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May 15, 2011 (Vol. 31, No. 10)

Biosimilars Proceed with Caution from Starting Gate

Market Poised for Explosive Growth in the Coming Years as Hurdles Are Surmounted

  • Then Why the Continued Pursuit?

    “They’re hoping to thread the needle,” Dr. Dahiyat explains. “Perhaps they believe they can leverage other elements of their organizations, or balance that risk across a portfolio of products.” It helps to have manufacturing infrastructure in place. A sales and marketing force would not hurt either, although partnering in this area could work.

    “Regardless, they will have to fight for market share,” Dr. Dahiyat says. “This is not a business where you manufacture it, get it approved, and make a lot of money right away.”

  • Deep Discounts

    No one is sure how U.S. pricing and reimbursement will pan out for biosimilars. Biobetters can at least compete on superiority, while the incentive for biosimilars will be a modest reduction in price. But prescribers are expected to balk at meager cost savings as an incentive to switch gravely ill patients away from a drug that is already working.

    Most observers predict that biosimilar discounts versus innovator molecules will hover between 15% and 30%. The belief is that the cost of entry is simply too high to reach the level of competition compatible with the 80% to 90% drop in price we see for small molecule generics.

    Dr. Gal feels discounts will be much steeper: “Innovators will suffer serious loss of market share as well, if they fail to play the discount game.”

    He explains that while entry costs are indeed high, believing that they are a significant barrier is “downright wrong.” The historical pricing structure and gross margins for biologics—in the high 90s (according to Dr. Gal and disputed by others)—more than compensates. “You can drop the price from $10,000 per patient per month to one thousand and still make an 80 percent gross margin. That’s a very profitable business.”

  • So The Process Is Not The Product?

    Click Image To Enlarge +
    PlantForm is using its plant-based technology to produce antibodies in tobacco plants. The firm hopes to be able to make low-cost biosimilars.

    Some of the suspicion around biosimilars emanates from a once universally accepted catch-phrase: “The process is the product.” This mantra served to alert the world that only one manufacturer—usually the speaker’s company—was capable of producing a biotherapeutic.

    Kenneth Hughes, a co-founder of PlantForm could not disagree more. “Process does not equal product. Product equals product,” he chuckles. While processes must be validated, it’s the end, not the means, that’s important. “Besides, if your process is so subtle that it alone can produce a product, I question your validation data.”

    PlantForm is attempting to enter biosimilars markets through transgenics, a scientifically elegant approach that has received little respect. The company, which expresses therapeutic proteins in nicotinia plants, plans to make biosimilars of three cancer drugs with global sales in 2009 of more than $23 billion. The company estimates markets for its biosimilar products at $2 billion per year by 2016 and $4 billion by 2020.

    The company’s pipeline leader is trastuzumab (Herceptin/Roche). PlantForm claims its version of the drug has purity and activity equal to Herceptin’s, but costs only 5% as much to manufacture.

    Dr. Hughes recognizes the difficulties and the history, but notes that this time is different. Advances in analytic technology enable “much more exquisite characterization for demonstrating the equivalence of biologics,” he says, not to mention surrogate assays for efficacy. “But safety—particularly acceptable immunogenicity—is more difficult to prove.”

    Despite the economic uncertainty surrounding biosimilars, the pharmaceutical and biotechnology industries are forging ahead. Novartis with two biosimilars on the market, continues with its biogeneric strategy, while Merck’s BioVentures division announced a collaboration with Parexel in January 2011.

    At the recent “J. P. Morgan Healthcare Conference” in San Francisco, Biogen Idec  CEO George Scangos predicted that biosimilars would become “a meaningful source of revenues” for his company within a few years. Even Samsung, the consumer electronics giant, announced a $389 billion investment in biosimilars in 2010.

    Yet Roche, in deciding to defend its $6 billion-per-year Avastin franchise against competition from biosimilars, is staying on the sidelines. Or is the company hoping that U.S. regulators remain in a state of bewilderment? Roche has a lot of time to change its mind, as the drug does not lose patent protection for another eight years.

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