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Drugs for little-known symptoms can bring big-time profits

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Anthony Marucci is the CEO of Celldex Therapeutics, which specializes in orphan drugs.
Anthony Marucci is the CEO of Celldex Therapeutics, which specializes in orphan drugs. - ()

Orphan drugs generally aren't considered blockbusters because, by definition, they target small populations.

But come up with a drug that attacks multiple rare diseases and potential market size grows. That belief motivates the strategy at many New Jersey biotechs.

Take the Princeton-based Advaxis Inc., which developed its lead drug candidate, ADXS-HPV, to treat various forms of cancer associated with human papillomavirus. ADXS-HPV has received orphan drug designation for the product's application to anal cancer, as well as head and neck cancer. Advaxis is also seeking orphan drug status for invasive cervical cancer.

Add them up and incentives multiply.

"Inside the United States, those markets are relatively small individually, as orphans," Advaxis CEO Daniel O'Connor said. "But in the aggregate, it's actually a pretty substantial market opportunity. Combined together, it gets to be a larger patient population."

The outlook reflects an age when more breakthroughs come from the medicines targeting specific populations, such as hard-to-treat cancers. That stands in contrast to the blockbusters of yesteryear, such as cholesterol or asthma drugs, that catered to bigger groups.

Those drugs have been coming off patent for years and haven't been replaced by new blockbusters — meaning the industry has to find new approaches.

The U.S. Food and Drug Administration confers orphan drug status to spur development of drugs that afflict small populations, defined as 200,000 or less, because it is concerned that companies might not otherwise take up the expensive cost of developing drugs for few patients.

But a big benefit of orphan drug status is that, if approved, these drugs receive seven-year market exclusivity arrangements.

"That means the FDA is not going to approve another drug for seven years, so whether or not you have patent protection is not as relevant because there is nobody coming into the market to compete against you for seven years," said O'Connor, whose company's products are all experimental drugs still in the pipeline. "That's the incentive aspect of it."

The designation also provides grant eligibility, exemption from regulatory fees and tax credits.

Many orphan drugs start small but end up big because they have multiple indications, said Mahmud Hassan, a professor who studies the pharmaceutical industry at Rutgers Business School.

The drugs also tend to have lower marketing costs, leading to better margins, he said. And they can command better pricing. (Gattex, a drug by Bedminster's NPS Pharmaceuticals Inc. to treat short bowel syndrome, a disease that prevents the body from properly absorbing nutrients, costs $295,000 annually per patient.)

"There is no doubt," Hassan said. "Orphan drugs are big opportunities for growth."

And while the FDA targets orphan drugs for what it deems small populations, biotech executives say 200,000 patients is not insignificant either.

"There are companies out there that will take 200,000 patients," said Celldex Therapeutics Inc. CEO Anthony Marucci, whose company has gained orphan drug status in the United States and Europe for Rindopepimut, its lead drug candidate to treat brain cancer.

E-mail to: tomz@njbiz.com
On Twitter: @biztzanki

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