According to a new report produced by rare disease non-profit Global Genes, investment in rare disease therapeutics went up 28% in 2021 compared with the previous year, a positive sign in a field where funding has been difficult to find in the past.

The report notes that 2018 was a better year for rare disease therapeutic financing with total public and private capital raised of more than $40 billion. However, since a large drop in capital raised in this sector in 2019, investment has continued to increase and went up to $22.9 billion in 2021.

“Rare diseases continue to have a strong allure to investors, as evidenced by the significant capital raised in 2021 to advance companies and pipelines focused on rare conditions,” said Craig Martin, CEO of Global Genes, in a press statement.

However, as he told Inside Precision Medicine “the fact that investment in rare diseases outpaced the market is good. But I look at that probably now more with a sense of relief than confidence, given the way the markets are right now.”

Over 7,000 rare diseases impact more than 30 million people in the U.S. Drug development to combat these diseases can be very challenging due to limited numbers of patients and knowledge about these conditions. There is also a limited chance for companies to make any return on their initial development costs due to the small numbers of patients involved.

“Less than 5% have a treatment,” Martin explains. “For many of these patients the two key things that are major challenges are the diagnostic odyssey, which can take five to seven years on average… There’s the pressure of that and the urgency of trying to get to a diagnosis. And then, once you are diagnosed, is there any drug development going on in your rare disease area?”

These problems were identified more than 30 years ago and in 1983 the FDA’s Orphan Drug Act, which defines a rare disease as a condition that affects less than 200,000 people in the U.S., became law to help speed up development of drugs and other treatments for rare and neglected diseases.

The act makes it more attractive for companies to develop therapies for these rare diseases through schemes such as tax credits, expedited drug development, waiver of the prescription drug user fee (which can be almost $3M) and extended market exclusivity after approval compared with other drugs.

As well as the regulatory advantages, a similar scheme is also in place in Europe run by the European Medicines agency, rare diseases can also be attractive to drug developers due to the smaller trial sizes needed.

Lucia Faccio, is a partner at the European life sciences venture capital firm Sofinnova Partners. She told Inside Precision Medicine, “Clinical trials in the rare disease space require a much smaller number of patients to get approval because the population affected by genetic diseases is more homogeneous.”

There has been a number of creative recent approaches in the rare disease space to try and develop treatments for even the rarest of rare diseases. For example, Sanath Kumar Ramesh’s founding of Open Treatments, a platform to link patients and their families with drug developers and investors, and the n-Lorem Foundation, which aims to help develop treatments for ultra-rare diseases present in 30 patients or less.

“While scientific innovation is critically important, there is an ever-increasing importance of the voice of patients, families, and advocacy organizations driving the research agenda for rare disease,” says Parag Meswani, Chief Commercial Officer of Sio Gene Therapies, a U.S. based biotech developing gene therapies for rare diseases.

“Over the last few years, patient organizations have been playing a vital role in shaping and driving more research across the rare disease space, raising awareness, driving legislative agenda, and serving as a catalyst for progress across rare diseases. For instance, the advocacy organization, Cure GM1, has been instrumental in the pediatric lysosomal storage disease space in shepherding three gene therapies into clinical trials—an unprecedented achievement for a rare disease.”

Investors are also applying innovative approaches in this space. “We launched the Sofinnova Telethon Strategy, which at €108 million is the largest fund dedicated to biotech in Italy with a focus on rare and genetic diseases,” explains Faccio. “Italy is a little-known hotbed of genetic research, but the Fondazione Telethon is a charity that has been supporting the best research in this field for the past 30 years and is extremely advanced in space, which is why we have partnered with them.”

Future directions

While COVID-19 had an initial impact on any life science investment and development not in the infectious disease space, that seems to have morphed into a more general interest in life sciences and medicine since 2020.

“The COVID-19 pandemic brought a unique interest into the biotech industry for investors—both general investors and those considered to be more seasoned in healthcare investing,” says Meswani.

“While this was initially mainly focused on infectious disease, the renewed spark in healthcare innovation has sharpened investors’ mindsets as they focused on potential investments across new therapeutic areas and new therapeutic modalities. With that increased understanding, investors have grown more savvy in the types of areas they research and invest in, and in today’s market, they have the potential to across numerous therapeutic modalities, indications, and market size.”

Faccio agrees, “the potential for investment in this area is enormous,” she emphasized. While she concedes that the pandemic has proved challenging, for example, in terms of keeping clinical trials going, she adds: “There is still a lot of opportunity for additional investment in this space—we have only scratched the surface.”

The current legislation in the U.S that has been crucial for getting many rare disease drugs into development and onto the market in recent years may change in 2026. It is uncertain whether the current system will stay in place, but the FDA states on its website that “After September 30, 2026, FDA may not award any rare pediatric disease priority review vouchers.”

“We are keeping a close eye on whether policies that are put in place in the U.S. or other markets may create disincentives to continued investment,” says Martin.  “Whether that’s tax, tax breaks and incentives for the exploration of priority review vouchers, or just the general climate around coverage and reimbursement for treatments, we’ve got to keep an eye on that as well and make sure that the patient voice is heard in those conversations.”

Faccio adds: “A major challenge for the rare disease field will be how the regulatory requirements and reimbursement policies can cope with a personalized approach to medicine, aiming to treat ‘individual’ genetic mutations.”