Despite remarkable advancements in medical science and the development of innovative treatments over the past 150 years, the pharmaceutical industry continues to fall short in one crucial area: addressing the unique healthcare needs of children. While adult patients have benefited from many new therapies, children - whose bodies respond differently to medications and whose conditions often progress in ways different from those of adults - remain at the margins of pharmaceutical progress.

About the authors

Federica Masut is a Sustainable Investment Analyst in the Impact Equities & Bonds team and joined Triodos Investment Management in 2020. Federica holds a Master’s degree in Economics from the University of Trento, Italy. 

Luiza Toledo is a Sustainable Investment Analyst in the Impact Equities & Bonds team and joined Triodos Investment Management in January 2024. Luiza holds a Master’s degree in Business Management from the Erasmus University Rotterdam. 

Sebastian Rojas joined Triodos Investment Management in 2020 and is Associate Portfolio Manager Triodos Global Equities Impact Fund and Financial Analyst in the Impact Equities & Bonds team. He holds a Master’s degree from the Duisenberg School of Finance, a Master’s degree from Los Andes University in Colombia and is a CFA Charterholder.

“Two main factors explain why paediatric pharmaceuticals lag behind adult treatments: logistical challenges and financial incentives.”

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Off-label medicines

Two main factors explain why paediatric pharmaceuticals lag behind adult treatments: logistical challenges and financial incentives.

The cost of developing dedicated clinical trials for children is high, not least because children’s bodies grow and develop rapidly. This means that clinical trials must account for different age groups and developmental stages, often requiring separate studies for infants, toddlers, young children and adolescents. Moreover, children represent a smaller portion of the overall patient population, making the market for paediatric medicines less attractive from a traditional investment perspective.

As a result, many medicines prescribed to children are used ‘off-label’, meaning they have not been specifically tested or approved for paediatric use. While off-label prescribing can be lifesaving, it also carries risks, as children metabolise drugs differently and require age-appropriate dosing and formulations.

Addressing rare diseases: orphan drugs

The challenge of developing appropriate medicines for children is particularly acute when it comes to rare diseases. Medicines for rare diseases, also called orphan drugs, are notoriously costly to develop and market due to the small number of patients affected by rare conditions. Many such conditions are genetic and manifest early in life, significantly affecting children’s health and development. On the other hand, orphan-drug status for pharmaceuticals generally comes with regulatory incentives to offset development costs (e.g., tax credits, grants, reduced fees, faster approval), as well as extended market exclusivity periods that ensure stable revenue.

In portfolio: Swedish Orphan Biovitrum

One of the companies we invest in through our Future Generations strategy is Swedish Orphan Biovitrum (SOBI). This company develops therapies for rare and severe conditions, filling critical gaps for adults and children alike, who might otherwise have no effective treatment options. Importantly, SOBI also works to improve global accessibility to such medicines, partnering with healthcare systems and humanitarian initiatives to donate life-saving medicines and support programmes in underserved regions.

Childhood conditions with lifelong impact

Common conditions often begin during childhood and may affect a person for a lifetime. Respiratory allergies, for example, are one of the most common chronic conditions, affecting between 20% and 30% of children and up to 40% of adults globally. Allergies often begin in childhood, disrupting sleep, concentration and daily activities, and can progress into more serious respiratory diseases if left untreated. Notably, antihistamines, the drugs usually prescribed for respiratory diseases, are also the most common off-label medications administered to children.

In portfolio: ALK-Abello

Danish company ALK-Abello (ALK) plays a key role in addressing the global burden of allergic diseases. This portfolio company develops diagnostics and immunotherapies that target the root causes of allergic disease rather than just the symptoms. The company offers treatments specifically developed and approved for children. As an early mover in allergy tablets for children, ALK has gained a leading market share.

The return of personalised medicine

In the case of children, it’s very important to move beyond a one-size-fits-all approach to pharmaceuticals, adapting treatments to patients’ specific needs. Personalised medicine, once the norm with treatments tailored to each individual, gave way in the 20th century to standardised approaches thanks to breakthroughs like antibiotics, vaccines, and large clinical trials.

Pharmaceutical compounding

Pharmaceutical compounding is the process of preparing customised medications for patients by mixing, combining or altering ingredients to create a medication tailored to their specific needs. This service is typically provided by trained pharmacists when commercially available drugs are not suitable - such as when a patient requires a different dosage, a unique formulation (like a liquid instead of a tablet), allergen-free ingredients or improved taste (especially important for children).

Compounding is regulated to ensure quality and safety and is particularly valuable in paediatric care, where individual needs and tolerances can vary widely. By allowing medicines to be tailored precisely to the patient, compounding supports personalised treatment and improved health outcomes. One example is Fagron’s oral suspension of omeprazole, a medication used to treat gastroesophageal reflux. In many regions, this medication is only available in tablet form, which can be very difficult for children to swallow. Fagron’s solution allows for compounding omeprazole in liquid form, making this treatment viable for children.

This greatly improved public health, but also introduced disadvantages for individuals with special needs, or groups that were simply less represented in clinical trials. Since the late 20th century, scientific and technological advances have brought about a renewed focus on personalised medicine, making it possible to match treatments more closely to each person’s unique needs.

In portfolio: Fagron

Dutch/Belgian company Fagron is a leader in pharmaceutical compounding. The company’s product portfolio includes over 500 specialised paediatric formulations, ranging from oral suspensions to nutritional supplements and topical therapies. Compounding allows for adjusting dosages, but also for creating child-friendly formulations, from medicines that are easier to swallow, to improved taste.

A call for impactful investment

Investing in paediatric pharmaceuticals is more than a good business opportunity. It also offers the chance to create lasting social impact. By supporting companies that innovate for children, investors can help ensure that young patients receive the safe, effective and age-appropriate treatments they deserve. This is not only ethically compelling but also essential for building healthier societies and addressing long-term health burdens.

Education and knowledge sharing

While developing paediatric drugs is essential, so is raising awareness and sharing knowledge of safe, effective treatments. Pharmaceutical companies play an important role in bridging this gap.

ALK and Fagron are both good examples of this, as they both invest in practitioner education, helping to bridge the knowledge gap and improve outcomes for paediatric patients. ALK also provides training for healthcare professionals on allergy care, sponsors symposia on paediatric respiratory allergy (including children and adolescents) and maintains an online medical-education platform for clinicians. Fagron offers extensive training, including online seminars and guides on personalised paediatric medication and compounding, and has been investing in a global Formulary, a comprehensive selection of customised formulations developed for pharmacists and prescribers. These measures are key to increasing knowledge of pharmaceutical compounding, contributing to its advancement and concrete adoption in the medical practice, for the benefit of children and adults alike.

Targeted investment in paediatric pharmaceuticals is therefore an indispensable part of advancing global health. By championing companies like SOBI, ALK-Abello and Fagron, we can help close the gap, foster innovation and improve the lives of children worldwide.

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