Orphan status can be granted to a company developing a drug...

Orphan status can be granted to a company developing a drug treatment for a disease with only small prevalence in the population...it effectively grants the company an additional 7 years market exclusivity (monoploy rents) after patent expiry.

It is done to encourage R&D into indications with smaller addressable markets and hence profit potential.

Orphan status can also theoretically allow slightly quicker review times by regulatory agencies however in practice there's little difference.

One shoudl note that Orphan status DOES NOT in practice improve the statistical probability of achieving regulatory approval. One still needs to generate viable clinical data.