Pharmaceutical and biotechnology companies are moving toward orphan indications in a quest to bypass pricing pressure from patent cliffs and austerity measures in Europe, and obtain quicker approval by the FDA, says Ian Somaiya, Managing Director at Piper Jaffray & Co.
“Orphan drugs are focused on smaller patient populations. They are priced higher, so one might think there is going to be more price sensitivity, because some of them are priced at $250,000 to $400,000 a year. But their benefit is near absolute, as long as the patient receives the drug earlier in the disease cascade,” Somaiya said.
Somaiya is focused on Alexion Pharmaceuticals (ALXN), a larger-cap orphan drug maker. ALXN’s Soliris is approved for two different ultraorphan indications, and clinical data supports use in probably three or four new ones. Somaiya says the drug seems to offer benefit to a vast majority of the patients, which makes it unique among peers.
“[Alexion’s] stock had an amazing run over the past year, and probably has been one of the better-performing stocks since the middle of last year. But we’re also looking at a revenue stream that approaches $800 million this year that could generate peak sales of north of $5 billion. So we’re still early in terms of its eventual opportunities,” Somaiya said.
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