The rare disease drug business can provide a windfall for pharmaceutical companies in their research as they develop drugs for diseases that are not very common in the general population. But it is not easy getting there. Pfizer (PFE) is a good example of that, as it found out with its drug Tafamidis.
There's a reason why many drug companies have an interest in the rare disease business. There are many advantages, such as:
- Profits can be higher, since clinical trials for rare disease drugs are usually shorter and have fewer patients (this lowers costs).
- The Orphan Drug Act in the U.S. provides a 50% tax credit for the development of drugs that treat diseases affecting fewer than 200,000 patients.
- Drugs for rare diseases can find a quicker road to U.S. Food and Drug Administration approval.
Over the past five years, 22% of orphan drugs submitted to the FDA gained approval, vs. 16% of drugs overall. With fewer costs and a greater possibility of acceptance by the FDA than drugs 
overall, of course companies are going to gravitate toward this segment of the industry. Estimates say there are 7,000 rare diseases and only about 200 drugs on the market.
So here comes Pfizer with Tafamidis. Pfizer inherited the drug when it bought FoldRx in a buyout in 2010. Why buy FoldRx? It was influenced by the urgent need in tiny patient populations for a drug with prospects for big returns.
What is Tafamidis? An oral therapy for the treatment of Transthyretin Familial Amyloid Polyneuropathy (TTR-FAP). Tafamidis would be used to delay the onset of neurological impairment caused by the disease. TTR-FAP is a rare, progressive, and fatal neurodegenerative disease that affects approximately 8,000 patients worldwide -- including 2,500 in the U.S.. Usually manifesting itself between 20 and 40 years of age, it is characterized by pain, a feeling of tingling or burning of the skin, muscular weakness, and autonomic dysfunction. In its terminal state, the kidneys and the heart are affected. In the absence of a liver transplant, TTR-FAP is invariably fatal, usually within a decade. Tafamidis would be used to delay the onset of neurological impairment.
Tafamidis would be the first and only medication in the U.S. indicated to treat patients with this debilitating genetic disease, if the FDA approved it. That's a big "if."
The drug received mixed reviews from FDA advisers, creating uncertainty as to whether or not it will be used in the U.S. market. After what was described as "inadequate evidence of effectiveness," the FDA stopped Tafamidis in its tracks. Pfizer now has to build a bigger case for the drug before returning to the agency for approval. With such mixed signals, the advisory committee voted 13-4 that Pfizer's drug failed to hit the main goals of a study. Then advisers endorsed evidence, in a 13-4 vote, of a separate efficacy endpoint that could indicate that the drug provides a clinical benefit for patients with the disease. The vote on approval did not even take place because the original application was rejected.
The drug as granted both an orphan drug and priority review designation. But it was a risky move, looking for approval of the drug when the study it relied on was evidenced by just a single study. The road to profits in the rare disease market may not be that easy or quick after all.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
