A recent post by Robert Wessman of Alvogen pointed out that some companies are abandoning their efforts in the biosimilars markets. Amgen, for instance, recently decided to postpone the launch of a biosimilar version of adalimumab until litigation issues are resolved, which could take years (if ever).
By the way, adalimumab is a $16.5 billion product.
An excellent review of the EU expereince, and some of the economic challenges faced by companies wishing to launch biosimilars in the US, was published in 2013. And much of what was written then remains true to form today.
But these markets are worth trillions of dollars over time. So why abandon them entirely?
Where to begin…
Patent Risk – Patents have always been THE key issue with generics. But with biosimilars, it’s a far more complex issue. An excellent summary of the evolving legal issues is here. What is patentable? Methods for growing cells? For harvesting them? API purification? Glycosylation patterns? Formulation? PK? Delivery systems? Other? All?
As an example, Amgen was able to receive a new patent on Enbrel (etanercept), extending protection until 2028. For a product which launched in 1998, that is an extraordinarily long lifetime for a branded product. Meanwhile, the FDA approved a biosimilar version developed by Sandoz in August, 2016.
Will Amgen vigorously defend the patents protecting a $9 billion product? You bet. A legal battle is currently underway. When will the Sandoz product reach the market? It’s anyone’s guess.
According to MedTrack, there are 26 active programs for etanercept. Essentially, anyone developing an etanercept biosimilar today will likely have to enter into a complex litigation process, or abandon their development program altogether.
But it’s not etanercept alone. Adalimumab supposedly has 200+ patents to defend. Want to enter this legal shark tank? Be our guest.
As an aside, this is precisely why analyst projections for the Biosimilars market should be interpreted with caution. Unlike the small molecule world, it is highly unlikely that any single patent expiration will trigger a flood of entrants into a particular market.
For instance, making the assumption that a generic entanercept will cut into Amgen Revenues in 2017 is clearly incorrect.
Commercial & Reimbursement Risk – While it took years for physicians to feel comfortable with generics, it will be interesting to see if physicians will jump on the opportunity to prescribe biosimilars, or if they will push back and insist on DAW prescribing. Given the cost of these medications, even with a sightly lower price, there will be arguments in many hospitals over this issue.
How might this differ in different therapeutic areas? Given what we know about discounting and reimbursement practices, will the cost savings truly be that significant?
Competitive Risk – A quick perusal of MedTrack shows there are 35 active development programs for bevacizumab ($6.8 billion in 2016 sales), and another 32 for trastuzumab ($6.9 billion in 2016 sales). Obviously, many of these companies will not succeed. Some will likely give up as other competitors finish development and commercialize their own products.
For example, bevacizumab has two programs Pending Approval (Amgen, R-Pharm), and another 7 in Phase III. It is not unreasonable to think we could have 3-5 versions of bevacizumab on the market very soon, across multiple geographies, sold by different companies (assuming the patent landscape allows such diversity).
What happens to the other 20+ programs?
We can’t say, but there may be some unhappy investors in the future.
Infrastructure Risk – Biopharmaceutical contract manufacturers have been riding the wave of biosimilars product development. Reports suggest that CMOs are reporting ~15% increases in their business, largely due to biosimilars projects. But as the market evolves, capacity constraints may be observed in some parts of the world. As products are approved, capacity investment will likely be made.
For example, Celltrion is increasing their capacity >2x to accomodate the manufacturing of Inflectra, a biosimilar version of infliximab approved in the US in 2016. We note that the manufacturing investment was triggered by the approval, suggesting management waited until they were 100% certain that they had a commercial product on their hands.
We also note this capacity will also be used for versions of rituximab and trastuzumab. Similarly, Samsung, announced a ~$400 million investment in biosimilars in 2009, citing their expertise in “low-cost, quality manufacturing.”
Some companies will likely experiment with different expression systems to improve yields. But will this trigger the need for additional trials?
Regulatory Risk – To be fair, the US FDA has made progress. In the US, we have Zarxio (Sandoz/Novartis) and Inflectra (Janssen Biotech/J&J), the latter achieving $239 million in Global Sales in 2016. Erelzi (Sandoz) was approved by the FDA in August, 2016.
So the US FDA is clearly moving in the right direction, after many years of uncertainty.
Development Risk – Biosimilars tend to be indicated for rather serious conditions, and often with small patient populations. How challenging will it be to recruit enough patients for a clinical trial, especially when an established active comparator is available?
To put it another way…suppose you or a loved one had breast cancer, and trastuzumab is the drug of choice. Would you want to be shuttled into a clinical trial aiming to demonstrate the efficacy of the biosimilar version? Probably not.
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As Wessman correctly states there will be relatively few companies who will have the value chain (especially infrastructure), the long-term vision, and cojones to succeed in this complex, evolving marketplace.
In Europe, large, established companies (Sandoz, Teva, etc.) are the major players in the biosimilars market, and a similar competitive dynamic is anticipated in the US.
Performing clinical trials and getting products approved is one thing. Getting through the lawsuits will be another matter. These are record-setting, multi-billion dollar products we are talking about
These molecules are complex. Their complexity lends itself to multiple patent opportunities, and hence multiple defensive stakes in the patent fence protecting these revenues. Will enough companies get around these fences to capture market share?
Perhaps.
But it may be very difficult for companies, especially in the US, to achieve any market share for molecules with complex, multilayered patent protection.
Indeed, the most successful companies in the biosimilars space may be the ones with the infrastructure, products, AND the legal/commercial expertise necessary to compete in selected markets where litigation is less of an issue.
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