Ensuring Orphans Thrive

Since the turn of the millennium, the share of the prescription drug market held by orphan drug sales has doubled from 6 to 12 percent (excluding generics), and is projected to reach 20 percent by 2020 (1). As the market has expanded, a number of large pharma companies have shown an interest in drugs for orphan diseases. Some have initiated in-house rare disease programs (sometimes with little to show for them), whereas others have acquired smaller specialist companies. In June 2016, Shire completed its acquisition of Baxalta to create a specialist rare disease firm of unprecedented size; approximately 65 percent of the company’s total annual revenues will be generated by rare disease products (2). Recently, Sanofi also decided to integrate its subsidiary Genzyme into the larger organization and to create a Rare Disease franchise. The franchise aims to focus on the use of gene-based applications.

I am a consultant and around 10 years ago, I founded a consulting company, Bionest Partners, to help pharma companies understand their market opportunities and to develop strategies for their product launches. In light of big pharma’s growing interest in rare diseases, my team and I have had to ask ourselves what business models are conducive to effectively developing and selling drugs to small patient populations? And crucially, are those business models compatible with traditionally structured big pharma companies? I believe that the answer to this latter question is no – and there are three main reasons for this.

Bigger is not best

Firstly, large pharma companies lack the flexibility of smaller specialist firms. A large pharmaceutical company often generates a few billion dollars’ worth of revenue each year, but an orphan drug might only generate $100 million. Because the orphan therapy area represents such a small slice of the company’s revenue, the higher-ups have to worry about maximizing return-on-investment across a variety of opportunities in a portfolio. In a smaller specialist company, one therapy area usually represents the entire business, and management is dedicated to that one disease space. This allows smaller companies to act with greater flexibility and risk tolerance – and allows them to thoroughly understand and concentrate on their one market. 

Secondly, large companies are structured in a way that makes forming close relationships with the patient community – essential for putting pressure on regulatory authorities – difficult. Conventionally, drugs require trials with hundreds of patients before they gain regulatory approval. But firms in the orphan disease space could be developing drugs for only a handful of patients. For this reason, the regulators will often “bend the rules”, so to speak – especially if there’s a degree of patient pressure involved. In 2012, the FDA introduced the Food and Drug Administration Safety and Innovation Act (FDASIA) that states a company must be certain it has strong advocates that can help discuss the need for a rare disease drug (3). This means building relationships with patient advocacy groups and key opinion leaders. It’s much easier for a small company to gain the trust of patients, physicians and researchers when the company is set up specifically to develop treatments for patients exclusively in that disease space. They are also able to send senior contingents to meetings with patient advocacy groups, which can go a long way to building relationships.

Finally, conventional marketing practices used by big pharma companies aren’t suited to orphan diseases. Let’s say you’re a large pharma company and you’ve developed a promising oncology drug with millions of potential recipients. In order to maximize profits, you would deploy a large sales force, and competition and marketing would be the keys to your success. In comparison, success in the rare disease space is usually driven by patient access and relationship building with key opinion leaders. Successful companies engage with the patient population needing treatment and the only way to do this effectively is to work with advocacy groups to educate patients about products and to identify and recruit them for post-approval studies sponsored by physicians. This is more important than with other therapy areas because of the often tiny numbers of people with the disease. This model also serves to build company credibility as it demonstrates that you are in it to advance science and treatment, rather than just to make money (and we all know that the pharma industry can have an image problem in the eyes of patients).

Seeking orphan success

Many large pharma companies have moved into the orphan disease space and initiated drug development programs, but have had limited success. Pfizer, for example, created a separate division to develop their orphan products, but the endeavor was unsuccessful primarily because the division was part of the overall structure. They had to respond to the fixed rules and regulations that govern the company as a whole.

Contrast this with Genzyme who, 30 years ago, paved the way for other orphan disease companies. Their former president, Henri Termeer, pioneered the patient advocacy approach, stressing the importance of creating goodwill amongst all stakeholders and motivating collaboration towards therapy development (4). Termeer also created the business model, adopted by many others in the biotech industry, which is based on garnering steep prices for therapies for rare genetic disorders. Sanofi acquired Genzyme for over $20 billion in 2011 in one of the biggest biotech deals in history. Often subsidiaries flop in the years after a takeover, but Genzyme has flourished. I think this has a lot to do with the fact that Sanofi decided to keep the Genzyme unit separate, allowing it to keep its management, and more importantly, its patient orientated culture. I fear that now that Sanofi has decided to fully integrate Genzyme, this culture could be in danger of disappearing – indeed, a number of key staff have already left and moved on to other smaller orphan drug companies.

The exception to the rule

Perhaps after reading this article you may be wondering whether large pharma companies are doomed to fail in the orphan disease space. It’s not all negative and there are some advantages to being a big company, particularly when it comes to financing. Many small firms can struggle to obtain the funding required to develop their drugs, but large pharma companies can pick up and integrate these firms or their products (providing they understand the importance of patient centricity). Shire is an example of an orphan disease firm that has grown into a large company. Since 2013, Shire has acquired NPS, Dyax and ViroPharma – each for around $5 billion; and in January of this year, Baxalta for $32 billion. Shire is a good example of a company that has been able to keep its patient centric model as the company has expanded – they even have a department dedicated to patient advocacy. I think large companies can succeed if they accept that their market will be miniscule, and that they’ll need to work with patient organizations. For most large companies, however, the real key to maintaining the success of an acquired small orphan drug firm is to maintain separation from the rest of the company.

In fact, this business model will become ever more important as companion diagnostics and personalized medicine continue to advance. Soon, we will have cancer drugs that only work in a small subset of oncology patients with a particular genetic profile – a kind of orphan disease within a disease. Pharma companies moving into this space would be wise to draw from the experience of successful specialized orphan disease companies; and for big pharma, this means leaving their orphans alone. 
 
Alain J. Gilbert is Co-Chairman of Bionest Partners, France.