• Biosimilars, the next big thing

    It took nine years for the first biosimilar product to get US FDA approval for India.  The European Union had given its nod to the first biosimilar product in 2006 but the FDA finally approved it on March 6, 2015 for India. Thus, this day can be considered as one of the major milestones in the development of global biosimilars market. This provided an opportunity to Indian pharma companies, active in biotechnology arena, to exploit the world’s largest biologics market. 

    Many of the Indian companies – such as Biocon, Dr Reddy’s, Zydus Cadila, Wockhardt, Intas, etc – are already active in biosimilar markets in India and other emerging markets. Dr Reddy’s Laboratories Ltd, the first Indian firm to rollout a biosimilar, has seen its biologics business grow multiple-fold since the launch of Reditux (rituximab) in 2007 and its products are currently being sold in over 10 emerging markets. 

    Dr Cartikeya Reddy, executive vice president - biologics, Dr Reddy’s Laboratories Ltd, says that they have increased patients access to these otherwise unaffordable drugs by 7-10 times across these markets, while simultaneously reducing the burden on healthcare systems.

    Dr Reddy’s regions of focus are the US, India & South Asia, Southeast Asia, Russia & CIS, Latin America and the Middle East & North Africa.

    Currently, the company has four biosimilar products - rituximab, filgrastim, pegfilgrastim and darbepoetin. They are sold across various markets. The next two products, trastuzumab and bevacizumab, are in clinical development and are expected to be launched shortly.

    Similarly, Biocon Ltd, which received its first approval for insulin glargine in a developed market (Japan) in March last year , is gearing up to submit application for approval in Europe and the US for four products - namely pegfilgrastim, trastuzumab, insulin glargine and adalimumab - in FY17. Regulatory filings for the four most advanced biosimilar programs are likely to provide the company an early mover advantage in an over $ 30 billion addressable market.

    The Biocon has approvals in over 60 emerging markets for the rh-Insulin and in over 20 emerging markets for the insulin glargine. He company expect trastuzumab approvals in emerging markets to make meaningful contribution to their revenues beginning FY17.

    The global biosimilar industry is growing rapidly with the market estimated to reach $ 20 billion by 2020. Biopharmaceutical products with current sales of $ 72 billion are expected to be off patent by 2024.  
    According to a Deloitte report, the loss of patent protection between 2014 and 2022 for 11 established biologics products - representing 48 percent of total biologic sales - combined with increasing global focus on improving healthcare access and reducing the cost of care, presents growth opportunities for biosimilars manufacturers in both developed and emerging markets.

    This has attracted new players in the biosimilar space. For example, Cipla recently announced its plans to set up a new biotech facility for the production of biosimilars in South Africa.

    According to Ministry of Commerce and Industry, India’s pharmaceutical export segment has more than doubled from $ 7.8 billion in 2008 to $ 16.5 billion in 2014. With biologic treatments introduced for diseases such as diabetes, cancer, multiple sclerosis, and rheumatoid arthritis, potentially lucrative biosimilars market could emerge as another growth driver of India’s pharmaceutical sector.

    Indian companies are setting up manufacturing base overseas. For example, Biocon has reportedly invested $ 200 million on its just commissioned insulin plant in Malaysia. 

    Similarly, Cipla is investing about Rs 600 crore in the new biosimilars manufacturing facility in South Africa, which the company intends to use to serve local as well export markets such as US, Europe and Asia.

    Though biosimilars have emerged as important tool to treat cancer and autoimmune diseases, they are only used by about 8 percent of patients worldwide due to the high costs of these drugs. As more companies join the bio-generics race, prices are likely to fall resulting in higher usage. According to IMS Health study, patient access to biologic treatments has grown by as much as 100 percent following the availability of biosimilars.

    The IMS study highlighted that greater acceptance of biosimilar medicines in a growing number of therapy areas and an active pipeline of 56 new products in clinical development are expected to deliver total savings of as much as $110 billion to health systems across Europe and the US through 2020.

    Probably this is one of the reasons why outgoing US President Barack Obama pushed for setting the exclusivity period for biologic drugs at 7 years instead of 12 to ensure early availability of cost-saving copies in the market. If this happens, Indian companies should be ready for a windfall of opportunities. 

    Biologics are drugs whose active ingredients are sourced from living organisms so these products are based on proteins, genes, etc, unlike normal small-molecule drugs where the active ingredient is a chemical.

    Due to this complex base, biologics are not as easily copied as other drugs and companies that are leading such research in India are the top pharmaceutical firms such as Biocon, Dr Reddy’s, Lupin and Cadila Healthcare.

    Sales margins on biosimilar drugs range from 20% to 80%, according to analysts. On the other hand, almost 90% to 95% of the innovator price of a drug is eroded when a generic version of a small-molecule drug is launched.

    With the US drug patent pipeline drying up, it is the high-margin biologics that will sustain sales for Indian companies, analysts.

    Biologic therapies are among the most expensive on the market, because unlike traditional small-molecule drugs, they're manufactured in living cells. Biologics' complexity has kept at bay generic versions of these drugs, many of which are multibillion-dollar blockbusters, but new technology, along with an FDA increasingly willing to approve them, is leading to a flurry of biosimilars R&D activity.

    Because biosimilars, like biologics, are created in living organisms, there is no way for them to be identical to the underlying biologic drug, but that doesn't mean biosimilars can't be as effective as their branded counterparts.

    According to pharmacy benefit manager Express Scripts, biosimilars could save healthcare payers a whopping $250 billion over the next decade if just 11 biosimilars to popular medicines win regulatory approval and those biosimilars are priced at a 30% discount to the brand-name drug.

    Many industry watchers view the ability to create and roll out biosimilars as critical to curtailing the soaring cost of specialty drug medicine.

    The approaching wave of biosimilars could be as transformative to biopharma as the introduction and growing use of generic small-molecule drugs was in the 2000s.

    Generic-drug makers entered this century with sales that were a fraction of what they are today, but steadily increasing demand for cheaper therapies has led generic drugs to represent more than 80% of all prescriptions filled, and that surging script growth has shifted billions of dollars in revenue away from big pharmaceutical manufacturers to generic-drug makers.

    While generic drugs have had a big impact on industry revenue, biosimilars' impact on the top line could be significantly greater. Typically, generic-drug prices are 80% to 90% lower than their brand-name drug, and that's a far steeper discount than we're likely to see for biosimilars. If biosimilars' discount is around the 30% then they could be incredibly profitable.

    Biologics, or drugs developed from biological sources, have taken the pharma world by storm over the past decade or so. Five of the top 10 best-selling drugs in 2014, for example, were biologics indicated for either autoimmune disorders or cancer.

    The rapid rise of biologics has come from a variety of factors, including their ability to effectively control a range of debilitating diseases, their premium pricing structures, and a tendency toward a long shelf life stemming from the onerous U.S. regulatory pathway for the development and approval of generic versions known as "biosimilars". 

    However, a number of blockbuster biologics, worth an estimated $52 billion in global sales, are set to lose patent protection over the next five years. Biosimilar sales are thus expected to blossom from about $1.9 billion to $2.6 billion in the U.S. next year to a staggering $25 billion by 2020, representing a 7.7% compound annual growth rate, or CAGR.

    Biosimilars, by the nature of their development process, cannot be exact replicas of approved biological drugs. This issue has left considerable room for pharmas to defend their star products in the patent arena, or through novel formulations or changes in delivery devices that leave biosimilar sponsors in no-man's land on the regulatory front, so to speak. 

    The Biologics Price Competition and Innovation Act was signed as part of the Patient Protection and Affordable Care Act in the USA (better known as Obamacare) in March 2010, creating a formal regulatory pathway for biosimilars. However, it took another two years for the FDA to release its long-awaited guidelines for biosimilar regulatory submissions, presumably because of the fierce pushback from pharma companies looking to protect their top brands. 

    Because biosimilars have the potential to save the U.S. healthcare system a whopping $44 billion over the next decade, payers and regulators alike will probably continue to push for a more streamlined regulatory pathway. That's why major pharmas and biotechs such as Amgen, Merck, Pfizer (via its acquisition of Hospira), Novartis, and Teva Pharmaceutical Industries have all been busy building out their biosimilar pipelines, with their collective sights set primarily on big-ticket drugs such as Herceptin, Humira, and Remicade. 

    Biosimilars will one day be a huge growth story in pharma and biotech. The area of biotech is worth keeping tabs on from an investing perspective, but it doesn't come across as nearly as promising as, say, immuno-oncology at the moment.