected. ‘Maybe the patient population is not as simple as was first thought – what we thought was one genetic modification might turn out to have 87 different subsets. Every one is different.’

Ron Smith, chief operating officer of the Physicians Pharmacy Alliance in the US, told BIO he is becoming increasingly concerned that the tools are not there to help understand the risks. This may have an impact on the willingness of regulators to approve a product – or governments and insurance companies to pay for it. There is a growing demand for biomarkers and surrogate markers from the regulators, yet still no certainty that the payers will agree with the results – or even have access to those data to help them decide whether or not a drug should be reimbursed. And even with the biomarkers, there is a danger that regulators and payers may not understand the advantages a drug might offer a patient.

There is a growing demand for biomarkers and surrogate markers from the regulators, yet still no certainty that the payers will agree with the results

When a successful orphan disease treatment is identified and launched, the effect on both patient and company can be dramatic. Patients who were facing an uncertain future, whether through a disease that would dramatically shorten their lifespan or one that greatly debilitates them, can look to the future with more certainty if the drug works for them – and someone will pay for it. And companies gain a steady income from those drugs, which will probably have to be taken for life, and cost significant amounts of money. While the next Lipitor won’t lie in the orphan diseases pool, the next Rituxan might. And even those truly niche products present opportunities, quite apart from their effect on the lives of patients.

How rare business can bring rich rewards

Genzyme (now part of Sanofi) built its business around orphan diseases, such as Gaucher disease. As David Meeker, its chief executive, said at the BIO convention held in Boston in June, patients with this condition are missing an enzyme, glucocerebrosidase, causing lipids to accumulate in cells and organs, with symptoms ranging from joint and bone pain to liver problems and cognitive impairment.

The company started work on the disease in the late 1980s and, he said, there were just 12 patients in the pivotal trial for the placenta-derived enzyme imiglucarase (Cerezyme) – a far cry from the huge numbers that are needed in Phase III trials in conditions such as Type II diabetes.

‘It was a great example of collaboration with the regulatory agencies,’ Meeker said. ‘For each patient treated, we had to pool 22,000 placentas. As this was at the height of the AIDS problem, there were a lot of regulatory issues to deal with.’ Now made in a Chinese hamster ovary cell line, the drug has revolutionised the lives of many patients with this disease.

Sometimes the diseases are so rare that companies have to get creative in the trials. Children with the infantile form of Pompe disease, in which glycogen builds up in the cells, usually die before they reach their first birthday.

Sometimes the diseases are so rare that companies have to get creative in the trials

‘It would be unethical to randomise to placebo,’ Meeker says. ‘Instead, we had to develop a natural history curve from historical data as it is so rare. The infants had to be identified by the age of six months, with the average age of diagnosis four months.’

They were looking for only 16 to 18 infants, but they were not sure it would be possible to find even that many. In the end, they were flying all over the world to treat trial patients, but the result was the approved enzyme replacement drug alglucosidase (Myozyme), and most of those trial patients are still alive and doing well.

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