Analyst says smart money is on drugs for certain orphan diseases

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Rare-disease therapies have accounted for about a third of approvals of new molecular entities between 2007 and 2012, according to an FDA drug approval round-up published last year. And a quick scan of the list of the agency's orphan-drug designations and approvals between January and September 2013 indicates a strong showing for cancer therapies among this group. But a recent report by Leerink Swann analyst Joseph Schwartz indicated that the future of rare disease research lies in therapies for neurodegenerative orphan drug development.

This category includes conditions like Duchenne muscular dystrophy (DMD), spinal muscular atrophy (SMA), amytrophic lateral sclerosis (ALS) and familiar amyloid polyneuropathy, among others. In a note to investors, Schwartz laid out his case based on numbers. Among them, orphan-drug designations in the neurodegenerative space have grown from 12% to 22% since 2003, compared to cancer orphan designations, which accounted for 45% of orphan designations in 2007, but currently account for 33% of these designations.

Schwartz acknowledged that being designated an orphan drug and being approved are two different things, and that neurodegenerative orphan drug approvals have not kept pace with scoring designations.

In terms of potential sales, Schwartz wrote that the market for an “effective, novel” Duchenne treatment could reach $4.4 billion in the US, based on prices between $200,000 and $500,000 for treatments, a threshold he calls an “ultra-orphan” price. He projected that a treatment for spinal muscular atrophy could also hit an ultra-orphan level if it could treat Type I or II, with an annual cost of around $350,000, whereas an SMA treatment for Type III or Type IV would probably have a price of around $100,000, representing a market of around $2 billion.

High prices for small-population disease treatments are not new to the rare-disease space, and drugs, like Alexion's Soliris, show that there's not just a market, but a buyer for these drugs. Leerink's Schwartz says that the emotional component associated with these diseases, specifically neurodegenerative diseases, can give companies the room to develop these drugs and get payers to sign on.

Among the reasons are the symptoms of the diseases themselves. These can include loss of speech, vision or hearing; movement and feeding difficulties; and intellectual impairment, among others. And it is this last one, Schwartz wrote, that is of particular note because “the heartbreak associated with cognitive decadence could engender companies with a unique source of leverage in their discussions with payors.” He also noted that patient advocates are “notoriously assertive,” and may add additional pressure on payers to cover costs.

On the micro front, Schwartz pointed out that where current treatments exist, they are insufficient or ignored. He added that the standard of care for Duchenne patients can extend life expectancy from age 20 to around 28. Meanwhile, patients are generally in wheelchairs by age 12, using ventilators by 20 and require 24-hour care for the last eight years they live.

ALS patients (predicted market for a product that shows a “functional or palliative benefit” is $4.5 billion US) also end up in wheelchairs and on ventilators, and usually die within five years of being diagnosed. He noted that while there is a treatment – Sanofi's Rilutek– it does not ease symptoms, and “questions about its efficacy have inhibited patient uptake.”

Schwartz wrote that patients are not the only potential beneficiaries, and that development agreements between small biotechs and Big Pharma provide additional interest for drug makers, as seen by alliances like those between Biogen Idec and Isis (for SMA), Roche and PTC (for SMA), and GlaxoSmithKline and Prosena (for DMD). The agreements are generally structured with upfront and milestone payments to the biotech, with Big Pharma covering development after Phase II. He wrote that these types of arrangements protect smaller companies from risk and give the larger companies a potentially rich pipeline.

Nine orphan drugs were approved last year, including Incyte's Jakafi for the bone cancer myelofibrosis and Pfizer's Elelyso for the metabolic disorder Gaucher's disease.
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