REVIEW: Specialty Drugs for Rare Diseases

Our Rating











AltaThera has received a substantial financial commitment and targeted 3 specialty drugs for acquisition.

Founded in May 2012, AltaThera Pharmaceuticals is a commercial-stage specialty pharmaceutical company focused on critical care and alternative therapeutics for the unmet medical needs of patients with rare, life-threatening diseases for which few effective treatments are available. AltaThera’s mission to improve patients’ lives includes active support of patient advocacy organizations serving those communities.

PRODUCT/SERVICE: AltaThera Pharmaceuticals identifies, acquires, re-launches, and effectively markets FDA-approved specialty drugs with $1MM to $10MM in revenue that treat diseases which affect fewer than 200,000 people in the U.S. AltaThera targets niche and ultra-niche drugs which possess many of the following characteristics: they treat rare, severe diseases; the initial launch was sub-optimal; they are ignored due to a corporate strategy shift; there are few if any alternative viable options for effective medical treatment; therapy decisions are driven by specialists.

VALUE PROPOSITION: AltaThera offers the following value propositions: 1. AltaThera has the core expertise to search, identify, acquire, and effectively market specialty drugs which expand the availability of critical medical treatment for rare, life-threatening diseases. Large, publicly-held pharmaceutical companies frequently under-market or abandon drugs with annual sales below $10MM. 2. AltaThera’s business model of acquiring approved but under-marketed or abandoned specialty drugs circumvents the risky process of obtaining FDA approval. 3. AltaThera works closely with advocacy groups to improve patients’ lives. 4. They control SGA expenses in the launch. 5. The management team has collectively developed key relationships with doctors and hospitals over a 25-year period.

MARKET SIZE: Specialty pharmaceutical drug sales account for 25% of the $310 billion pharmaceuticals market in the U.S. The specialty pharmaceuticals market segment is growing more than twice as fast as the total market for drugs. According to the two largest U.S. pharmaceutical benefit managers, CVS Caremark and Express Scripts, prescription drug spending on specialty drugs is projected to increase 70 percent over the next 3 years. Provisions in the soon-to-be-implemented Affordable Care Act are expected to accelerate this trend. From 2009 to 2012, 70% of all drugs approved by the FDA were for orphan diseases.

REVENUE MODEL: AltaThera focuses on drugs that are profitable within the first year of acquisition.  Each drug has measured expenses in the first year. The revenue generated from any drug depends upon price, frequency of use, and the duration of the disease. Many diseases are chronic so revenue can recur for many years. For example, Carbaglu, an ultra-orphan drug, treats hyperammonemia, a rare genetic disorder that causes dangerously high blood ammonia levels. The drug costs $1MM for a child and $2MM for an adult on an annual basis. There are approximately 30 to 50 patients in the U.S. with the disease. Soliris treats paroxysmal nocturnal hemoglobinuria. Approximately 470 people have the disease and the average patient will survive for 10 years after diagnosis. The annual cost of the drug per patient is $440K. Commercial health insurance, i.e. Blue Cross Blue Shield, and government health insurance, i.e. Medicare, cover most, if not all, of the drug costs.

MANAGEMENT TEAM: Brandon Kashfian, founder and CEO, is former Director of Business Development & Licensing for Lundbeck and Ovation Pharmaceuticals where he led their efforts in identification, commercial evaluation, and acquisition of specialty pharmaceutical assets. Prior to joining Ovation in 2003, he worked at William Blair Capital Partners, JP Morgan Chase, and ARCH, and raised capital for life science companies. He’s held positions in Clinical Development at Novartis, AG, and Pfizer and consulted for Abbott and Eli Lilly. In addition, Kashfian conducted gene therapy research in the Department of Medical Oncology & Therapeutics Research at the City of Hope National Medical Center where he co-authored several scientific publications. John Flavin, Chairman, served 12 years as co-founder, COO and CFO of MediChem Life Sciences, Inc. (NASDAQ: MCLS). Flavin has led two successful IPOs, raising more than $220 million in private and public capital, and is also Managing Director of Flavin Ventures. Stephen O’Sullivan, General Counsel and Chief Compliance Officer, most recently served as Pfizer’s Assistant General Counsel. Prior to Pfizer, O’Sullivan was Senior VP and General Counsel of Pharmacia. He has 25 years of experience representing pharmaceutical clients.

COMPETITIVE ADVANTAGE: AltaThera has the following competitive advantages: 1. The management team has over 100 years of combined experience identifying, licensing, and marketing pharmaceutical products. Members of the AltaThera management team executed a similar business model for Ovation Pharmaceuticals which was acquired by Lundbeck for $900MM in 2009. 2. AltaThera has improved the Ovation business model by developing a unique, proprietary system for identifying, analyzing, and acquiring promising drugs. 3. Their unique business model targets an underappreciated niche of the drug market. Fortune 500 pharmaceutical companies focus on the higher-value commercial opportunities. 4. AltaThera targets drugs with low SGA expenses in the first year. 5. The management team has a proven ability to partner with patient advocacy organizations supportive of the company’s commercial strategy and raise the level of awareness so that doctors can properly diagnose and treat rare diseases. 6. Competition is limited as there are typically few or no other drugs to treat rare diseases.

PROOF OF CONCEPT: They are replicating a similar business model that worked so well at Ovation Pharmaceuticals. Team members averaged two product acquisitions per year at their former company over an eight-year period.

CUSTOMERS/USERS: In the hospital setting, physicians and surgeons write orders for these drugs, which are then administered to patients by nursing staff. In the office-based setting, physicians and surgeons write prescriptions which patients subsequently fill at retail pharmacies, such as Walgreens and CVS. AltaThera has targeted 3 specialty drugs for acquisition.

STRATEGIC PARTNERS: AltaThera’s business model is built around a core of relationships with both patient advocacy groups and professional advocacy groups and a commitment to improving patients’ lives and serving communities. The management team has a successful track record of partnering with patient advocacy groups supportive of AltaThera’s mission and building valuable relationships with key thought-leader physicians and surgeons across multiple therapeutic areas.

FUNDING: Company founders provided the initial seed financing.  Currently, AltaThera has received a commitment for capital sufficient to fund the acquisition of multiple specialty drugs.

SUMMARY: According to Albert Einstein, the definition of insanity is “doing the same thing over and over again and expecting different results.” Altathera wants to “do the same thing over and over again and get the same results.” Members of the management team are more experienced and have improved the processes that led to the sale of Ovation Pharmaceuticals to Lundbeck for $900MM in 2009. ❒

Leave a Reply

Your email address will not be published. Required fields are marked *