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Cystic Fibrosis: When Charity and Profit Collide... and Embrace

Update Date: May 19, 2013 10:22 PM EDT

Last year, Vertex Pharmaceuticals made news when announced a new drug for treatment of cystic fibrosis, a rare genetic mutation.

The drug was called Kalydeco (ivacaftor) and its development was funded by an investment of $75 million from Cystic Fibrosis Foundation and the National Institutes of Health.

Kalydeco made news as much for being a much needed breakthrough in the treatment of the disease, as for its price tag. It was at the time one of the most expensive medicine on the planet.

Executives of the company pocketed more than $100 million by cashing in stocks and stock options. At one point, the value of company's stock increased more $6 billion in a single day.

Vertex Pharmaceuticals now is charging $307,000 per year per patient, for the drug. The reason being that the disease is based on a uncommon genetic mutation, which means the drug only helps 4% of those who have cystic fibrosis, or about 1,200 people in the U.S.

In spite of that, Kalydeco sales this year are expected to hit $300 million worldwide and are projected to run into the billions annually if it can be used to treat more people when combined with other drugs now being tested -- drugs from a pipeline that was also funded by the Cystic Fibrosis Foundation.

That's the kind of math that can exist in a world where venture philanthropy can help make profitable treatments for so-called "orphan diseases," those that affect fewer than 200,000 people.

Cystic Fibrosis Foundation invested $75 million in the development of the drug, and for that investment it demanded a cut of sales. The exact amount is unclear, but it is a percentage between single digits and the low teens.

Last year, the foundation sold a portion of its rights to Kalydeco royalties to an undisclosed firm for $150 million. It now is using that money to fund more drug development work with Vertex, Pfizer, and Genzyme.

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