The small-target-large-investment ratio of the rare disease market may appear to be a daunting one: at best, a treatment will be suitable for fewer than 200,000 patients. At worst, the percentage of folks that will find the medication helpful could be far smaller.

Yet an article in July’s Drug Discovery Today says that several factors make pursuing a discrete patient population less of a sinkhole than it is an investment in a longer-term payoff.

The key is to secure an Orphan Drug Designation which can be applied for under two circumstances: when the drug would be for patients who have one of the estimated 7,000 rare diseases or for diseases, or when a treatment’s R&D costs are so high it would be impossible for a company to earn the money back. An Orphan Drug Designation eases the burden through tax credits that can match up to 50% of the research costs as well as through grants, waived FDA fees and seven years of exclusivity.

The study notes that because the orphan drug category is heavily into biologics, biosimilars are a lesser threat to sales once exclusivity wears off, compared to the small-molecule space, where generics have a greater likelihood of parity.

The data shows that within the larger pharma context, the rare disease market could be a considerable one for pharma. While a blockbuster such as Pfizer’s Lipitor earned about $197 billion over its lifetime, the study’s authors estimate that Genentech’s rare disease cancer drug Rituxan could wind up relatively close behind, ringing up $150 billion in sales before generics can enter the marketplace. This represents a 24% difference in sales, but, Genentech’s earnings power comes from treating fewer patients. Further, it spans both sides of the prescription market, because its indications include the rare diseases chromic lymphocytic leukemia and non-Hodgkin’s lymphoma as well as the more mainstream rheumatoid arthritis.

This is not to say that developing orphan drugs is without challenges. A limited population means finding patients and coordinating clinical trials can be difficult, but the smaller population means clinical trials can be shorter.

Additional study highlights:

•    The orphan drug market grew almost 26% from 2001 to 2010, while mainstream pharma grew just slightly more than 20% during that same period.

•    A clearly defined patient pool requires a lower marketing investment.

•    Orphan drugs can have multiple indications—the authors found that 15% of the drugs analyzed had sales from several rare diseases, providing an average of $34.3 billion in revenue potential. Single-indication orphan drugs had an average of around $8.1 billion.

•    250 new rare diseases are identified every year.