The way to make money from medicines used to be to develop a blockbuster commodity drug, such as a remedy for high blood pressure or elevated cholesterol. Used every day by millions, it was a sure route to profits.
Now, increasingly the way to be sure of a good return on investment is to conceive a treatment for one of the hundreds of rare diseases for which there is no cure. The actual pool of patients who can benefit may be tiny, but for that group it will be life-changing or life-saving.
Worldwide sales of these orphan drugs are forecast to total $262bn by 2026, according to data provider EvaluatePharma, growing at a compound annual growth rate of 11 per cent compared to 6.4 per cent for the pharma market as a whole. Three UK companies are among those seeking to take advantage of this favourable commercial climate.
Summit, dual listed on Aim and Nasdaq, was spun out of Oxford university and has a market capitalisation of £155m. Its most immediate focus is neuromuscular diseases, particularly a treatment for Duchenne muscular dystrophy, which leads to the progressive wasting of muscles throughout the body.
Summit’s drug, ezutromid, has been shown in a phase-two clinical trial to reduce the muscle damage and inflammation that characterises DMD — the first drug to do this — and fuller data are due in the coming months. Glyn Edwards, chief executive, said if the data are positive “then we expect a very significant change in the value of the company based on that data”.
The shares have risen more than 13 per cent in the past year and currently stand at 195p.
Amryt was formed less than three years ago but already has a product on the market and is generating revenues. Joe Wiley, who founded the company, said that, aware it would look to access the capital markets quickly for investment, it had “focused on being commercial from the get-go”.
Setting out to find “great assets which were perhaps under-appreciated or undervalued”, Amryt holds an exclusive license to sell Lojuxta across the EEA, Middle East, north Africa, Turkey and Israel. The drug treats a form of very high cholesterol, Homozygous Familial Hypercholesterolaemia, which can cause heart attacks at the age of 12.
The disease affects between one and three people per million and in 2017 Amryt increased revenues for the product from €7m to just under €12m. It has chosen to invest those revenues in developing a number of products, including one undergoing late-stage trials for Epidermolysis Bullosa, a severe condition that can cause skin to peel off.
Shares in the company, which has a market cap of almost £47m, have fallen around 30 per cent in the past year to 16.13p as it awaits data from clinical trials. But Mr Wiley insisted: “Analysts covering us are saying: ‘Look, this business’s valuation is justified by Lojuxta alone.’”
For Aim-listed Midatech, the focus is on pioneering oncology and immunotherapy treatments, which take existing cancer therapies and allow them to be delivered more effectively, either at exactly the right time or to exactly the right place. This compares to the imprecision of current chemotherapy treatments, and the markets for its products range in size from $50m to more than $100m.
With a market cap of about £12m, the company recently began a combined phase-one and phase-two study in the US for one of its core oncology programmes, MTX110, a potential treatment for diffuse intrinsic pontine glioma, a highly aggressive form of childhood brain cancer.
Craig Cook, chief executive, said revenues grew about 31 per cent in the 2017 financial year from a US arm of the company that sells “oncology supportive care products”, such as a medicine to treat chemotherapy-induced nausea and vomiting.
However, he said Midatech’s R&D pipeline was the principal focus of the company.
The shares have fallen by more than 70 per cent in the past year, which Mr Cook ascribed to long timelines for R&D, which is now coming to fruition. “We’re now at the point where each of our technologies . . . can be used in humans”, he said.
Having raised about £56m since its inception, Mr Cook added: “We’ve got sufficient cash flow to see us through to the end of the year.” The company was now examining alternatives to secure further funding “and that will all be reflected in the share price”, he said.
The shares currently stand at 29p.