Friday 31 May 2013, Amsterdam
Biosimilars have stated their intention of being here to stay, as recent events show an increasing trend in efforts by companies to enter and/or enhance their position in the biosimilars industry. Indeed, biosimilars are becoming crucial features of governments’ plans to reduce healthcare expenditures and increase foreign investment. Various factors, including financial austerity measures due to increasing budget deficits and debt, slowed economic growth in countries such as the US, an increasing aging population and an associated increase in the demand for healthcare in other countries like Japan, are some of the key drivers of initiatives to encourage biosimilars.
Furthermore, the recent intensification of efforts to establish frameworks under which biosimilars can be effectively regulated, by various regulatory bodies including the US Food Drug and Administration (FDA), point to a future influx of biosimilars into significantly untapped markets, as companies continue to actively position themselves strategically. Interestingly, pharmaceutical and biotech companies are not the only ones getting into the biosimilars business, but also Contract Manufacturing Organizations (CMOs) such as Lonza and Celltrion, Contract Research Organizations (CROs) like Quintiles and Paraxel, and multi- industry conglomerates such as Samsung and LG – all companies that fancy a significant payday from being involved in the development and sale of biosimilars.The figure below shows the various groups of companies currently involved in biosimilars development.
Although biosimilars will deliver some healthcare cost savings, the discount percentages earlier expected have been significantly reduced. Biosimilars are expected to be marketed at between 70% and 80% of the cost of the branded biologic, thereby delivering only a 20%–30% reduction in cost. For instance, Celltrion’s recently approved Remsima – a biosimilar to Merck’s Remicade (infliximab) – is expected to sell for 70% the price of Remicade in South Korea. This is in sharp contrast to generic small-molecule drugs, some of which sell for up to only 10% of the price of the innovator drug. However, the expensive nature of biologics, some of which sell for as much as hundreds of thousands of dollars for a year’s treatment, makes even a 20% price reduction quite significant. In fact, it is estimated that enabling generic options on just the top 12 categories of biologic treatments with expired patents would save the US $67 billion–$108 billion over the first 10 years, and $236 billion–$378 billion over 20 years – an average of about $31 billion a year (Shapiro, 2008). This would significantly aid the government’s efforts to stabilize the economy and reduce its budget deficit.
Branded Biologics Sales Will Grow through 2017
The growing dependence on biologics to provide significant benefits in the effective treatment of chronic diseases such as rheumatoid arthritis, psoriasis, cancer, Crohn’s Disease and similar conditions has resulted in the continued increase in sales, generating over $128 billion in 2012 alone. This trend is expected to continue in the short term, growing by a Compound Annual Growth Rate (CAGR) of about 5.6% to reach over $168 billion by 2017. Afterwards, patent expirations and the existence of clearer regulatory frameworks for biosimilars will result in an upsurge of biosimilars in key biologics markets such as the US, having an adverse effect on global branded biologic sales. Furthermore, the uptake of biosimilars is also expected to increase in other markets outside the US as physicians and other stakeholders get more comfortable with their substitution – capturing market share from branded biologics. The figure below shows the historical sales of branded biologics from 2008–2012 and forecast to 2018.
Industry Challenges Result in Caution by Potential Entrants and Current Players
The biosimilars business is not for the faint-hearted, as various challenges are currently facing the development and commercialization of biosimilars. One of these is the uncertainty regarding the regulatory and legislative structures available for the review, regulation, and substitution of biosimilars in certain markets, particularly the US. Furthermore, the development of biosimilars involves greater investment than is required for the development of chemical-based generics. Biosimilars potentially pose a greater risk to patient safety than chemical-based generics, primarily due to issues regarding immunogenicity. Therefore, they are currently required to undergo non-clinical, clinical, and post- marketing surveillance – the same requirements for obtaining approval for novel biologics. In addition to potentially resulting in increased review times, the need for other capital-intensive steps like clinical testing, as well as the complex manufacturing processes required, significantly increases the financial muscle needed to participate in biosimilar development.
Furthermore, companies currently active in the field of biologics are establishing various barriers, including patents protecting their manufacturing techniques, to prevent or at least slow the entry of biosimilars into the market. Indeed, companies such as Amgen, Genentech (now part of Roche), Pfizer, J&J, and AbbVie are not ready to surrender market share, bearing in mind the substantial sales being generated by blockbuster drugs such as Humira (adalimumab), Rituxan (rituximab), Enbrel (etanercept), Herceptin (trastuzumab), and Remicade (infliximab). In June 2011, Merck licensed biosimilar etanercept from Hanwha Biologics in a deal worth about $720m over 12 years. However, Amgen’s announcement of a new Enbrel patent in the US in November 2011 forced Merck to halt the development of the Enbrel biosimilar. Similarly, AbbVie has stated that it intends to aggressively defend about 200 patents on Humira to prevent the approval of biosimilar versions, noting that competitors will experience a difficult time trying to enter into the market.
Consequently, many potential entrants are exercising caution in advancing their biosimilars programs. In October 2012, Teva halted Phase III clinical trials of a biosimilar to Roche’s Rituxan (rituximab), while Samsung also stopped its studies on the same drug. Roche does not anticipate that a rituximab biosimilar will appear on the market before 2016, three years later than its initial expectation of 2013 – when Rituxan’s patents expire in Europe – adding that the timelines for biosimilars are “moving out”.
Deals Emerging as a Vital Means of Entry into Biosimilars
The noteworthy challenges and risks associated with the development of biosimilars, particularly in the current regulatory and economic climate, has led many companies to embrace strategic deals as a way to enter and/or strengthen their presence in the global biosimilars industry. Most of these deals are collaborations and licensing agreements targeted at enabling companies to pool their resources and capabilities, share the risks involved, and consequently, to improve their chances of success.
Despite the company’s past unsuccessful attempts to develop biosimilars, Merck entered into a joint venture (JV) with Samsung Bioepis – itself a JV formed by Samsung and Biogen Idec – in February 2013 to develop and commercialize multiple pre-specified and undisclosed biosimilar products. Pfenex also signed a partnership agreement with Strides Arcolab’s Agila Biotech unit – acquired by Mylan in February 2013 – in a deal that seems to be focused on tapping into the significantly untapped South Asian and South-East Asian biosimilars markets. Other deals include Viropro and Oncobiologics’ partnership to manufacture six monoclonal antibodies (mAbs) that are being developed by Oncobiologics, and Dr. Reddy’s Laboratories’ agreement with Merck Serono to co-develop a portfolio of biosimilar compounds in oncology.
US Biosimilars Regulatory Framework Gradually Evolves
In February 2012, the FDA issued three draft guidances on biosimilar product development in the US. This is a big step forward for the market as the US remains the largest pharmaceuticals market, including biologics; therefore, being able to obtain approval to market biosimilars in the US holds considerable benefit. However, the draft guidelines have been received with mixed feelings, particularly among companies seeking to pursue the development of biosimilars in the US. On the one hand, the guidelines emphasize a totality of evidence approach, the use of analytics and focused clinical trials to document biosimilarity, and use of ex-US reference products, and allows extrapolation across indications that share the same mechanism.
On the other hand, there are areas of uncertainty and risks. These include the absence of an interchangeability guidance, a lack of clarification on naming biosimilars – something that is quite clear in the European Medicines Agency’s (EMA) guidelines – and a requirement to provide a full dossier to the originator of a biologic. Consequently, there are fears that the FDA’s guidances may, in fact, slow the entry of biosimilars into the US market.
Governments Aim to Utilize Biosimilars Development to Foster Macroeconomic Development
Emerging markets, including China, India, Brazil and Mexico, have developed their own regulatory pathways to manage the approval of biosimilars. However, they have generally established lower barriers to entry in terms of clinical trial requirements and regulatory control, thereby enabling domestic companies to easily enter the market, while also potentially providing a lower-cost entry point for international players. Some of these governments are actually entering into deals to drive the growth of their biosimilars industry. In April 2011, the Brazilian Ministry of Health (Ministério da Saúde) entered into an agreement with PharmaPraxis to manufacture a biosimilar to Humira.
Furthermore, the governments of South-East Asian countries like South Korea have launched various initiatives targeted at boosting the biosimilars market and thereby, sustaining their domestic industry. For instance, the South Korean government has been setting up bio-clusters, some of them matching the quality standards of advanced economies, to foster biopharmaceutical manufacturing and establish the country as a leading biosimilars market. In February 2011, the government pledged to promote the biosimilars industry and revealed plans to provide financial and institutional support to the industry as well as aim to capture 22% of the global biosimilars market by 2020. Also, it anticipates the creation of about 120,000 new jobs by its biosimilars industry.
