NPS Pharmaceuticals, Inc. (NPSP), Pfizer Inc. (PFE): The Profitable Business of Developing Orphan Drugs

Page 1 of 2

“Making every patient count” is a catchy phrase that is perhaps most meaningful for biotech companies like NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) who are in the business of developing orphan drugs. The simple reason – they cannot afford to lose a single patient just because there aren’t too many of them. Their whole business is centered around producing drugs for rare diseases that bigger pharma often does not address, and in this way they perform an important role in the industry.

NPS Pharmaceuticals, Inc. (NASDAQ:NPSP)This article looks at the business of developing and commercialization of orphan drugs – pharmaceutical products developed specifically for treating rare diseases (orphan diseases).

Orphan drug

An orphan drug needs to pass through the same regulatory process as any other drug candidate seeking approval from the FDA. However, certain statistical burdens are lessened because of the rarity of the disease for the simple reason that there may not be adequate number of patients available and it may not be possible to test as many in Phase III clinical trials as stipulated by FDA rules for non-orphan drugs. The Orphan Drug Act of 1983 was meant to encourage biotech companies to develop drugs for rare diseases for the reason that the limited scope makes it an unprofitable venture. Under the law, a company developing a drug for which there are less than 200,000 patients in the U.S. gets a tax incentive, enhanced patent protection and financial subsidy on clinical research.

One would think that with all these encouragements/subsidies, it would be cheaper to treat a rare disease. Let us see and be prepared for a surprise!

NPS Pharmaceuticals, Inc. (NASDAQ:NPSP)

I have selected NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) as a test case because it is a clinical stage biopharmaceutical company that has recently launched an orphan drug. The company focuses on rare gastrointestinal and endocrinal disorders that have unmet medical needs. It has recently made a public offering of 6 million shares at $14.53 a share to raise $87.2 million.

Gattex (teduglutide [rDNA origin]), for adult parenteral dependent short bowel syndrome (SBS), approved in December 2012, is the company’s first FDA approved drug. In Europe the drug was approved in September 2012 and marketed as Revestive. The company’s other major candidate, Natpara (recombinant human parathyroid hormone), for hypoparathyroidism is in late stage (Phase III) clinical testing.

Teduglutide is also being tested for Crohn’s Disease (Phase II) and pediatric SBS (preclinical stage). The company has two more candidates in preclinical stage.

Short bowel syndrome is a rare condition in which a person is either born missing a large part of intestines or has had them removed surgically, which makes it difficult for the body to properly absorb nutrients (malabsorption). It is classified as a rare disease as there are less than 5,000 SBS patients in the U.S.

This is where the “every patient counts” byword comes into play. However, orphan drug companies usually make their money with pricing strategies, which are again subsidized for patients through federal assistance for rare disease patients.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!