One of the appeals of producing drugs for rare diseases is that a company often has the market all to itself. Alexion Pharmaceuticals' (NAS: ALXN) Soliris, for instance, is the only drug approved to reduce hemolysis in paroxysmal nocturnal hemoglobinuria patients and treat another ultra-rare disease called atypical hemolytic uremic syndrome. The challenge is in finding patients, not competing for them.
But for Gaucher disease, which affects 6,000 patients in the U.S., the competition is getting fierce. There are now three drugs approved after Pfizer (NYS: PFE) and Protalix BioTherapeutics' (ASE: PLX) Elelyso got a thumbs up from the Food and Drug Administration yesterday.
The newest entrant looks like it might have a small window of opportunity. Sanofi's (NYS: SNY) Cerezyme is expected to be supply constrained until around the end of the year or early 2013, and Shire Pharmaceuticals (NAS: SHPGY) recently failed to get a new manufacturing plant approved to produce its Gaucher disease drug Vpriv. Not having to worry about whether a drug will be available for your next dose will drive patients onto Elelyso.
How large that window is remains to be seen, though. As patients transfer onto Elelyso, it frees up the other drugs to be used on other patients, so it might not take too many patients before the market equalizes and the opportunity dries up.
After that, Pfizer and Protalix plan to compete on price. The duo is pricing Elelyso at a 25% discount to Cerezyme, which might help capture patients, but probably only if insurance companies decide that the discount is worth encouraging -- or, dare I say, forcing -- patients to switch. Given the high cost, very few, if any, patients are actually paying for the drug out of pocket.
Of course, Sanofi could just lower its cost to compete. Pfizer and Protalix should be able to win a price war because Protalix's manufacturing costs are probably cheaper, since it produces the drug in plant cells. Remember, though, there are a limited number of patients, so reducing the cost too much will make it hard to make any money selling the drug.
Short term, I see a lot of challenges for Protalix, so I opened an underperform CAPScall to track my prediction. Longer term, I like the manufacturing technology, and the approval of Elelyso will make the next approval much easier. Unfortunately, the next drug in development is back in phase 1, so it's still years away from approval.
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At the time thisarticle was published Fool contributorBrian Orelliholds no position in any company mentioned. Check out hisholdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Pfizer. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.