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

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

Biosimilars were briefly (albeit unofficially) known as biogenerics, then follow-on biologics, before the current nomenclature was adopted. The U.S. FDA website defines biosimilars as “biological prescription drugs that are demonstrated to be ‘highly similar’ (biosimilar) to or ‘interchangeable’ with an FDA-approved biological product.” Yet some experts believe the designation can apply solely based on chemical similarity, approval mechanism, or a combination of chemistry and medical indication.

The 2009 biosimilars market for the U.S. and Europe is estimated at $150 million, according to Datamonitor’s recent report Pharmaceutical Key Trends 2011—Biosimilar Market Overview. But with 30 biologics—with annual sales of $51 billion—losing patent protection before 2015, biosimilars should experience explosive growth with sales reaching $3.7 billion by 2015. Worldwide revenues for all biologics in 2008 were $123 billion.

Although this article is about biosimilars, it is useful to discuss them within the context of the gamut of follow-on biologics (here meant descriptively and intuitively, not in any official sense) that include biobetters (a.k.a., biosuperiors) and innovator biologics that in some way resemble an approved molecule.

For our purposes, biosimilars are drugs that strive to be identical in every measurable way to an approved biological. Next-generation improvements in drug properties (e.g., pharmacokinetic advantages through PEGylation or drug-device combinations) are biobetters, while changes resulting in altered drug function result in new biological entities, or innovative drugs.

The relative significance of the three follow-on classes becomes apparent when global pharmaceutical markets are divided into emerging (“pharmerging”), European-style single-payer, and the more complex U.S. system.

In emerging markets (e.g., Russia, South America, Eastern Europe), where consumers generally pay for their own medicines, biosimilars will dominate based on price. In these nations, loyalty to domestic manufacturers and brands combined with high commercial entry barriers suggest that breaking in will likely follow a branded-generic model that relies heavily on manufacturing and distribution partnerships.

Western Europe has already shown its accommodation to biosimilars by approving 14 of them, compared with just four in the U.S. Here the operative term is value. Biobetters and innovative biologicals must demonstrate some combination of testable patient benefit and pricing advantages.

Not surprisingly, and despite the paucity of stateside approvals, the U.S. has become the testing ground for discovery, manufacturing, regulatory approval, and reimbursement for the three follow-on classes, particularly biosimilars. Not everyone agrees that success will be automatic.

Industry observers expect biosimilars to achieve worldwide sales of $3.7 billion by 2015. [Steve Mann/Fotolia]

Significant Hurdles

Developers of biosimilars face significant hurdles, as the 2010 U.S. healthcare legislation legalized them but ignored the thorny issues of science and regulation.

If regulators insist that key studies compare the candidate, head to head, against a reference product licensed specifically in their jurisdiction, streamlining and coordinating development programs to work across jurisdictions will be difficult. “We spend considerable time trying to justify the use of only one reference product past a early certain stage of the clinical program,” says Bruce Babbit, principal consultant with Parexel International.

The second issue involves the degree to which biosimilar developers can import clinical results from the innovator’s development program for secondary indications. For example, rituximab was originally indicated for cancer and later for rheumatology. If a developer’s data for the first indication is convincing, how much clinical development for the second (or third) indication will be required?

Ideally, if sponsors can demonstrate a high level of physicochemical similarity, repeating the innovator’s entire clinical program should be unnecessary. Reaching this level of trust, however, could take many years and many approvals.

Complicating matters is the comparability, or lack thereof, between reference studies conducted a decade before and modern practice, which may be built on evidence from postapproval studies or pharmacovigilance.

“The clinical trial challenges will be significant,” Babbit adds. “It would not surprise me if FDA holds more frequent meetings with biosimilar developers than with other biologics developers, particularly around chemical manufacturing and controls. It will be a slow-moving process, and the agency will not commit to Phase III from the outset.”

As companies and regulators gain experience the system will relax by virtue of experience and familiarity. The question is: Will anyone be left standing at that point?

Worth the Trouble?

“The entry barrier for biosimilars, in many cases, will be the money companies can afford to spend on clinical trials,” observes Paul Wotton, Ph.D., president and CEO of Antares Pharma, which specializes in biosuperiors based on enhanced delivery. “Faced with the prospect of long development times for a biosimilar, and uncertain revenues, companies may decide that a biobetter would be more worth their while.”

Another doubter is Bassil Dahiyat, Ph.D., CEO of Xencor, who describes biosimilars as a “low-risk, low-reward strategy,” while biosuperiors are “higher risk, higher reward.”

While clinical risk for biosimilars is lower than for biosuperiors and new biological entities, it is not zero. Add to that manufacturing start-up costs, human testing requirements, uncertain reimbursement, competition, no pharmacy-level substitution, the burden of demonstrating similarity, and the almost assured need to employ a BLA-like sales and marketing force.

“A good case could be made to stay out of the biosimilars business altogether,” he explains, “particularly for complex molecules like antibodies.”

Most approved biosimilars are hormones and cytokines. Last autumn, EMEA released guidance on generic monoclonal antibodies, several years after issuing rules for somatropin, G-CSF, erythropoietin, alpha interferon, and insulin. Fourteen drugs have been approved under these guidelines. United States approvals amounted to four hormones: HGH

(Omnitrope®/Sandoz), calcitonin (Fortical nasal spray/Upsher-Smith), hyaluronidase (Hylenex/Baxter), and glucagon (GlucaGen pen delivery system/Novo Nordisk). All have a long history of safe use and were approved under the 505(b)(2) designation usually associated with generic small molecule drugs.

Teva, known for its small molecule knockoffs, has been selling its version of Amgen’s Neupogen (filgrastim) in Europe since 2008. The eponymously named product, TevaGrastim, was approved under abbreviated BLA-like tracks but U.S. approval, which has been delayed for about 18 months, is expected under a full-blown BLA.

Interestingly, the downside to Amgen is limited since it has already moved on to a biobetter. U.S. sales from Neupogen total $900 million, while revenue from Neulasta, a PEGylated version, exceeds $2.5 billion.

“The tumor necrosis factor market is one big biobetter,” notes Sonny Gal, Ph.D., senior analyst at Bernstein Wealth Management. These include the antibody TNF blockers Enbrel, Humira, and Remecaid.

The Sweet Spot

“The clinical path will be somewhat shorter for biosimilars than for new biologicals or biobetters,” Dr. Dahiyat observes, “but if any safety signals arise, you’re toast. The margin of success is very narrow.”

Or, as Widener University economist Joseph Fuhr, Ph.D., puts it, “If just one of these biosimilars turns out bad, if people are injured, it will kill the entire market for years.”

The sweet spot for biosimilars will be drugs that are perfectly equivalent but cost less. Even then, prescribers may need convincing, and regulators will not cut anyone any slack.

Dr. Dahiyat cites the case of MedImmune’s Synagis antibody for preventing respiratory syncytial virus in children. The company sought approval of a second-generation drug through a full BLA, but FDA rejected the drug based on a nonsignificant rise in mild infusion reactions. The lesson is clear for manufacturers of any follow-on biologic: Safety signals will not be tolerated.

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?

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.

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

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