Rare disease drug developers struggle to survive in a biopharma investment market that prioritizes large patient populations. Initiatives like the Orphan Therapeutics Accelerator are attempting to solve what CEO Craig Martin says is not a science problem, but a math problem.
The rare disease space got a huge boost last month when the FDA’s rare pediatric disease priority review voucher program was reauthorized after more than a year in limbo. While a step in the right direction, rare and orphan drug leaders say more needs to be done to attract investment for these often-niche programs.
“That was, I think, a great legislative victory,” MediciNova Chief Business Officer David Crean said of rare pediatric disease priority review vouchers (PRVs).
Craig Martin, founder and CEO of the Orphan Therapeutics Accelerator (OTXL), agreed. “There’s some progress at least,” he told BioSpace at Phacilitate’s Advanced Therapies Week earlier this month, referring to PRVs and recent updates to the U.S. newborn screening program.
The rare disease space has also seen a number of regulatory wins recently. This week, the FDA provided highly anticipated guidance for its plausible mechanism pathway for personalized therapies, first announced in November 2025. Two months before that, the agency unveiled its new Rare Disease Evidence Principles framework, intended to streamline the approval of therapies for ultra-rare diseases.
But while the regulatory piece is rapidly evolving, the very nature of rare—and particularly ultrarare—diseases, poses a significant investment quagmire for the traditional biotech model, which assumes access to deep public equity markets, Crean said.
This is largely due to the small—and sometimes minuscule—number of people affected with these diseases. There are more than 10,000 rare diseases, defined as those affecting fewer than 200,000 people, according to the Rare Disease Company Coalition. Ultrarare conditions, afflicting less than 1,000, offer an even smaller market opportunity. OTXL estimates more than 9,000 indications fit this definition.
“Small patient populations mean lower peak revenue potential per indication and that changes the whole risk-return calculus for traditional VCs,” Crean said.
Kristen Hege, former SVP of Early Clinical Development, Hematology/Oncology & Cell Therapy at Bristol Myers Squibb, agreed, saying, “Right now, as a rule of thumb, if your product isn’t going to bring in a billion dollars a year, it’s not going to be developed.”
Alternative Models
This dilemma was the impetus behind OTXL. Prior to 2022, the rare disease drug development space had already begun to stall from both a market and a policy perspective, Martin said. Provisions from the Inflation Reduction Act, signed into law in August 2022, further eroded confidence and commercial viability of these treatments.
“A number of these programs were ones that had advanced into trials, were helping children in particular, and yet weren’t moving forward,” he said. “I was haunted by the fact that there were so many of these treatments that could be helping patients, and it wasn’t a science problem; it was a math problem.”
OTXL obtains, funds and completes development of these shelved assets, leveraging a network of partners and its tax-exempt status as a nonprofit to lower costs.
This tax exemption “incentivize[s] companies that were maybe sitting on an asset to liberate it and allow us to move it forward and to reduce or eliminate upfront costs for licensing or obtaining that asset,” he explained.
The company has built relationships with a network of CROs and CDMOs, with whom it works on a deferred or reduced cost basis to further decrease the funding required for late-stage drug development in particular, Martin said.
Since its launch in 2024, OTXL has considered more than 60 programs focused on ultrarare diseases, according to Martin, many of which are cell and gene therapies for pediatric conditions.
OTXL can’t adopt them all, of course, so the organization is working on an AI-based platform that would allow it to ingest data rooms, vet investigational therapies, perform predictive modeling and conduct development planning, all intended to attractively package the assets for companies or investors to take on.
Once a therapy wins regulatory approval, OTXL works with partners and employs alternative approaches—including its tax-exempt subsidiary Orphan Therapies—to ensure access.
Recently, OTXL partnered with Italy-based Fondazione Telethon, which in December 2025 won FDA approval for Waskyra, a gene therapy for Wiskott-Aldrich syndrome.
Fondazione Telethon, the first non-profit sponsor to secure FDA approval for a gene therapy, was looking for a U.S.-based commercial partner to support Waskyra’s launch this year when OTXL stepped up. With Waskyra,“We kind of got to commercial stage a little faster than we thought we would,” Martin said.
Next up, the nonprofit is finalizing terms of an agreement for its first clinical-stage asset, an AAV gene therapy. While Martin declined to reveal the exact program or disease area, he said that compared to Waskyra—which might have a market reach of five to seven patients per year—the condition “is a little bit closer to the cusp of what a biotech might be willing to take on once we further de-risk it.”
The challenges faced by rare disease drug developers sometimes mean a company is forced to sell off multiple assets or fold entirely.
Hege sat on the board of Adaptimmune until the biotech sold its cell therapy portfolio, including synovial sarcoma cell therapy Tecelra, to US WorldMeds in July 2025. Approved by the FDA in August 2024, Tecelra was the first engineered T cell therapy approved for solid tumor cancers in the U.S.
“That was a major accomplishment for the field of cell therapy,” Hege said. “Unfortunately, Adaptimmune wasn’t really able to make it commercially viable enough to continue as a standalone company.
“Synovial sarcoma is a pretty rare indication, so you couldn’t get a lot of Big Pharma or venture investor interest in that small market opportunity,” Hege continued, calling this a “fundamental problem with our drug development system.”
Hege is working with the nonprofit Friends of Cancer Research, which aims to drive collaboration among industry, scientists and policy makers, to devise a strategy to advance breakthrough therapies for “uncommon” cancer indications, including sarcoma, small cell lung cancer, pancreatic cancer and “pretty much every” pediatric cancer. These indications “are still not commercially attractive to drive investment in our current paradigm of cancer R&D,” Hege said.
For companies intrepid enough to attempt to traverse the complex rare disease market, the experts who spoke to BioSpace offered advice.
“Capital efficiency is super critical here,” said Crean, whose company, MediciNova, faces the additional hurdle of developing treatments in the notoriously challenging neurodegenerative disease space. “It almost becomes a part of the strategic imperative.” Crean recommended employing shared infrastructure across rare disease assets and staged development strategies aimed at reaching meaningful clinical milestones with less capital deployed per stage.
In terms of fundraising options for rare disease-focused companies, Crean noted the “creative fundamentals,” including royalty financing, which he is becoming more prevalent.
Revolution Medicines last month signed a $2 billion deal with Royalty Pharma to support its portfolio of treatments for RAS-addicted malignancies, including pancreatic cancer. Royalty, which buys royalties on future sales in exchange for non-dilutive capital, counts Roche’s Evrysdi for spinal muscular atrophy and Denali’s tividenofusp alfa for Hunter syndrome—which has an FDA action date in April—among its portfolio.
Regulatory incentives, such as FDA orphan drug and breakthrough therapy designations, along with PRVs, also need to be incorporated into the strategic and capital financing strategy, Crean said.
Part of the solution could actually be on the regulatory side, Hege said. “What does it take in these uncommon cancers to get a product approved? Because in our country, until a product is approved, payers don’t pay for the product, so the cost of development is all borne by the sponsor.” These costs include product manufacturing and clinical trials.
Hege suggested a model of shared risk between sponsor and payer, where the payer covers the cost for a product in development, or a regulatory process where the asset is granted accelerated approval earlier in its development course, “at which point it is an FDA-approved product, and the payers have to pay.” This would be followed by a post-marketing agreement to run larger, more expensive trials.
“I think when the unmet need is high enough,” Hege said, “we just have to become more risk tolerant.”
