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. 2016 Oct 21;11(10):e0164681.
doi: 10.1371/journal.pone.0164681. eCollection 2016.

Profitability and Market Value of Orphan Drug Companies: A Retrospective, Propensity-Matched Case-Control Study

Dyfrig A Hughes  1 , Jannine Poletti-Hughes  2
Affiliations

Profitability and Market Value of Orphan Drug Companies: A Retrospective, Propensity-Matched Case-Control Study

Dyfrig A Hughes et al. PLoS One. .

Abstract

Background: Concerns about the high cost of orphan drugs has led to questions being asked about the generosity of the incentives for development, and associated company profits.

Methods: We conducted a retrospective, propensity score matched study of publicly-listed orphan companies. Cases were defined as holders of orphan drug market authorisation in Europe or the USA between 2000-12. Control companies were selected based on their propensity for being orphan drug market authorisation holders. We applied system General Method of Moments to test whether companies with orphan drug market authorization are valued higher, as measured by the Tobin's Q and market to book value ratios, and are more profitable based on return on assets, than non-orphan drug companies.

Results: 86 companies with orphan drug approvals in European (4), USA (61) or both (21) markets were matched with 258 controls. Following adjustment, orphan drug market authorization holders have a 9.6% (95% confidence interval, 0.6% to 18.7%) higher return on assets than non-orphan drug companies; Tobin's Q was higher by 9.9% (1.0% to 19.7%); market to book value by 15.7% (3.1% to 30.0%) and operating profit by 516% (CI 19.8% to 1011%). For each additional orphan drug sold, return on assets increased by 11.1% (0.6% to 21.3%), Tobin's Q by 2.7% (0.2% to 5.2%), and market to book value ratio by 5.8% (0.7% to 10.9%).

Conclusions: Publicly listed pharmaceutical companies that are orphan drug market authorization holders are associated with higher market value and greater profits than companies not producing treatments for rare diseases.

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Conflict of interest statement

The authors have declared that no competing interests exist.

Figures

Fig 1
Fig 1. Relation between the number of orphan drugs marketed and the performance of companies.
Calculated from predictions of the fitted pooled OLS regression, with NORPHAN as the explanatory variable of interest, and with all other covariates fixed to average values. Data are presented as the means and 95% confidence bounds (S4 Table).
See this image and copyright information in PMC

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