In recent years, large pharmaceutical companies have launched a variety of initiatives to restock ailing pipelines and boost business performance including mergers and acquisitions, diversifying business portfolios to non-pharmaceutical products, downsizing, spinoffs, and entering the biopharmaceutical arena.

Whatever the approach, pharmaceutical companies want balanced portfolios with programs at various stages and risk profiles, says Melinda Richter, founder and CEO of San Francisco-based Prescience International in a BioPharm International podcast.

To date, most Big Pharma companies have partnered or acquired assets of biopharmaceutical companies with products in late-stage development, says Richter. However, as the availability of late-stage development opportunities shrink and the landscape becomes more competitive, Big Pharma is turning to more early-stage partnerships with academia and early-stage companies.

It is attractive to for the pharmas to go after early-stage companies because “by nature, they are smaller, they are nimbler, and they are willing to take the risks that the large pharmas just can’t. These small companies have to swing for the fences and they have to win. Pharmas have a lot to protect. They have to be more conservative,“ says Richter.

More scalable innovation opportunities are another part of the story, says Richter.

For example, last year, Merck announced a $90 million, seven-year commitment for the California Institute for Biomedical Research (Calibr), an independent, not-for-profit organization established to accelerate the translation of basic biomedical research to innovative new medicines.

However, for hands-on research, startup companies need laboratory and office space, as well as specialized equipment. Janssen Labs, located on the West Coast Research Center of Janssen Research & Development in La Jolla, Calif., offers short-term leases on wet laboratory and office space.  Tenants also have access to core research facilities and instruments.

The facility, operated by Prescience International, has a “no strings attached” policy. Janssen R&D does not take an equity stake or first right of refusal in the work of tenants, protecting the entrepreneurial rights of startup companies that choose independence.

Janssen Labs and Calibr are two options offered by Big Pharma that will be explored in the session “And Now for Something Completely Different: How Will Pharma Access External Early-Stage Innovation?” at the 2013 BIO International convention on April 23, 2013.

The US Orphan Drug Act of 1983 defines a rare disease as one that affects fewer than 200,000.  There are nearly 7000 rare diseases affecting nearly 30 million—or nearly one in 10—Americans, according to the National Organization for Rare Disorders (NORD).

The National Institutes of Health (NIH) reports that approximately 80% of rare diseases are genetic in origin; about half affect children. The challenges of facing a chronic, disabling, severe, or even life-threatening disease is compounded by difficulties in receiving an accurate diagnosis, and the lack of therapies to address the condition.

For the past six years, the last day in February has been designated Rare Disease Day. First observed in Europe in 2008 by the European Rare Disease Organization, the initiative expanded to the US in 2009. In 2012, more than 60 countries participated.

This year, events will be held worldwide on Feb. 28 to bring the cause of rare diseases to the attention of patients, the public, the medical profession, and policy makers. For example, the NIH is sponsoring a two-day conference for researchers and policymakers, including FDA representatives, to raise awareness of rare diseases, bring stakeholders closer together, coordinate policy actions between nations, and emphasize rare disease research and the search for new therapeutics.

The Orphan Drug Act provides tax credits and marketing incentives for sponsors to develop products for rare diseases. Since 1983, the number of applications submitted and products designated as orphan drugs has continued to grow. More than 400 drugs and biologic products for rare diseases have been approved.  In contrast, fewer than 10 such products supported by industry came to market between 1973 and 1983.

Drug makers have financial incentives to develop orphan drugs. A 2012 report from Thomson Reuters, The Economic Power of Orphan Drugs, estimated the orphan-drug market at the end of 2011 at $50 billion globally, or 6% of total pharmaceutical sales. However, a compound annual growth rate (CAGR) of 25.8% for 2001 to 2010, compared to a 20.1% CAGR for a matched group of non-orphan control drugs, and an increasing number of orphan-drug approvals, suggests that the growth rate of orphan drugs will exceed that of non-orphan control drugs over the next 30 years, according to the report. Because many orphan drugs are biologics, they are less susceptible to generic competition than small-molecule drugs.

The impact of the smaller population needing the orphan drug is offset by the high cost of the drugs. In fact, the Thomson Reuters study found that 29% of orphan drugs have annual sales greater than $1 billion, about the same percentage as non-orphan drugs.

While the Orphan Drug Act has spurred the development of life-saving and life-improving therapies for individuals with rare diseases, it also has provided financial incentives for drug companies to invest in these narrow specialties. However, as the sponsors of Rare Disease Day point out, there is still much work to be done.