The U.S. Food and Drug Administration’s recent reauthorization of the rare pediatric disease priority review voucher (PRV) program has been welcomed by leaders in the rare disease sector, though many believe further steps are needed to stimulate investment in these specialized drug programs.
“That was, I think, a great legislative victory,” said David Crean, Chief Business Officer at MediciNova, referring to the PRVs. Craig Martin, founder and CEO of the Orphan Therapeutics Accelerator (OTXL), echoed this sentiment: “There’s some progress at least,” he told BioSpace at Phacilitate’s Advanced Therapies Week earlier this month, referencing both PRVs and updates to the U.S. newborn screening program.
Recent regulatory developments have also brought changes for rare disease therapies. The FDA issued guidance for its plausible mechanism pathway for personalized therapies this week and introduced its Rare Disease Evidence Principles framework two months prior, aiming to streamline approvals for ultra-rare diseases.
Despite these advances, experts say that rare and ultrarare diseases present significant challenges under traditional biotech investment models. These conditions affect small populations—rare diseases impact fewer than 200,000 people in the U.S., while ultrarare ones affect fewer than 1,000—making them less attractive to venture capitalists due to lower potential revenue.
“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 Senior Vice President of Early Clinical Development at Bristol Myers Squibb, added: “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.”
Martin explained that OTXL was created in response to these challenges. Market uncertainty and policy changes—including provisions from the Inflation Reduction Act signed into law in August 2022—had already started slowing progress in rare disease drug development before OTXL’s founding.
“A number of these programs were ones that had advanced into trials, were helping children in particular, and yet weren’t moving forward,” Martin 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 seeks out stalled or shelved drug assets for rare diseases and completes their development by leveraging partnerships with contract research organizations (CROs) and contract development manufacturing organizations (CDMOs), often at reduced costs due to its nonprofit status. Its tax exemption encourages companies holding unused assets to allow OTXL to develop them without high upfront licensing fees.
Since launching in 2024, OTXL has evaluated over 60 programs focused on ultrarare diseases—many involving cell or gene therapies for pediatric patients—and is developing an AI platform to help assess new opportunities more efficiently.
After regulatory approval is achieved for a therapy candidate, OTXL collaborates with partners such as its tax-exempt subsidiary Orphan Therapies to ensure patient access. In December 2025, Italy-based Fondazione Telethon received FDA approval for Waskyra—a gene therapy for Wiskott-Aldrich syndrome—marking the first time a non-profit sponsor secured such approval from the agency. When Fondazione Telethon sought a U.S.-based commercial partner for Waskyra’s launch this year, OTXL stepped in.
“We kind of got to commercial stage a little faster than we thought we would,” Martin said about Waskyra's progress.
The organization is now finalizing terms on its first clinical-stage asset involving an AAV gene therapy but did not disclose further details. Martin noted this condition may offer greater market potential than Waskyra's five-to-seven annual patient reach.
Rare disease developers often face tough decisions about whether they can continue independently or must sell off assets when commercial viability falters. Hege cited Adaptimmune’s sale of its cell therapy portfolio—including Tecelra (approved by FDA in August 2024 as the first engineered T cell therapy for solid tumors)—to US WorldMeds last July as an example: “That was a major accomplishment for the field of cell therapy,” she said. “Unfortunately Adaptimmune wasn’t really able to make it commercially viable enough to continue as a standalone company."
Hege is working with Friends of Cancer Research on strategies aimed at advancing breakthrough therapies targeting "uncommon" cancers like sarcoma or pediatric malignancies—which remain unattractive under current R&D investment paradigms.
For those continuing efforts within rare disease markets despite obstacles, Crean emphasized efficiency: “Capital efficiency is super critical here... It almost becomes part of the strategic imperative.” He recommended shared infrastructure across projects and staged development milestones requiring less capital per phase.
As traditional fundraising methods become more difficult amid uncertain markets—for example smaller biopharma firms are increasingly turning toward royalty financing deals instead of equity or debt arrangements—Crean pointed out their growing role among "creative fundamentals." These agreements provide upfront capital without diluting ownership stakes or incurring debt obligations; one notable example includes Revolution Medicines’ $2 billion deal with Royalty Pharma last month supporting treatments targeting RAS-addicted cancers such as pancreatic cancer (https://www.biospace.com/article/royalty-financing-serves-as-lifeline-for-some-biopharma-companies-in-uncertain-market-/).
Regulatory incentives like orphan drug designation and breakthrough status should also factor into funding strategies according to Crean.
Hege suggested reforms allowing earlier product approvals or risk-sharing between sponsors and payers could help offset high development costs before insurance coverage begins: “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... so all cost... is borne by sponsor.” She advocated granting accelerated approvals followed by post-marketing commitments once unmet need justifies higher risk tolerance: “I think when the unmet need is high enough... we just have to become more risk tolerant.”
