Gauging Opportunities in the Biosimilars Market

Facing slower growth prospects for small molecules and a highly competitive market for small-molecule generic drugs, pharmaceutical companies, both large and small, are evaluating opportunities in the biosimilars or follow-on biologics market.

“Financial strength and a combination of generic and branded business expertise will be key factors in determining success in the biosimilars market,” says Sarah Terry, president and global managing director of Life Science Analytics (Scranton, PA), a biomedical database company, whose product is MedTRACK. She spoke at the Drug, Chemical and Associated Technologies Association (DCAT) “2009 PharmaChem Outlook,” an education program held last month in New York City. She classifies three type of players in the biosimilars market: leading biosimilar developers; new, smaller biosimilar-focused companies; and emerging biosimilar players.

On a strategic basis, these companies may use mergers and acquisitions or licensing deals as a means to build biosimilar capabilities. Follow-on biologics developers conducted a relatively large number of licensing and collaboration deals (approximately 55 deals) and mergers and acquisitions (approximately 44 deals) during the past six years, says Terry. “Deals are used extensively to enable biosimilars to penetrate new markets,” says Terry. “Mergers and acquisitions are the preferred tool to gain access to a specific emerging or Western market. A core focus for licensing deals is to source marketed and/or pipeline products to build biosimilar product portfolios. Also, biosimilar developers can use licensing deals to gain access to reformulation and/or drug delivery technology.”

Leading biosimilar players
“Leading biosimilar developers currently dominate the biosimilar market due to commercial and financial strength and in-house expertise,” says Terry. These companies include generics companies such as Teva Pharmaceuticals (Jerusalem) and advanced biosimilar developers such as BioPartners (Barr, Switzerland).

Teva, the leading global generics company, is actively building its capabilities in biosimilars. In January 2009, it announced the formation of a joint venture with the contract manufacturer Lonza (Basel, Switzerland) for developing, manufacturing, and marketing biosimilars. The move adds to earlier deals by Teva in building biosimilars capabilities, which included the 2004 acquisition of Italy’s Sicor for $3.4 billion.

"We had identified biosimilars as a major growth driver for Teva in our long-term strategy and have been augmenting our knowledge base, capabilities and infrastructure to position Teva as a leader in this market," said Shlomo Yanai, Teva's president and CEO, in a January 2009 company press release. "This strategic partnership bolsters our biologics capabilities. Lonza is an ideal partner for Teva in this field with its deep knowledge and experience in biopharmaceutical development, large-scale manufacturing, and state-of-the art manufacturing facilities. Combined with Teva's global leadership and expertise in clinical development and marketing of generic pharmaceuticals, the joint venture generates significant opportunities and benefits for both companies."

Biopartners (Barr, Switzerland), owned by the Polish biotechnology firm Bioton, is developing biosimilars. The company received European regulatory approval for a biosimilar version of recombinant human growth hormone in 2006. A second biosimilar, Alpheon (interferon alpha) is under European regulatory review, and a third biosimilar, erythropoietin, is in preclinical development.

Sandoz (Holzkirchenf, Germany), the generics arm of Novartis (Basel, Switzerland), and Merck & Co. (Whitehouse Station, NJ), with its decision to form Merck BioVentures, are two leading examples of Big Pharma’s involvement in biosimilars. Sandoz had the first biosimilar product, Omnitrope (recombinant human growth hormone), approved in Europe and the US in 2006. Binocrit and Epoetin alfa Hexal, Sandoz’s tradename for a biosimilar version of epoetin alfa and the first glycosylated protein biosimilar to receive marketing authorization from European regulatory authorities, was approved in 2007. Binocrit/Epoetin alfa Hexal was developed as a similar biological product to the reference product Erypo/Eprex (epoetin alfa) by Janssen-Cilag (Beerse, Belgium), which is part of Johnson & Johnson (Raritan, NJ). Sandoz received European approval for its third biosimilar, filgrastim, in February 2009. The Sandoz product is approved for the same range of indications as the reference product, Neupogen, by Amgen (Thousand Oaks, CA).

In December 2008, Merck announced the establishment of a new division called Merck BioVentures, which is designed to leverage the company's position in glyco-engineering technology for both follow-on and novel biologics. Merck gained a position in glycol-engineering through its acquisition of GlycoFi in 2006. Merck's first follow-on biologic program, MK-2578 for anemia, is in clinical development, and the company plans to launch MK-2578 in 2012. In addition, the company says it anticipates having at least five follow-on biologic candidates in late-stage development by 2012.

Merck added to its biosimilars position with the pending acqusition of the follow-on biologics business of the biotechnology firm Insmed (Richmond, VA) and a Boulder, Colorado, manufacturing facility of Insmed. Merck announced the deal in February 2009, and as of press time, the deal was scheduled to close at the end of March. Insmed's pipeline of follow-on biologic candidates include NS-19, an investigational recombinant granulocyte-colony stimulating factor (G-CSF) in Phase III development, and INS-20, a pegylated recombinant G-CSF designed to allow for less frequent dosing that is currently in Phase I clinical trials.

Smaller biosimilar-focused companies
New, smaller biosimilar-focused companies will drive the next wave of the biosimilars market. “These companies are in a more precarious situation since they lack the financial security and/or the commercial experience of the leaders,” says Terry. Companies in this category include Cangene (Winnipeg, Canada), Hospira (Lake Forest, IL), Phage Biotechnology (San Diego), and GeneMedix (Offaly, Ireland)

Emerging biosimilar developers
Already competitors in the small-molecule generics markets, companies from India and China may be classified as emerging biosimilar developers. “Biosimilar companies in India and China are positioning to enter Western markets, either directly or through strategic alliance,” says Terry.

The higher cost structure needed to develop a biosimilar product compared with developing a traditional small-molecule generic drug, however, erodes an often competitive advantage that Indian companies can have in the small-molecule generics market. “Also, with biosimilar development, a low-cost structure is not sufficient if biotech manufacturing skills are limited,” adds Terry. She observes, however, that several Indian companies have a range of biosimilars (e.g., streptokinase, insulin, G-CSF, erythropoietin, and human growth hormone) available in the domestic market in India and in other markets in Asia, South America, and Africa. “Indian players will have a major part to play in Western markets, either directly or through marketing alliances.”

Chinese companies also may be potential candidates for acquisitions or partners in licensing deals. “With a rapidly growing technology sector and lack of intellectual property recognition, China is an important location for early biosimilar development and marketing,” says Terry. “While most Chinese companies are selling locally only, their manufacturing experience is certain to make them useful acquisition or partners.”

She points out there are numerous low-cost players investing in biopharmaceuticals in China, making it a highly competitive market. For example, it is estimated that at least 20 G-CSF products are already on the market in China.

Dragon Pharmaceutical (Vancouver), Shantha Biotech (New Delhi, India), and Bharat Biotech (Hyderabad, India) are some examples of companies in the emerging markets whose local expertise could be beneficial to larger biosimilar companies set to enter these markets or that offer low-cost manufacturing and outsourcing.