Rare Disease Therapies: How Orphan Drugs Are Reshaping Global Biopharma Sourcing

Published on: February 26, 2026

In part four of this four-part series on rare diseases, the authors examine how orphan drug economics are reshaping biopharma deal-making behavior, accelerating earlier-stage transactions, and shifting the geography of innovation sourcing, with future rare disease innovation increasingly emerging outside traditional US and European development centers.

As development costs rise and timelines extend in the United States and Europe, orphan drugs should increasingly be favored as vehicles for capital-efficient innovation.1.2 Their ability to generate clear clinical signal earlier, support flexible regulatory pathways, and require lower commercialization investment is driving buyers to engage earlier in development, often at Phase II proof-of-concept.3.4.5

Together, these forces have fundamentally repositioned orphan drugs from defensive portfolio hedges to primary engines of biopharma deal-making. As development costs rise, evidentiary expectations intensify, and capital discipline tightens, orphan assets are now dictating when companies engage in transactions, how risk is allocated through deal structure, and which programs advance within increasingly competitive pipelines. In this environment, orphan drugs are not merely managing portfolio risk; they are actively reshaping the strategic logic that underpins modern biopharma business development.

Orphan drugs and the evolution of business development and licensing (BD&L) strategy

Orphan drugs are no longer simply attractive options within business development portfolios. Increasingly, they should be viewed as the preferred vehicle for capital-efficient innovation and value creation.1 This shift reflects a growing alignment between orphan drug economics and the realities of modern biopharma development.6

Rare disease programs are structurally advantaged across three dimensions that matter most to deal-makers: capital efficiency, speed to signal, and earlier value inflection. Smaller and more clearly defined patient populations enable reduced trial sizes, shorter enrollment timelines, and higher effect sizes that can be detected earlier in development. As a result, clinical development costs for orphan drugs are often materially lower than for broad-population assets, particularly in Phase I and II studies.1

Commercialization economics further reinforce this advantage. Orphan drugs typically target concentrated prescriber bases, reducing the need for large-scale sales forces and broad promotional spend. Patient identification and engagement strategies are more targeted, and launch execution can be highly focused around centers of excellence and specialist networks. Taken together, these factors lower the total cost required to translate clinical success into commercial impact.

Regulatory environments have also proven more permissive for rare disease development.7 Regulators have demonstrated flexibility around endpoints, trial design, and post-approval evidence generation in settings of high unmet need. This adaptability shortens development timelines and increases confidence that early signal can translate into approval, supporting earlier transaction points.

Historically, however, deal activity has not reflected these advantages. Orphan drugs account for a disproportionate share of new approvals yet represent a smaller fraction of overall deal volume and aggregate deal value (Figure 1A-C). This disconnect highlights how BD&L strategy has lagged behind the underlying economics of rare disease innovation.

As capital discipline becomes paramount and portfolio volatility increasingly penalized, this misalignment is beginning to close. Orphan drugs increasingly represent not just attractive opportunities, but the most rational deployment of BD capital.

Deal structures reflect diverging orphan and non-orphan strategies

Disaggregating deal activity by transaction type highlights how business development strategies have diverged meaningfully between orphan and non-orphan assets in response to evolving scientific, financial, and macroeconomic constraints. Partnerships, licensing agreements, and acquisitions now play distinct and differentiated roles depending on orphan status.

Among orphan-involved deals, partnerships have emerged as the most dynamic transaction type. Partnership activity remained relatively stable from 2004 to 2014, expanded rapidly between 2015 and 2022, and then contracted sharply in 2023 and 2024, returning to pre-2014 levels (Figure 2A). This cyclicality reflects the inherent sensitivity of partnerships to capital availability, as these structures rely on staged economics, long-dated milestones, and embedded optionality. Periods of low interest rates and abundant capital favor such arrangements, while rising rates significantly reduce the ability of therapeutic originators to find pre-market development capital, requiring capital-based deal structures.

Licensing activity in orphan deals declined more gradually over the same period, while M&A volumes showed modest growth with year-to-year variability. Notably, orphan M&A activity has proven more resilient to macroeconomic shifts, consistent with its role as a strategic tool reserved for late-stage or commercially validated assets that offer durable revenue and clear portfolio fit.

Non-orphan deal structures followed a different trajectory. Licensing volumes declined steadily by approximately 60% between 2004 and 2024, and partnerships fell by roughly 45%, while M&A activity remained broadly stable (Figure 2B). These patterns suggest that external innovation sourcing outside rare disease has become structurally more selective, reflecting higher evidentiary thresholds, intensifying competition, and diminishing returns in large therapeutic areas.

Deal value further reinforces this divergence. For orphan assets, median licensing and partnership values generally remained below $200 million, reflecting earlier-stage access and deliberate risk-sharing (Figure 2C). In contrast, orphan M&A values trended upward after 2022, consistent with growing scarcity of high-quality late-stage assets. Non-orphan deal values rose sharply across all structures after 2018, particularly for partnerships and licensing, signaling intensified competition for scale and platform-level advantage (Figure 2D).

Why has Phase II become the orphan deal sweet spot?

Changes in deal structures have also been accompanied by changes in deal timing. One of the clearest manifestations of this shift is the trends in orphan drug transactions, specifically M&A and licensing deals toward Phase II (Figure 3A, 3B). Buyers are engaging earlier, not despite scientific risk, but because risk in rare disease development manifests differently and is often resolved sooner.

Phase II studies in orphan indications frequently require smaller patient numbers and can deliver clear mechanistic readouts. Strong genotype-phenotype relationships and well-understood disease biology allow clinical relevance to be demonstrated earlier. This enables buyers to accept higher nominal risk in exchange for faster timelines and lower capital exposure.

Regulatory precedent reinforces this approach. In the past two years alone, FDA has approved six rare disease therapies supported primarily by single-arm trials. None of these programs included randomized controlled trials, and all received either traditional or accelerated approval (data not shown). These approvals underscore the regulatory willingness to act on compelling early data in settings of high unmet need, further validating Phase II as a credible value inflection point.

Earlier engagement also carries strategic benefits beyond price. Acquiring or licensing around an orphan asset at Phase II allows buyers to shape pivotal trial design, align endpoints with commercial value drivers, and integrate access and evidence strategies earlier in development. This alignment reduces downstream friction between clinical development and commercialization.

In parallel, partnership activity is increasingly concentrating around marketed orphan assets (Figure 3C). This trend reflects a preference for de-risked revenue streams in environments where late-stage development costs, access uncertainty, and post-approval evidence requirements continue to rise. For originator-manufacturers, partnering marketed assets offers immediate cash flow participation and commercial optionality while preserving capital discipline.

Which therapeutic areas and modalities are driving orphan deals?

Orphan deal activity remains concentrated in therapeutic areas characterized by high unmet need and strong biological rationale, including oncology, neurology, metabolic, and genetic diseases (Figure 4A). These same areas are often dominated by advanced modalities such as biologics, cell therapies, and gene therapies (Figure 4B). This concentration matters because it mirrors the areas where development efficiency and early signal generation are most critical.

Buy-side and sell-side perspectives on orphan value

Sell-side willingness to out-license or divest rare disease assets is shaped primarily by perceptions of market potential, but in a way that reflects disciplined portfolio management rather than reduced confidence in the science. Market research of industry experts revealed that there is greater readiness to transact assets with lower expected peak sales, consistent with rational capital allocation and prioritization decisions (Figure 5A). This pattern reflects internal portfolio triage as organizations balance finite resources, development capacity, and strategic focus.

This effect intensifies with increasing company size. Larger organizations show lower tolerance for assets that fall below internal commercial thresholds, even when scientific rationale remains strong (Figure 5B). As portfolios expand, internal competition for capital, management attention, and development infrastructure increases. In this context, out-licensing or divestment enable companies to redeploy resources toward higher-priority programs while retaining upside through milestones or royalties. Resource constraints, capability gaps, and financial risk consistently rank among the top drivers of sell-side willingness to transact, reinforcing that these decisions reflect portfolio optimization rather than opportunistic divestment (Figure 5C).

On the buy side, industry experts reported lower appetite for assets with limited peak sales potential, indicating that minimum commercial thresholds remain relevant across all company sizes (Figure 6A, Figure 6B). Buy-side decisions are driven primarily by scientific validity, clinical differentiation, alignment with existing capabilities, and favorable access and pricing dynamics (Figure 6C), while commercial and regulatory factors rank lower, reflecting uncertainty in early-stage development.

Company size further differentiates behavior. Growth-stage biopharmaceutical companies demonstrate the greatest willingness to transact on both the buy and sell sides, regardless of asset value (Figures 5B and 6B). Facing pressure to expand pipelines while managing capital and execution risk, these firms often act as intermediaries within the rare disease ecosystem. Overall, this shows that rare disease deal-making is shaped less by headline market size and more by the interaction of scientific confidence, portfolio fit, and organizational constraints.

What are some strategic implications for global dealmakers?

The deal-making patterns observed across orphan drug transactions point to a clear set of strategic implications for biopharma leaders. First, rare disease drugs should no longer be evaluated using the same timing, valuation, and ownership frameworks applied to non-rare disease assets. Their economic and regulatory characteristics favor earlier engagement, more flexible deal structures, and greater tolerance for scientific risk when early signal strength is high.

Second, Phase II has become a critical strategic inflection point. Buyers that engage at this stage may gain not only pricing advantage, but also meaningful influence over pivotal trial design, endpoint selection, and evidence-generation strategy. Earlier ownership or partnership enables tighter alignment between clinical development and downstream commercial requirements, reducing the risk that late-stage programs generate data that are scientifically compelling but commercially misaligned, especially in term of pricing, access and reimbursement.

Third, deal structure itself has become a strategic lever. The growing divergence between orphan and non-orphan transaction types underscores the importance of matching structure to asset profile. Rare disease Licensing and acquisitions models allow non-originating companies to manage uncertainty while preserving optionality, whereas partnerships are increasingly reserved for late-stage or marketed orphan assets with clear portfolio fit and commercial synergies. Capital discipline, rather than control at all costs, is emerging as the defining principle.

Finally, sourcing strategies must evolve. As development in the US and Europe becomes slower and more expensive, dealmakers will need to expand their aperture for where innovation originates. Comfort with non-traditional development geographies, alternative regulatory pathways, and earlier-stage clinical data will increasingly differentiate successful BD&L organizations from those constrained by legacy frameworks. China is quickly emerging as a complementary and increasingly important environment for early-stage orphan drug innovation due to a more permissive development and regulatory environment.

Conclusion

Orphan drugs have moved well beyond their historical role as niche or opportunistic assets. As demonstrated throughout this article, they are now actively reshaping how biopharma companies allocate capital, time transactions, structure deals, and source innovation globally.

The convergence of lower development and commercialization costs, regulatory flexibility, and earlier clinical signal has made orphan drugs particularly well suited to an era defined by capital discipline and portfolio risk management. These characteristics have driven a shift toward earlier-stage transactions, greater use of partnerships and licensing, and a more prominent role for growth-stage companies as intermediaries within the rare disease ecosystem.

At the same time, geographic sourcing patterns are changing. As traditional development centers face rising friction, more efficient early-stage environments are increasingly contributing to rare disease innovation. In this context, orphan drugs are no longer just portfolio hedges against volatility. They have become engines of deal-making that shape who transacts, when they transact, and where innovation originates.

For biopharma leaders, the implication is clear. Competitive advantage in rare disease will accrue not to those who pursue scale alone, but to those who adapt their BD&L strategies to the structural realities of orphan drug development and the evolving global innovation landscape.

Methodology

Figure 1: Analyses was conducted using data from Global Data (December 2025), following the subsequent methodologies. A.) Deal volume per year is the total count of all pharmaceutical industry transactions (i.e., deals) that occurred globally in a given year from 2004–2024. Sample is subdivided between deals that involved any drug which received an orphan drug designation in the US in any indication (“Orphan”) and deals that did not involve any such drug (“Non-orphan”). B.) Orphan deal prevalence reflects the number of pharmaceutical industry transactions that involved a drug which received an orphan drug designation in the US in any indication, expressed as a percentage of all pharmaceutical industry transactions in the given year from 2005–2024. Orphan approval prevalence reflects the number of assets that received an orphan drug designation in the US in any indication, and were approved in that indication in the US, expressed as a percentage of all assets approved in the given year from 2005-2024. Approvals account for assets approved in their first indication in the US. C.) Median deal value by year is the median value in millions US dollars among all pharmaceutical transactions completed in the given year from 2004–2024. Sample is subdivided between deals that involved any drug which received an orphan drug designation in the US in any indication (“Orphan”) and deals that did not involve any such drug (“Non-orphan”).

Figure 2: Analyses were conducted using data from Global Data (December 2025), following the subsequent methodologies. A) Orphan deal volume by deal type reflects the total count of all pharmaceutical transactions globally involving an asset receiving an orphan drug designation in the US and completed in a given year from 2004–2024, subdivided based on the type of deal. B) Non-orphan deal volume by deal type reflects the total count of all pharmaceutical transactions globally that did not involve any assets receiving an orphan drug designation in the US and completed in a given year from 2004–2024, subdivided based on the type of deal. C) Orphan median deal value is the median value in millions US dollars of all pharmaceutical transactions globally involving an asset receiving an orphan drug designation in the US and completed in a given year from 2004–2024, subdivided based on the type of deal. D) Non-orphan median deal value is the median value in millions US dollars of all pharmaceutical transactions globally not involving an asset receiving an orphan drug designation in the US and completed in a given year from 2004–2024, subdivided based on the type of deal. Merger & acquisition deals are transactions where one company buys or combines with another to obtain ownership and control of assets or capabilities, strategic alliances (licensing) deals are agreements granting rights to use, develop, or commercialize an asset without transferring company ownership, and strategic alliances (partnership) deals are agreements where companies collaborate on development or commercialization of an asset while remaining independent.

Figure 3: Analyses were conducted using data from Global Data (December 2025), following the subsequent methodologies. Merger & acquisition deals are transactions where one company buys or combines with another to obtain ownership and control of assets or capabilities, strategic alliances (licensing) deals are agreements granting rights to use, develop, or commercialize an asset without transferring company ownership, and strategic alliances (partnership) deals are agreements where companies collaborate on development or commercialization of an asset while remaining independent. A) Merger & acquisition deals where the lead asset was an orphan drug represents the breakdown of all pharmaceutical M&A deals completed in the given year (2009, 2014, 2019, 2024) wherein the most valuable (i.e., lead) asset received an orphan drug designation in the US in any indication. Sample is sub-divided based on the development stage of the lead asset at the time the deal was completed, with each value expressed as a percentage of the total M&A deals where the lead asset was an orphan drug occurring in the given year. B) Licensing deals where the lead asset was an orphan drug represents the breakdown of all pharmaceutical licensing deals completed in the given year (2009, 2014, 2019, 2024) wherein the most valuable (i.e., lead) asset received an orphan drug designation in the US in any indication. Sample is sub-divided based on the development stage of the lead asset at the time the deal was completed, with each value expressed as a percentage of the total licensing deals where the lead asset was an orphan drug occurring in the given year. C) Partnership deals where the lead asset was an orphan drug represents the breakdown of all pharmaceutical partnership deals completed in the given year (2009, 2014, 2019, 2024) wherein the most valuable (i.e., lead) asset received an orphan drug designation in the US in any indication. Sample is sub-divided based on the development stage of the lead asset at the time the deal was completed, with each value expressed as a percentage of the total partnership deals where the lead asset was an orphan drug occurring in the given year.

Figure 4: Analyses were conducted using data from Global Data (December 2025), following the subsequent methodologies. A) Volume of orphan deals by therapeutic area reflects the total number of pharmaceutical transactions globally completed from 2004–2024 wherein all assets involved in the transaction received an orphan drug designation in the US in any indication. Sample is sub-divided based on the primary therapeutic area addressed by the lead asset involved in the deal; for deals with multiple lead assets, the therapeutic area of the asset with the highest development stage at the time of the deal was used. Sample excludes any deals for which the therapeutic area of the lead asset was unavailable in the dataset. B) Volume of orphan deals by molecule class reflects the total number of pharmaceutical transactions globally completed from 2004–2024 wherein any asset involved received an orphan drug designation in the US in any indication. Sample is sub-divided based on the molecule class of the lead asset involved in the deal; for deals with multiple lead assets, the molecule class of the asset with the highest development stage at the time of the deal was used. Sample excludes any deals for which the molecule class of the lead asset was unavailable in the dataset.

Figure 5 and 6: Data were collected through an online quantitative survey designed to capture senior industry perspectives on rare disease business development, including asset divestment, acquisition, and in-licensing decision-making. Respondents were required to meet predefined qualification criteria, including holding a senior-level role, having a minimum of five years of biopharmaceutical industry experience, and possessing demonstrated familiarity with clinical development, commercialization, and portfolio strategy in rare disease. The survey comprised 15 closed-ended questions using multiple-choice, matrix, and ranking formats. It was conducted between September 19 and Sept. 25, 2025, and yielded a final analytical sample of 31 qualified respondents (n=31). Results are presented as mean values across respondents and stratified by company size where applicable. Ranking analyses reflect the relative importance of decision drivers reported by respondents at the point of deal evaluation. Analyses focused on minimum peak sales thresholds considered acceptable for sell-side and buy-side transactions, respectively, as well as the primary factors influencing willingness to transact. All reported values represent aggregate respondent averages unless otherwise noted.

References

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Edwards, Bianco, M.; N.; Spruce, J.; Law, P.; and Khan, N. The Rare Disease Access Gap: Navigating the Economics of Global Innovation. ARYA Consulting Partners. 2026.

About the Authors

Nathan Edwards, PhD, specializes in business development, new product planning, and early brand strategy. He helps companies lay the foundation for successful launches through data-backed strategies. Nathan integrates both commercial and access insights into early asset development to maximize market opportunity.

Michael Bianco specializes in brand strategy, product launch, and advanced analytics. He helps companies navigate critical decisions across the asset lifecycle, from early strategy through launch execution, with a focus on maximizing patient access to treatment. Drawing on expertise in analytics, ML, and AI, Michael combines quantitative rigor with cross-functional insight to support more robust strategy and informed decision-making.

About Ayra Consulting Partners

Arya Consulting Partners is a global, full-service boutique consulting firm that partners with biopharma companies to navigate complexity and support growth. We combine deep therapeutic expertise, real-world insights, and end-to-end commercialization capabilities with a people-first approach. Our mission is simple: deliver strategies that create measurable results and lasting impact for our clients, our people, and the communities we serve.