Rare diseases, abundant resources

Analysis

Big Pharma and angel investors turn to small patient groups.

In December last year, Portfolion, leading Hungarian bank OTP’s venture capital arm, completed a million-euro deal in which it purchased a definitive stake in KPS Labor, a Hungarian diagnostic service provider. At the same time, acquisition talks between a multinational pharmaceutical company and Avidin Pharmaceutical and Histopat, two Hungarian companies active in health care development, have entered into their final phase, the BBJ has learned.

Since the company profiles in question vary from molecular biology to pharmaceutical device manufacturing, the most important common feature may well remain hidden to superficial observers: in one way or another, all these companies are connected to the treatment of rare diseases.

A rare disease is legally defined as an ailment from which less than seven in 10,000 people suffer. Too bad, as far as capital increase chances are considered, market-minded outsiders would say. Testing such pharmaceutical agents is likely to be more complicated than usual; the recovery of investments is also less predictable, as the per unit price of the future drug is surely going to be much higher than that of average drugs, their argument would go.

Staunch defenders of the state drug subsidy fund are likely to react with hostility as well. “Success for these companies means that increasingly smaller groups of patients cut out an increasingly bigger stake of drug funds,” they would say. As a result of such reasoning, it used to be difficult to find a manufacturer, let alone a developer, for medication designed to cure rare diseases. That is why these  have been named “orphan drugs”. And this is why the drug administrations of both the US and the EU encourage pharmaceutical companies to develop orphan drugs by reducing testing requirements and giving developers a 10-year marketing exclusivity.     



New trends

Fortunately, orphan drugs have their supporters. For example, pharmaceutical experts who consider them as the first samples of chemical agents tailored to the needs of specific patient groups. “Orphan drug developers are doing a pioneer job on the way towards personalized medication,” György Németh, medical director of Chinoin and president of the Hungarian Association of Personalized Medication says.

In pharmaceutical development, Németh argued at the recent Euroterv Rare Disease Conference, a huge paradigm shift is under way. Blockbuster drugs, the most profitable products of Big Pharma, have always been the ones meant for a very broad range of patients with a very broad range of indications – like antibiotics, anti-cholesterol, blood pressure regulators, and anti-inflammatory agents.

The problem is that this era is coming to an end. Most blockbuster patent protection is going to expire in the next few years. New molecules that are still in the pipeline are expected to replace present blockbusters and, at the same time, must surpass the efficiency of the latter. “As a matter of fact, the upcoming generation of drugs is more effective than the previous one was, since even the genetic background of possible users is taken into account,” explains Németh.

This, however, makes development much more expensive and restricts the scope of application; the ranges of both the indications and possible users become narrower. “Nevertheless, the trend cannot be reversed,” Németh says. Existing patient categories are breaking up into many new subcategories constituting patients of the same genotype. On the other hand, old blockbusters are being gradually replaced by a group of “niche-busters”.

If so, then orphan drugs had been niche-busters long before the term was coined, Gábor Pogány, president of National Union of Rare Diseases, remarked to the BBJ. “And not because orphan drugs have only a narrow range of users, but because development has been based on users’ genetic background,” he adds. 

The protagonist: Diagnostics

The leading role in the new trend is played by diagnostics: it provides the refined tools by which it is possible to determine the genetic backgrounds of possible users. So it is probably not an accident that two of the above mentioned Hungarian firms have diagnostics as a main profile. “As a producer, we can see every day how competitive and progressive this field is. We are forced to come up with something new every six months or else we risk losing old clients consisting mostly of domestic hospitals,” says György Szekeres, managing director of Histopat.

In such a competitive market, it is well worth developing diagnostics for rare diseases. Their reagents are entitled to the same ten-year market exclusivity as orphan medications themselves, which guarantees considerable safety for their developers. “We have a diagnostic procedure for a rare sort of cancer,” Szekeres says. However, it would require €1-1.5 million in capital to develop it into a technology applicable on a large scale. In order to raise capital, Histopat’s management has already established a project company for cancer diagnostics, a minority stake of which is up for sale.

As for KPS Diagnostics’ services, the firm is in a much-advanced position both in a professional and financial sense. “We’ve got a top-notch molecular diagnostic laboratory infrastructure that meets the very pinnacle of the industry standards worldwide; we have an in-house developed technology to analyze small and damaged tissue samples and cytology smears, and have just agreed with Portfolion on selling a minority stake in the firm in order to increase capital for expanding services in the Central European region,” István Peták, co-founder and scientific director of KPS Diagnostics says of the firm’s achievements.

The details of the deal are confidential, but he says that the deal value exceeds €1 million. “It requires state-of-the-art technology, since formaldehyde fixation and paraffin embedding makes nucleotide chains fragmented, which creates huge problems for the routine molecular diagnostic labs,” Peták explains. 

A hunger for new molecules

“Thanks to molecular diagnostics, non-small-cell lung cancer as a disease category will be reclassified based on its driver oncogenes, which can be targeted with the new class biologic therapies. Although the original disease is one of the most prevalent human diseases, naturally it did not qualify as an orphan disease at all, the molecular subspecies that are the basis of new therapies do,” Peták continues. According to its medium-term plans, KPS Labor will launch a precise cancer diagnostic system. Oncompass will be able to diagnose a whole range of tumor subtypes strictly on a molecular basis, Peták says. “There is huge demand for such complex diagnostics, and not only in our region.”

Expiring blockbusters are not the only problem Big Pharma struggles with nowadays. “It is a statistical fact that the number of pharmaceutical agents tested throughout the patent process is decreasing. Year by year, there are fewer and fewer promising molecules in the pipeline,” says Tamás Vas, managing director of biotech pharmaceutical Genzyme’s Hungarian branch. The old recipe of original drug producers for developing new agents from scratch is too time-consuming and also too risky.

“The producers should commission a ‘big name’ in the scientific field to commence a targeted inquiry. Until the launch of the marketed drug, this process might take as much as 20 years as well as $1.2 billion, and up until the last stage there is a risk whether the experiment will result in a product at all,” Vas tells the BBJ.

Purchasing molecules that have already passed preclinical trials is a much more reasonable way of drug development – but precaution is especially called for in the case of orphan drug and biotech agents. “Technically, this means acquiring project companies. There are, however more buyers from classical pharma industry than from financial VCs.” Genzyme itself was bought up by Sanofi-Aventis last April, he notes.

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