The science behind rare disease drug development is evolving rapidly, transforming not only how treatments are discovered but also how they are funded and brought to patients.
A major example is the launch of Rare Ventures, a venture philanthropy-based accelerator led by EB Research Partnership CEO Michael Hund. Supported by an investment of up to $25 million from the Richard K. Mellon Foundation, the initiative aims to apply a funding model that helped support the development of three FDA-approved treatments for epidermolysis bullosa to other rare diseases.
New Funding Models for Rare Disease Treatments
Rare Ventures will initially focus on funding treatments for seven rare conditions. The accelerator will help reduce development risks, making promising therapies more attractive for commercial investors and pharmaceutical companies.
If successful, returns generated from licensing or acquisitions will be reinvested into additional rare disease programs, creating a sustainable cycle for advancing new treatments.
However, philanthropy is only one part of the changing rare disease landscape. The sector has also experienced significant merger and acquisition activity, with smaller and midsize biotechnology companies increasingly becoming key players in acquiring, licensing, and developing new therapies.
Biotech Companies Look Beyond Traditional Drug Development
Small and midsize biotech companies often face major challenges, including regulatory hurdles, limited funding, and stock market volatility. But some companies with successful approved therapies are now shifting their focus from survival to strategic growth.
BioCryst Pharmaceuticals is one example. CEO Charlie Gayer said the company’s biggest challenge is no longer raising capital but determining how to invest its resources effectively after achieving profitability.
“We were profitable last year, we’re going to be more profitable this year, more profitable next year. We will never drop below the line again. We’re going to have that discipline,” Gayer said.
BioCryst Expands Beyond a Single Rare Disease Drug
In 2020, the FDA approved Orladeyo, BioCryst’s treatment for hereditary angioedema (HAE), a rare genetic disorder that can cause severe and potentially life-threatening swelling episodes.
Since launch, Orladeyo has generated more than $2 billion in sales, and BioCryst expects revenue from the treatment to reach up to $645 million this year.
The success of Orladeyo has given BioCryst the financial flexibility to expand beyond HAE and pursue additional opportunities in the rare disease market.
“We’re trying to break out of the perception that we’re just an HAE company. We’re a rare disease company, and we’ve got the resources to do more,” Gayer said.
The Shift Toward External Innovation
Rather than relying only on internal research programs, BioCryst is now looking externally for early-stage assets that it can acquire, develop, and commercialize.
Gayer believes building every therapy internally creates unnecessary risk and expense. Instead, the company is taking a more flexible approach by evaluating potential treatments across different therapeutic areas.
Unlike larger pharmaceutical companies that often seek blockbuster drugs generating billions in annual sales, BioCryst is interested in therapies that address meaningful patient needs, even if their commercial potential is smaller.
“If we found a drug that looks like it serves a need, but only has a $300 million peak potential for us, we can plug this into our commercialization engine,” Gayer said.
Smaller Biotech Companies Fill a Growing Market Gap
The rare disease sector has traditionally struggled because smaller patient populations often lead to smaller commercial opportunities. This can make promising treatments less attractive to major pharmaceutical companies focused on larger markets.
According to Rod Wong, Managing Partner and CIO at RTW, large pharmaceutical companies are increasingly focused on therapies with peak sales potential of $2 billion or more, creating opportunities for smaller biotechnology companies.
“We’re seeing smaller companies buying assets with smaller peak sales. Hopefully this will encourage more companies of this size to become buyers, because we need a new cohort of natural buyers to replace big pharma,” Wong said.
A New Future for Rare Disease Companies
BioCryst hopes to become part of a new generation of rare disease companies that combine financial discipline, external innovation, and targeted commercialization strategies.
Gayer said the company aims to follow successful models from companies such as Genzyme, Shire, and Horizon, which built strong businesses by focusing on specialized therapies for underserved patient populations.
As funding models evolve and smaller biotech companies become more active investors and developers, the rare disease industry may see a broader pipeline of treatments reaching patients who previously had limited options.
