Bioverativ is a rare blood disease company.
It has two products on the market.
It generates enough free cash flow to finance the development of its pipeline.
Spin-offs have a history of outperformance. Alcoa (NYSE: AA) is a good example. Another example is Bioverativ (NASDAQ: BIVV), the hemophilia-business unit that was spun off from Biogen (NASDAQ:BIIB) earlier this year.
In 2007, Biogen acquired Syntonix Pharmaceuticals and this takeover yielded two FDA approved hemophilia drugs known as Eloctate and Alprolix. Biogen wants to focus on neurology and the hemophilia-business was too small to move the needle. So Biogen decided to spin off the company we now know as Bioverativ.
Rare diseases only affect a very small part of the population and as such are not interesting for pharmaceutical companies. The regulators have taken several measures to counteract this neglect by big pharma:
- The Orphan Drug Act of 1983
- The Rare Diseases Act of 2002
- Fast-track review protocols
- Market exclusivity.
As a consequence of these measures, clinical trials for rare diseases take less time and have a higher probability of success. Compared to the average of all diseases in Phase I, a rare disease has an almost 3 times higher probability to make it to approval by the FDA!
Generally, the rare disease drugs are priced higher than the mainstream drugs to enable them to earn sustainable profits in spite of the lower count of patients to use these drugs. Therefore, despite being developed to treat patient populations of fewer than 200,000 patients, they can become the key revenue drivers for a company.
There is sometimes public indignation about these high prices, but when you read the below facts and statistics about rare diseases, we might in my humble opinion be more grateful (and thanksgiving) that companies like Bioverativ are willing to take the risk to try to develop medicines that make a difference for people suffering from a rare disease.