Orphan Drugs Emerge as Blockbuster Engines for Top 10 Pharma Giants Amid Rare Disease Market Boom

Editor’s Note: This article is reprinted from MedTrend, with authorization granted to VCBeat.

Rare diseases with small patient populations were once a “minefield” that pharmaceutical companies avoided. However, fierce competition in innovative drug pipelines and a sharp decline in return on investment have changed this landscape.

The rare disease market has instead become a key battleground for major pharmaceutical companies:

• In April 2018, Takeda Pharmaceutical acquired rare disease giant Shire for $65 billion, creating the largest merger and acquisition deal in the pharmaceutical industry in 2018.

  
  

• In February 2019, Roche, a leading oncology company, acquired Spark Therapeutics, a pioneer in gene therapy, for $4.3 billion to expand its footprint in the rare disease sector.

  
  

• In March 2019, Biogen acquired the UK-based gene therapy company Nightstar for $877 million. Nightstar’s product pipeline is primarily focused on the treatment of rare eye diseases.

The number of orphan drugs approved on the market has also surged rapidly. In 2018, the FDA approved a record 61 new drugs, more than half of which (31, accounting for 51%) targeted rare diseases.

* Due to the small number of patients with rare diseases, these conditions are also known as "orphan diseases," and the medications used to treat them are correspondingly referred to as "orphan drugs."

Orphan Drugs Have Become the Cradle of Blockbuster Medicines.

The rising momentum in the rare disease market is not the result of a single factor achieved overnight, but rather the outcome of synergistic drivers encompassing market dynamics, policy support, and technological advancements.

In recent years, drug development across major therapeutic areas has accelerated, leading to a surge in the number of approved drugs and further market saturation. Newly launched medications face intense competition, turning the landscape into a veritable “red ocean.”

Moreover, the market for many rare disease drugs is far from saturated; in fact, most such conditions remain untreated (only 5% of rare diseases globally have approved therapies). Although the market size is relatively small, competition is limited while demand is high. Once a drug is successfully developed, it can rapidly capture a significant market share.

In contrast, choosing the rare disease field as a new R&D direction becomes "a matter of course."

Moreover, the revenue performance of orphan drugs is generally superior to that of other sectors.

▲ Orphan Drug Revenue & Its Share of Global Pharmaceutical Sales

According to a report released by EvaluatePharma, the orphan drug market is projected to have a compound annual growth rate (CAGR) of 11.1% from 2017 to 2022, significantly higher than that of the non-orphan drug market (with a CAGR of only 5.3%). By 2022, total sales of orphan drugs are expected to reach $209 billion, accounting for 21.4% of global pharmaceutical sales. The market performance of orphan drugs will outperform the entire prescription drug market.

▲ Top 10 Orphan Drug Revenues in 2017

Orphan drugs have become a breeding ground for “blockbuster” therapies through indication expansion.

• “Gleevec,” the drug that inspired the film “Dying to Survive,” was initially approved as an “orphan drug” and ultimately became a blockbuster with peak annual revenues approaching $5 billion.

• Opdivo and Keytruda, which are highly popular in the PD-1 market, also qualify as orphan drugs, with total revenues of $5.74 billion and $3.809 billion, respectively, in 2018.

• The Top 10 Orphan Drugs by Revenue in 2017, Each with Annual Revenue Exceeding $1 Billion.

▲Top 5 Blockbuster Drugs Launched in 2019

Even among the top ten blockbuster new drugs predicted for 2019, Alexion Pharmaceuticals’ injectable drug Ultomiris, used to treat paroxysmal nocturnal hemoglobinuria (PNH, a rare blood disorder) in adults, “outshone all other medications,” earning the title of the most significant new drug of 2019 with projected revenues of $3.4 billion by 2024.

Pharmaceutical companies’ willingness to shift from mainstream therapeutic areas to rare diseases is also driven by the policy advantages associated with orphan drugs.

In 1983, the U.S. FDA took the lead in enacting the Orphan Drug Act to incentivize orphan drug development. Subsequently, Japan, the European Union, South Korea, and other regions successively introduced incentive measures for orphan drug development. These measures have promoted pharmaceutical companies’ research and development of orphan drugs from multiple perspectives:

• Tax Incentives: Orphan drugs in the U.S. market are eligible for a 50% tax credit and exemption from user fees (waiver of the drug marketing application fee). The European Union and Japan also offer similar incentives.

• Market Exclusivity: Orphan drugs approved in the U.S. market are granted up to 7 years of market exclusivity; in the EU and Japan, it is 10 years.

• Drug Approval: The United States can shorten the approval timeline for orphan drugs by up to six months; the European Union employs centralized and priority review procedures.

• Payment Coverage: Health insurance systems in various countries provide coverage for rare diseases.

▲ Preferential Policies for Orphan Drug Approval by the U.S. FDA

In other words, orphan drugs can enjoy incentives such as tax reductions, special access channels, and accelerated approval throughout various stages including project initiation, research and development, and regulatory review. Furthermore, they benefit from substantial preferential policies in medical insurance reimbursement, which has become a significant driving force for advancing rare disease drug development.

Taking the FDA as an example, prior to the enactment of the Orphan Drug Act, there were only 38 orphan drugs in the United States; however, following the passage of the Act in 1983, a total of 748 orphan drugs had been launched by 2018, with the number of approved orphan drugs showing a year-on-year increasing trend.

Technological advancements, particularly in gene therapy, have “unlocked” the potential of the rare disease market. Orphan drugs have become the primary battleground for the development of cutting-edge new drugs and life science research tools globally.

There are currently nearly 7,000 known rare diseases worldwide, yet only 5% of them have approved treatments. Approximately 80% of these nearly 7,000 rare diseases are caused by genetic defects, mostly involving single genes, making them particularly attractive targets for drug development. Because they are often caused by mutations in a single gene, their etiologies are typically well-defined, facilitating the identification of more targeted therapeutic approaches.

For example, the world’s first “ophthalmic gene therapy” drug—Spark Therapeutics’ Luxturna—is indicated for the treatment of inherited retinal dystrophy caused by RPE65 gene mutations.

Advances in genomics and gene sequencing technologies have made the identification of rare diseases and drug development more accessible. This is also why Roche and Biogen are actively acquiring companies specializing in gene therapies for rare diseases.

The selection of rare disease R&D focus areas by different companies is closely tied to their core technological capabilities. Examples include targeting rare diseases aligned with their established strengths, repurposing existing drugs for rare disease indications, and exploring therapeutic areas based on shared mechanisms of action.

Amid the R&D surge in the field of rare diseases, it is essential to understand the differences between the R&D landscapes for rare diseases in China and abroad.

Pharmaceutical giants, already at the pinnacle of the industry, hold dominant positions in the treatment of common diseases. Meanwhile, these companies are accelerating their penetration into the rare disease sector, with the majority of “blockbuster” drugs for rare diseases also originating from these enterprises.

▲Top 10 Companies by Rare Disease Drug Revenue in 2017 and 2024

As shown in the chart above, the companies leading in rare disease drug revenue remain household names—Celgene, Johnson & Johnson, Novartis, Roche, and Merck & Co. Pfizer, currently ranked first in the overall pharmaceutical market, is projected to fall to 11th place by 2024.

Therefore, “expanding R&D in the field of rare diseases” is the mainstream direction.

▲ Orphan Drug Therapeutic Areas (Excluding Oncology)

Currently, major pharmaceutical companies are focusing their expansion in the rare disease sector primarily on hematologic rare diseases, with Takeda (Shire), Novartis, Sanofi, and Roche all having established a presence. They have also made significant inroads into rare diseases affecting the central nervous system, cardiovascular system, endocrine system, and dermatological conditions.

However, the vast diversity of rare diseases leaves room for new entrants.

R&D in the field of rare diseases in China started late, and there are currently no examples of orphan drugs becoming "blockbusters."

In recent years, various incentive policies for rare diseases have been successively introduced:

▲Successive Policies for Rare Diseases Introduced

It is expected that in the coming years, policies will provide support in areas such as review speed, hospital access, product pricing, and medical insurance reimbursement.

Driven by policy incentives and the growing recognition of the substantial value embedded in the orphan drug market, Chinese pharmaceutical companies are actively strategizing their R&D efforts in this area. For instance, the development pipelines of Fosun Pharma, Erya Jishi, CanHelp Genomics, and Shanghai Zhongqiang Pharmaceutical all include therapies for genetic disorders.

Among them, in 2017, Canopy Growth announced the establishment of a platform dedicated to the development of rare disease drugs. This platform will focus on introducing a series of rare disease drugs that are already marketed abroad or in late-stage clinical trials, creating an integrated effect and providing payers with more economically valuable solutions.

On February 22, 2019, the Ministry of Finance released a list of 21 rare-disease drug varieties subject to tax reductions, which included several domestically produced products such as growth hormone, human coagulation factor VIII, pirfenidone capsules, penicillamine tablets, and riluzole tablets, as well as human prothrombin complex concentrate. The listed companies involved include Changchun High-Tech, Hualan Biological Engineering, Tiantan Biological Products, Shanghai RAAS Blood Products, China National Pharmaceutical Group, Nhwa Pharma, and Jialin Pharmaceuticals.

Meanwhile, given the broad application prospects of gene therapy in the field of rare diseases, there is currently a large number of companies providing solutions for genetic testing of rare diseases, such as BGI Genomics, Berry Genomics, and Mingma Bio.