This year has been a tumultuous year for the rare diseases market with a number of significant news stories revolving around M&A rumours, regulatory approvals, IPO’s, investments and partnering agreements. Liftstream takes a look at these events:
The rare disease market has stolen the limelight recently, with big pharma joining the biotech and biopharmaceutical companies, in showing particular interest in the opportunities drug treatments in these rare diseases offer. Traditionally, big pharma had shied away from rare diseases as they didn’t represent the blockbuster revenues. Big pharma were more interested in treating patient populations in the millions, rather than the thousands, hundreds or even in the tens. Though, with pipelines looking thin and the patent cliffs looming, big pharma are turning to rare diseases as drugs like Cerezyme and Soliris have shown just how profitable these therapies can be. It is no longer the exclusive field of biotechs.
A recent report by Thomson Reuters highlighted that the economics of orphan drugs are often more favourable than their non-orphan counterparts. This is partly due to a number of economic drivers such as tax credits, waived FDA fees, reduced clinical timelines and higher chances of regulatory approval. This economic incentive has given rise to a highly innovative and adaptable field with the EMA counting over 1,000 orphan drug designations.
Alexion stands as a shining example of how a company can prosper in the rare disease space. Although a small market it can still generate big money. Alexion’s Soliris, launched in 2007 to treat a rare cause of anaemia is forecast to achieve over $1.1bn in sales in 2012. Alexion now has over 1,000 employees and recently announced that they aim to add 300 more jobs in the US.
Recruitment in the rare disease market can be exceptionally difficult. Often the skills required to be successful in the market are not always available. Even when mergers such as Sanofi/Genzyme and jobs cuts such as Actelion’s recent announcement of 135 job cuts the skills are often in the wrong location or wrong function. The skills sets required by all, from R&D professionals to regulatory professionals, are often very different to their traditional pharma colleagues. This is particularly noticeably within the field of regulatory affairs.
Regulatory approval has been at the centre of a number of news stories this year, most notably with the rejection of the Protalix/Pfizer Gaucher drug Elelyso. Eleyso was rejected on account of the competing drug VPRIV (Shire plc). The decision taken by the EMA to reject the Eleyso application was a defence of the marketing exclusivity Shire has for VPRIV via their orphan approval. This is the first time that a drug has been refused approval in order to uphold the market exclusivity in the EMA. The decision was based on the fact that Eleyso and VPRIV work in the same way and there was no evidence that Elelyso is clinically superior to VPRIV. The EMA seemed keen to uphold the protection VPRIV had and they saw no prospect that the patient could not be served by Shire. Protalix’s partnership with Pfizer has so far proved fruitful irrespective of this European setback and Eleyso has just gained a further approval in Israel, the domestic market for Protalix. Protalix is developing drugs that will directly compete with the rare disease heavyweights Shire and Genzyme (Sanofi).
Genzyme have long been seen as the rare disease leaders, but in recent months they have been riddled with problems, namely the high profile manufacturing problems with the Fabry Disease treatment Fabazyme. Genzyme announced in 2011 that a considerable amount of its Fabrazyme drug had been rejected for failing to meet quality standards. Sanofi set straight to work to rectify the Genzyme manufacturing issues and wasted no time in restating their ability and capacity for serving the Fabry patients in North America, which Shire had stepped in to provide during the problems. This claim by Sanofi coincided with an announcement from Shire that they were pulling the plug on the Biological License Application (BLA) with the FDA for their own Fabry Disease drug Replagal.
The growth in orphan drugs and rare diseases is attracting interest from all quarters. Consequently, the rare disease market is experiencing considerable levels of innovation. Such innovators are UniQure, Lysogene and BluebirdBio, who recently achieved FDA orphan drug designations approval for their novel gene therapy. BlueBirdBio’s therapy is for Adrenoleukodystrophy (ALD), ALD is a rare X-linked neurological disorder that affects one in every 21,000 boys worldwide. BluebirdBio now plans to go ahead with a phase 2/3 clinical study in childhood cerebral ALD in both the United States and Europe. Their relative success in this space has garnered them a recent funding round of $60m which was participated in by Shire. Companies such as UniQure in the Netherlands have also seen recent approvals for gene therapy with UniQure achieving EMA approval of Glybera for the treatment of LPL deficiencies. (First Gene Therapy Approval).
The recent economic malaise has inhibited the progression of many small biotechnology companies as they have struggled in a very tight financing market. However, companies such as Ultragenyx and Prosensa have found success in raising funds. Ultragenyx, founded by Emil Kakkis the former Biomarin CMO who was responsible for bringing products like Aldurazyme, Naglazyme and Kuvan to the market, recently raised $15.1m in series A funding. The funding will be used to progress the development for UX-001 for hereditary inclusion body myopathy. Prosensa, led by former Genzyme executive Hans GCP Schikan, raised $30m for the progression of the company’s RNA-modulating therapy for DMD.
This challenging environment has opened the window for large pharma and the emerging class of mid-size biopharmaceuticals to seek acquisitions, strategic investments or partnering deals with biotechnology firms. As the global orphan drug market is worth in excess of $50bn (2011, Thomson Reuters Report) and expected to continue to grow impressively, it’s easy to see why companies want to position themselves in this space. The large pharma companies already dominate the revenue landscape from an orphan drugs perspective, however, an estimated 48% of revenues from orphan drugs in the US come from oncology indications, while that figure holds as high as 40% in Europe. The strategic ambition now centres more on the rare disease and ultra-rare disease market. Acquisitions and strategic alliances will provide the usual routes to achieve this.
Traditionally small biotechs and investors saw the most profitable exit as an IPO, such as Synageva’s recent $115m IPO in the USA. Mergers or acquisitions are now more often the likely exit strategy for biotechs. Although we are unlikely to see any imminent deal on the scale of the Sanofi/Genzyme merger or the Roche/Genentech merger, a number of smaller strategically significant deals and partnership agreements have been done. For example, Alexion acquiring the Canadian Pharmaceutical firm Enobia and Kamada’s partnership agreement with Chiesi. One of the M&A rumours gaining momentum in the past 12 months was that of BioMarin being purchased. BioMarin has had many rumoured suitors but GSK and Shire were seen as two possible buyers. Shire moved quickly to distance themselves from the rumours and there has been little evidence of GSK getting a deal set up after its recent purchase of HGS, so BioMarin stays independent for now. Yet, IPOs have gained paced this year in the biotech sector and Pacira Pharmaceuticals and Supernus Pharmaceuticals two notable performers, whereas in the rare disease space, Synageva also got their $115m IPO away in 2012. Success can be found on the public exchanges and Alexion is a good example of this, as they have been the beneficiary of a 600% increase in their share price since Solaris was approved. Forbes ranked the company number two in their list of most innovative companies and Matthew Herper recently profiled their achievements. Likewise, Vertex Pharmaceuticals is currently experiencing some positive analyst sentiment as their cystic fibrosis product, Kalydeco, which gained European approval earlier this year, is expected to drive near-term growth.
Unquestionably, 2012 has been a year in which rare diseases has hardly been out of the sector news. It is a market with some very interesting commercial development, product and regulatory progressions, as well as driving some of the great innovations of the sector. There remain challenges though. Market access is a big issue for rare diseases and the healthcare assessors like NICE, remain unclear about how to truly evaluate the health economics of drugs intended for rare diseases. At an international and regional level, there is much debate and dialogue occurring about the cost of the medicines and how perhaps they need to be assessed according to the very specific nature of the diseases they treat, using rarity as one possible approach to this. This has given light to the idea of the ultra-rare category of disease. For now though, it remains one of the most dynamic areas of the sector and with large pharma pushing into sector in increasing ways, it will no doubt continue to command attention across the sector.