Let me start with a confession: I had never heard of little Synageva BioPharma Corp. before another company agreed to buy it for $8.4 billion last week.
The sale of the Lexington biotech company was remarkable on many counts — none more striking than the fact that it has no products for sale.
Synageva hopes to win US approval later this year for a drug to treat a disease estimated to afflict just 3,000 people in the entire developed world. It also has some other potential drugs in its development pipeline.
The fact a company with prospects like that can be worth more than $8 billion to anyone tells you something troubling about the booming business of drugs targeting very small groups of patients.
That business relies on a particular economic premise — medicines that individually are sold at very expensive prices but collectively are palatable to the health care system because so few people take them. They may induce sticker shock, but they won’t bust the budget.
Lexington biotech fetches $8b
Alexion Pharmaceuticals’s purchase of Synageva BioPharma is the second-largest takeover of a Mass. biotechnology company.
The problem: Those treatments, which can cost $300,000, even $500,000 per patient each year, won’t be a few drops in the bucket much longer. More of them are coming onto the market every year — truly good news for patients who suffered with little hope in the past, but a developing financial headache for us all.
Consider the medicines — both new therapies and existing drugs repurposed for small groups of patients — that are awarded orphan drug status by federal regulators each year. Those drugs earn extended patent protection, tax breaks, and research subsidies because they treat rare disorders.
The Food and Drug Administration granted orphan drug status to 43 medicines just in 2014. A decade earlier, only 13 therapies were recognized as orphan treatments.
Worldwide sales of orphan drugs amounted to less than $20 billion in 2000, but by 2020 are forecast to cost $176 billion, according to EvaluatePharma, a market research firm. By that year, the money spent on orphan drugs will account for about 19 percent of the world’s total drug expense.
Orphan drugs treat diseases that affect fewer than 200,000 people in the United States and cost an average of $137,000 a year. And treatments for so-called ultra-rare diseases, like the disorder that Synageva targets, generally cost much more.
Two important developments have encouraged many more companies and scientists to pursue expensive treatments for very rare diseases during the past decade.
One is simply a matter of technology. Drug developers now have much better tools and resources, especially for work attacking genetic diseases.
The other was the experience of Genzyme, a pioneer in the rare-disease drug business. Former Genzyme chief Henri Termeer showed how a company could thrive and prosper by targeting those diseases. The French drug giant Sanofi was so impressed that it eventually bought the Cambridge company for $20 billion in 2011.
Genzyme became a master at marketing both lifesaving drugs and high prices around the world, as described years ago by a former Globe colleague, Stephen Heuser.
Even better, those drugs often command premium prices for years because the odds of real competition are slim.
Genzyme introduced its therapy to treat Gaucher disease, an enzyme deficiency that affects about 10,000 people worldwide, in the 1990s. As of last fall, the company was charging more than $300,000 per year for its drug. Over many years, Genzyme has probably raked in nearly $15 billion in sales from its Gaucher treatment.
Now there is a new generation of Genzymes. It should come as no surprise that Sanj Patel, chief executive of Synageva, is a Genzyme veteran.
The company that bought Synageva, Alexion Pharmaceuticals Inc., operates from the same kind of biotech playbook. Its drug to treat a rare blood disorder lists for more than $500,000 a year. Alexion will pay half the cost of the Synageva acquisition with its own shares. That stock has appreciated more than 500 percent over the last five years.
Developing drugs to treat rare diseases is still a risky proposition, and companies that succeed certainly deserve rewards. We’re likely to see more of those drugs with even greater frequency in the future.
But something has to change. Health care systems once bent over backward to persuade companies to pursue those treatments — and agreed to pay through the nose for the ones that worked. Now, companies with prospects for treating a tiny population of patients are worth billions. That math won’t work for long.
Steven Syre is a Globe columnist. He can be reached at email@example.com.