Orphan Drug Designation
Orphan or Rare diseases are those that affect only a small number of people. The drugs that are developed to treat diseases with this special designation gain access to multiple incentives, including reduced fees and regulatory assistance to improve the design of the clinical trials and streamline the development of the drug.
The exact requisites to qualify as a Rare Disease vary from region to region, but they are generally life-threatening or chronically debilitating diseases affecting less than 10 people out of every 10.000, with no existing cure or treatment. Since these are usually very rare, developing treatments for them could be economically non-viable, and to ensure that new treatments are indeed developed the regulatory agencies compensate by granting several advantages bundled under the Orphan Drug Designation.
Once a new treatment is thought to tackle a rare or orphan condition, the Orphan Drug Designation warrants many advantages, including:
1 – scientific advice from regulators focused on the clinical development at a reduced cost, allowing some of the clinical trials to be bypassed or carried out with very few patients (tens of patients instead of thousands, for example)
2 – extended market exclusivity for up to 10 years (7 in the US), even if the company has no patent over the product.
3 – easier access to grants, soft loans and other forms of financial help, including tax cuts that can amount to millions of dollars per year
4 – in the US, Orphan Drugs have a higher rate of go-to-market approval from the Health authorities
Of those, the most valued incentive for orphan drugs is, by far, the market exclusivity period (also known as orphan exclusivity), which is strictly enforced by the regulatory authorities.
In average, companies who receive an orphan drug designation increase their value by almost 4%, although in the case of smallvoncological Biopharmas (market value below 50M) the company value leaps up by an average of 10%. As of today, the general consensus is that developing an Orphan drug is more profitable than developing a non-orphan drug.