The U.S. Food and Drug Administration’s Orphan Drug Designation (ODD) is one of the most strategically significant regulatory tools available to emerging biotech companies. Although widely referenced in ASX and NASDAQ biotech announcements, the designation is often misunderstood. It is not a signal of clinical efficacy, nor does it accelerate approval on its own. Instead, ODD functions as a structured incentive package created to make the development of therapies for rare diseases commercially viable.
The framework applies to diseases affecting fewer than 200,000 patients annually in the United States. Gastric cancer — the indication for which Chimeric Therapeutics (ASX: CHM) recently received ODD for its CHM CDH17 CAR-T therapy — falls within this category due to relatively low U.S. incidence compared with other major solid tumours.
Below, the individual elements of ODD are unpacked, with CHM CDH17 used as the practical example of how each component functions in real-world biotech development.
1. A Framework Designed to Reduce Development Costs
How ODD changes financial reality for early-stage programs like CHM CDH17
Orphan Drug Designation does not imply that a therapy works. Instead, it acknowledges that the therapy targets a disease with limited treatment options. The designation triggers a set of cost-saving mechanisms that substantially reshape early-stage economics — a crucial factor for small-to-mid-sized biotechs.
Tax credits for qualified clinical trial costs
Sponsors may be eligible for tax credits covering up to 25% of qualifying U.S.-based clinical trial expenses.
For a Phase 1/2 program like CHM CDH17 — now treating nine patients and enrolling ten — these reductions can meaningfully extend runway and reduce dilution pressure.
Waiver of FDA application fees
ODD exempts the company from paying FDA user fees at the time of regulatory submission.
For biologics, these fees normally exceed USD $3 million.
Avoiding this obligation is financially material for a company like Chimeric, which is simultaneously progressing multiple clinical programs (CDH17, CORE-NK, CLTX CAR-T).
These incentives allow a biotech to redirect capital toward trial expansion, manufacturing development, or the next stage of the regulatory process.
2. Exclusivity Rights Strengthen Long-Term Value
The most misunderstood — and strategically most important — benefit
If CHM CDH17 eventually secures FDA approval, it would receive seven years of marketing exclusivity for gastric cancer in the U.S.
This exclusivity is entirely independent of patents.
This means:
- Competitors cannot market the same active ingredient for the same indication.
- Even if a competitor develops a better therapy, FDA cannot approve it for that disease during CHM’s exclusivity period.
- Exclusivity begins after approval, not at designation.
For a first-in-class, third-generation solid-tumour CAR-T like CHM CDH17 — which targets CDH17, a biomarker associated with metastasis and poor prognosis — the exclusivity window provides a defensible commercial moat while the company scales manufacturing, expands indications, and strengthens reimbursement positioning.
3. Regulatory Support and Pathway Advantages
How ODD helps programs progress more efficiently, even without automatic fast-tracking
Orphan designation does not automatically grant accelerated status. Instead, it signals to the FDA that the therapy addresses a recognised unmet need. That signal matters.
With CHM CDH17 now in a Phase 1/2 study designed to determine dose, evaluate safety, and assess objective response rates across colorectal, gastric and neuroendocrine tumours, ODD establishes a foundation for:
Eligibility for additional expedited programs
Once supportive data emerges, the therapy becomes a stronger candidate for:
- Fast Track designation
- Breakthrough Therapy designation
- Priority Review
Each of these programs shortens different stages of the FDA review process.
Access to the Orphan Products Grants Program
Biotechs with ODD can apply for FDA grants specifically designed to fund early and mid-stage rare-disease trials. For a cell-therapy developer like Chimeric — which is also advancing CORE-NK and CLTX CAR-T in parallel — these mechanisms reduce capital burn and improve portfolio optionality.
4. ODD as a Practical Indicator for Investors
Why designation matters, even if it doesn’t validate the science
For investors evaluating early-stage biotechs, orphan designation is best interpreted as an economic and regulatory advantage, not a clinical validation.
In Chimeric’s case, ODD:
- Reduces near-term and long-term development expenditures
- Creates a potential seven-year commercial protection window
- Positions CHM CDH17 for expedited pathways once data matures
- Strengthens partnership and licensing discussions by reducing future regulatory friction
- Helps investors model future revenue scenarios with greater certainty
The designation also underscores that the therapy — particularly one as complex as a third-generation solid-tumour CAR-T — addresses a cancer type with persistent unmet need. Gastric cancer continues to suffer from poor outcomes, limited durable options, and late diagnoses, heightening the relevance of biomarker-directed therapies.
5. Using Chimeric’s CHM CDH17 to Illustrate Why ODD Matters
A real-world example of how the designation fits into a clinical strategy
CHM CDH17 is designed to target the CDH17 biomarker, which is associated with tumour invasion and metastasis in gastrointestinal cancers. Preclinical research demonstrated complete tumour eradication across seven cancer types in mouse models — one reason the therapy advanced into human trials.
As the Phase 1 portion enrols up to 15 patients and progresses toward dose selection, the ODD framework:
- Lowers the cost of executing the trial
- Sets up a clearer regulatory path for Phase 2 expansion
- Provides downstream commercial certainty should efficacy emerge
- Supports evidence generation across multiple tumour types
CEO Dr Rebecca McQualter summarised the company’s position clearly when she said: “This is a great step forward in the development of CHM CDH17 to serve patients with gastric cancer, where there is a significant unmet need.”
