Contact me to get the spreadsheet with full data I used for my analysis.
As a CEO of an early-stage biotech company (Neurolentech) operating in the space
of neurodevelopmental diseases (NDDs), I spend a significant part of my time
evaluating strategies for our drug discovery programmes.
Neurodevelopmental diseases are a group of conditions that affect the
development of the brain and nervous system. These conditions can cause a wide
range of symptoms, including intellectual disability, autism, cerebral palsy, and
epilepsy. Neurodevelopmental diseases have high prevalence globally, with total
global prevalence estimates ranging from 5-15%, and severe treatment-seeking
indications ranging from 3-5%. However, many of the individual indications defined
by genetic diagnosis are classified as rare diseases. According to the NIH, there are
over 7,000 known rare diseases. NDDs are the most common type of rare
disease, accounting for about 30% of all rare diseases.
I was wondering:
- If common sense suggests that you price a drug based on the size of a market, is there a minimum market size for biopharmaceutical companies to invest in a drug
candidate? - Does it mean that there are diseases that are so rare that the patient communities must give up hope of ever seeing any investment in drug discovery for their disease?
- And if you are a biotech startup and you want to make a difference for rare diseases
and specifically within neurodevelopmental diseases (NDDs), is there an obvious
strategy for which NDD indications to pursue in your pipeline? And what is the
potential total market value for selling NDD assets to biopharma?
I tried to find an answer to the above questions by sifting through data from
clinicaltrials.gov regarding licensing deals for drugs with indications classifying as
NDDs in the period 2017-2023. Out of 50 licensing deals for preclinical assets, for 13 of them it was possible to find information on at least one of upfront value or total value of the deal. For these 13 deals, I translated the description of the indication and prevalence to an estimate of how many individuals worldwide would be the target market for the drug.
Figure 1: Licensing deal values as function of global prevalence in 1000s of people. Blue: upfront deal value. Red: Total deal value.
The prevalence of the rare disease NDD indications ranged from as low as 8000 people worldwide to 12,000 people worldwide. The value of the deals ranged from $3M-117M upfront and $70-602M total value of deal including milestone payments. These deals were made between primarily smaller biotechs as the seller and primarily larger biopharma as the buyer of the rights to the assets.
Example licensing deal (2022): Sanofi signed a deal with miRecule for a preclinical Antibody-RNA conjugate candidate designed to treat a genetic muscle disease known as facioscapulohumeral muscular dystrophy, or FSHD. The upfront payment and early milestones were approx. USD $30M and additional milestone payments of up to $400M.
The good news is that there is apparently no lower bound for which deals are made (For one of the deals where the value of the deal was not disclosed, the global prevalence is estimated to be only 250 patients!). And all rare disease patient communities should keep supporting and pushing for drug discovery for their indication. However, the reasoning why it is possible for these deals to make commercial sense for a biopharma is less straight-forward.
If the cost of a drug on the market would be determined solely by the potential sales,
either the drug prices are doomed to balloon for low patient numbers, or if the prices
would be capped, there would be drugs that would not be worth launching in the
market because it would be impossible for the biopharma to achieve positive returns
on their investment. Another important factor that influences the price of an asset is
how far it has been developed towards clinical trials: Is it in preclinical development
or has it progressed to phase 1, 2 or 3? In addition, there are at least three more
factors that impact the value of these drug assets for rare disease indications:
- Firstly, many economies and legislations have implemented expanded access programs and accelerated regulatory approvals for indications with high unmet need. Both expanded access programs and accelerated regulatory pathways cut the total time and cost for gathering clinical evidence for the rare disease cohort. These programs help de-risk and make the asset more attractive to invest in.
- Secondly, many rare disease patient communities are very aware of the difficulties drug discovery and are very supportive in organising themselves and very keen to sign up and refer their communities to any open clinical trials. For a stellar example of well-coordinated rare disease communities, have a look at GlobalGenes. Biopharma that collaborate directly with the patient communities are likely to see faster patient recruitments and hence reduced costs for their clinical trials which again may de-risk and hence increase the value of the asset.
- Last, but not least, there is a potentially large intrinsic value for a biopharma to have an approved drug on the market which has passed toxicology and clinical safety trials and still has plenty of time left before its patent runs out. Once a drug is approved for one indication, the pathway for expanding the use to additional indications is much shorter and cheaper than developing a new drug candidate from first principles (for a recent example see Ozempic and Wegovy).
As for my third opening question, whether there is an obvious strategy for which rare disease indications to pursue in your pipeline as a startup biotech, we can start with a simple back of the envelope calculation: If there are 7000 rare diseases, 30% of which are NDDs, NDDs are estimated to comprise about 2,100 distinct rare disease diagnoses. Assuming a minimum deal size of USD 70M and average deal size USD 200M, the potential market value for licensing in this space would be USD 147B-420B and any one company that would be able to generate assets for just a 10% fraction of this market would be looking at potential asset values of USD $14.7B-42B.
And if you would like your assets to have higher chance of landing in the higher end of the deal valuation, I would suggest that you seek out the rare indications where there is an active and well-organized patient community. Ideally a patient community, who is actively supportive of your drug discovery activities as well as helpful in recruiting for future clinical trials to bring the potential new treatment to market. In addition, if you have sound evidence for the mechanism of action of the disease and if you can articulate how it would be possible to systematically look for potentially expanded indications for the drug candidate, these could be valuable arguments at the point of selling or licensing your rare disease assets.
If you would like to explore the above data further, just message me and I will send you a copy of the spreadsheet with the data on the licensing deals for neurodevelopmental disorders.
Notes
I did this analysis based on data from press releases and clinicaltrials.gov which was collected by First Step Consulting and a team of volunteer students. Big thanks to everyone who contributed to this piece.
Further reading
- Review of the prevalence of neurodevelopmental disorders: Current state of knowledge on the prevalence of neurodevelopmental disorders in childhood according to the DSM-5: a systematic review in accordance with the PRISMA criteria
- For an example of a well-organised patient community that are actively involved in drug discovery see From diagnostic odyssey to drug discovery: TESS Research Foundation’s Collaboration with Neurolentech
- In the UK the charity Beacon for Rare Disease help patient communities get organised including how to get ready to participate in research and drug discovery:
- For an overview on the economics of drug discovery for rare disease indications read: The economics of moonshots: Value in rare disease drug development
- See also this article from McKinsey: How to successfully launch a rare disease drug in a patient-centric world
Fiona Nielsen – enlightenbio guest blogger
Fiona Nielsen, CEO of Neurolentech – Serial entrepreneur in bioinformatics, genomics and big data. Previously at Illumina and Genomics England and o2h; Founder of DNAdigest and co-founder of Repositive. In 2013 Fiona founded the charity DNAdigest promoting best practices for efficient and ethical data sharing for genomics research for the benefit of patients. She next founded the startup Repositive, a company that focused on sharing of genetic data and patient-derived cancer models for preclinical research. Fiona led Repositive for 7 years as CEO, partnering with 25+ biopharma and preclinical CROs worldwide creating a global marketplace for patient-derived preclinical cancer models. Fiona Nielsen has accumulated several accolades, among them Highly Commended for CEO of the year by Cambridge Independent Science and Technology Awards as well as WISE100 – Women in Social Enterprise. Fiona is a highly sought after speaker and mentor for companies in life sciences and technology. Fiona joined Austrian biotech Neurolentech as CEO since Dec 2022 developing breakthrough novel therapeutics for epilepsies and neurodevelopmental diseases.
