Posted March 16, 2023
By Ray Blanco
Blasting Off With Biotech
Traditionally, when biopharma companies applied their resources to develop a therapy, they looked to treat large populations.
From their perspective, the risk/reward ratio tended to be better when the potential customer base (patients) was the largest.
Of course, if you suffer from a genetic disease that affects a small population, that means you are likely to be left out in the cold.
For the most part, those precious development dollars will be preferentially expended on bigger markets.
That started to change in the 80s when the Orphan Drug Act was passed, along with amendments since the original law.
The law sought to try to create a market for rare, or “orphaned” diseases and stimulate the development of new therapies for them by improving the economics of development for biopharma companies.
Some of the “carrots” in this law are considerable for prospective rare/orphan disease developers.
They include tax benefits, expanded market exclusivity, plus the granting by the FDA of what are called Priority Review Vouchers.
Not only can an orphan disease developer use a granted voucher to accelerate time to market for its own drug candidates, but these are also transferable to other companies.
This means it can also be sold to other biopharma companies so that they can accelerate the review time for their own candidates, a big deal if there’s a race to get to market first.
The value of these vouchers is considerable...with sales often reaching $100 million.
With this, biotech companies were off to the races, putting the new resources toward trying to find cures for rare diseases…
Finding a Needle in a Haystack
Over the decades since the Orphan Drug Act, pharma companies have built large and lucrative rare disease franchises.
The drugs are very expensive, but for patients with life-threatening rare diseases, they can be a new lease on life.
In fact, the most expensive therapies on the market are for such diseases...
Last year, we saw one such company score two big wins in rare diseases through FDA approvals.
Not only were the FDA approvals a majorly bullish development, but the therapies don’t come cheap either…
With costs literally up to $2 million, this creates a very lucrative revenue stream for the company in question.
In this case, the therapies appear to be “once and done” affairs, justifying the staggering cost.
One of the therapies aims to cure a rare genetic blood disorder. By existing treatments, at best the disorder would be something you have to live with and maintain your entire life.
That would mean a lifetime of expensive, frequent blood transfusions and additional health risks associated with the treatment.
But with the new “one and done” treatment, that lifelong battle seems to end.
A patient receiving this new gene therapy for a genetic blood disorder could possibly never need treatment again for the rest of their lives.
In fact, even with the nearly $2 million treatment costs, over a patient’s lifetime, the therapies would actually save money.
And this is just one rare disorder.
There are literally hundreds of rare genetic diseases out there left to treat.
So, there’s plenty of opportunity for other rare disease drug developers.
And when FDA approvals come across the table, you can bet that the companies receiving the approval see their stock prices skyrocket.
Hunting out and finding the diamonds in the rough sure does require quite a bit of research and due diligence, but it can be well worth the work if you’re a speculative investor.
And this applies to biotech as a whole, not just to companies looking to treat rare diseases.
Needless to say, biotech remains one of the most exciting sectors to be an investor in!
Now, before I go, I’d love to hear back from you about today’s topic. Are you investing in the biotech industry? If so, is there anything you’ve heard or read about that you’d like me to cover? Drop me a line and let me know here: firstname.lastname@example.org.