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The pros of investing in an orphan drug company

What is an orphan drug? Rare diseases are defined by the Food and Drug Administration and are based on the size of the patient population in which a compound aims to treat. An investigational compound for an indication treating fewer than 200,000 qualifies as an orphan drug. In the 70’s and 80’s, drug companies had no interest in spending the time and money to produce these types medications. This was due to the heavy restrictions in place at the time for getting a drug to market and the low possibility for return on investment. In 1983 the Orphan Drug Act was approved and created a new niche pharmaceutical market. Its goal is to provide incentives for biotechnology companies to produce orphan drugs creating a new type of investing strategy clinically minded investors.

Today, there about 600 orphan drugs meeting only 5% of the needs for the 7,000 to 8,000 rare disease states currently defined by the FDA. When a company decides to research an orphan drug, they will experience reduced cost and time to produce the drug, FDA incentives, less stringent testing requirements, greater leeway in drug pricing, higher revenues per patient per year. In a study performed by the Orphanet Journal of Rare Diseases, it was proven that stock price of any company will increase 3.36% after the announcement of a rare drug designation with oncology drugs and drugs produced by smaller companies to experience an even higher increase. An example of this lies in Alexion Pharmaceuticals announcement of Asphotase Alpha acquisition to the day it hit the market. Asphotase Alpha was announced as a potential compound for the treatment of hypophosphatemia in 2012 and was released in 2015. In that timeframe, the company’s share price rose $74 to $189 (189%). Investing in a rare drug company is very exciting and proven method thus far at increasing capital gains.


Alexion. “History: Alexion.” Https://,

“Angel and Venture Alert: The Case for Investing in Orphan Drugs - Carofin - An Alternative Investment Marketplace Powered By Carolina Financial Group.” Carofin, 10 Apr. 2019,

Haffner, ME., et al. “Do Investors Value the FDA Orphan Drug Designation?” Orphanet Journal of Rare Diseases, BioMed Central, 1 Jan. 1970,

Parkins, Kezia. “Why Invest in Rare Diseases & Orphan Drugs?” PharmaBoardroom,

Rhee, Taeho Greg. “Policymaking for Orphan Drugs and Its Challenges.” Journal of Ethics | American Medical Association, American Medical Association, 1 Aug. 2015,

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