Support : eNewsletters : Eye on Innovation : Issue 1, February 2011

Biologics bonanza or bust?

What do rheumatoid arthritis (RA), inflammatory bowel disease (IBD), psoriasis, and streptococcus pneumoniae have in common? They all can be treated with biologics. While only 20% of the drugs on the market today are biologics, it is expected that with 650 biotechnology medicines in development in 2010 for more than 100 diseases, half the new drugs approved in 2015 will be biologics.

Biologics are a major business. Last year alone the global market was over $100 billion, and all expectations indicate this market will continue to grow. If you are a player in the branded and generic pharmaceutical game, this is an area you want to investigate.

The nature of biologics, however, leads to important questions—the answers to which may determine whether this is a billion dollar market or a bust.

In this issue of Eye of Innovation, we review Dialog's scientific literature and its business and market research information to gain some answers.

• What effect will regulation, or lack thereof, have on the market?
• What are biosimilars and what segments are ripe for blockbuster biosimilars?
• What are the barriers to manufacturing?
• Who are the major global players?

Biologics 101: nature of the molecule

Using Dialog's scientific literature collection, we learn the basics of biologics. Biologics (vaccines, blood products or biotherapeutics) are complex molecules created from living organisms or the products of living organisms. Biologics can be composed of living cells or tissues, or they can be products derived from cells and tissues such as sugars, proteins, nucleic acids or any combination thereof. Biologics are highly specific (targeted) complex, high molecular weight medications. They tend to have a long half-life and cause fewer side effects than traditional medicines. Biologics are used to diagnose, treat or prevent diseases in humans and animals. Patients treated with these drugs frequently are suffering from severe, chronic diseases and sometimes fatal conditions.

What is the difference between biologics and traditionally produced pharmaceuticals? Most pharmaceuticals are synthesized in laboratories and are composed of defined quantities of chemicals that can be characterized and recreated batch after batch. Although you may not have heard of biologics, the concept is not new. Biologics are derived by biotechnology and because they are created from living cells are not as easily characterized. Vaccines and insulin are examples of biologics and have been around for many years.

Because of the complexities of biologics, even originator companies have problems replicating their own production process despite years of experience with a particular drug. Furthermore, these complexities make exact replication of the originator's active molecule nearly impossible. Due to their complex nature, careful attention is required for product design and manufacturing to assure a safe, effective and consistent product.

Biosimilars vs. generics

Biosimilars are basically generic biologics (biogenerics). Generic drugs make billions, so one would assume then that biosimilars would be a growing market as several successful biologics will be going off patent in the next 10 years (Avastin and Enbrel, for example). However, in 2009, biosimilars only generated $89 million in sales compared to $84 billion for "regular" generics. Why then is there such a disparity or rather what are the barriers to bringing biosimilars to market?

Biosimilars are similar to, but not exactly the same as, biologics. Biosimilar manufacturers do not have access to the same cell lines as the original manufacturer and differences in manufacturing process all lead to difficulties in creating a "true" copy of the drug. These differences can lead to additional side effects or less potency than the original drug. Biosimilars are different from generic pharmaceuticals because they cannot be analyzed in a laboratory to confirm they are exact copies as chemical drugs can. Because biosimilars are typically much more complex than traditional pharmaceuticals, producing an exact duplicate of an existing biologic is difficult, if not possible.

Despite the problems with creating biosimilars, the impending expiry of a number of patented blockbuster biopharmaceuticals and the increasing demand from patients, insurers, and government agencies to reduce drug costs have created numerous opportunities in the global biosimilars market.

Source: IMS databases

What's fueling biologics growth?

Biologics

The biologics therapeutic market is wide ranging and has important implications for the future of medicine and industry advancement. Forecasts suggest that six of the top ten drugs in 2014 will be biologics. A search in Dialog market research databases, company directories and pharmaceutical literature provides a look at the top ten biologics, their projected sales (in billions) and the drug makers. It's interesting to note that five of the top 10 biologics are antibodies (Avastin, Remicade, Humira, Rituxan and Herceptin), three are proteins and the last two are created through recombinant DNA technology. Figure 1 provides insight into growing fields in biologics.

Although therapeutic proteins are the leaders, antibodies (MAbs) are the fastest growing sector. Cancer ranks high for new MAb development, along with treatment for inflammatory and immune-related diseases including rheumatoid arthritis and multiple sclerosis. Development programs also abound in cardiovascular and blood, neurotherapeutics, respiratory and inflammation and infectious disease areas. (Figure 2) This latest bit of information suggests Roche or Amgen would be good partners in the biologics business.

Biosimilars hit the market

Sandoz (Switzerland) is currently the global market leader in biosimilars sales (the only company to have more than two biosimilar products approved) with Teva (Israel) and Hospira (U.S.) also developing a range of biosimilar products. Other players in the international market include Barr (Pliva), Stada (Bioceuticals), BioGeneriX (Ratiopharm) and Bioton. Cardiovascular, rheumatoid arthritis and oncology head the list as targets for biosimilars

Sources: Datamonitor, Business Insights, TableBase, IMS databases

The emerging landscape: Pluses and minuses are substantial

On the good side...

• Expiration of biologic patents. As mentioned earlier, patents of blockbuster biologic drugs, such as human growth hormone, Remicade^® for rheumatoid arthritis and Enbrel^® used to treat inflammatory diseases, will continue to expire. An estimated 25 billion dollars worth of biologics will have lost patent protection by 2016 creating a significant market opportunity.
• Manufacturing and marketing potential. Because of the loss of sales from blockbuster brands, R&D-based and generics companies are also eyeing biosimilars as an opportunity for future growth.
• Early closer relationships with academia. Pharmaceutical companies including Novo Nordisk will launch a full-scale campaign to establish closer relations with innovators in academia at universities and research institutes.
• U.S. incentives to biologics. Legislation in the U.S. healthcare reform bill passed in March 2010 includes the BPCI Act (Biologics Price Competition and Innovation Act of 2009) which allows the creation of an abbreviated approval pathway for biological products that are demonstrated to be either "biosimilar (highly similar) to" or "interchangeable with" an FDA-approved biological product. Other possible incentives allow biologics to maintain 12 years of patent protection after FDA approval, thus enabling companies to recoup some of the high R&D costs. Grants and tax credits for small and medium-sized biotech firms will help reduce clinical trials costs.
• Increase in pace and value of biologic company mergers and acquisitions, partnerships and contract manufacturing globally. To overcome some of the obstacles, big pharmaceutical players are acquiring small and mid-sized biotech firms now, while valuations are down. Others have formed agreements: for example, Merck BioVentures and Parexel with a global clinical-development services agreement and Pfizer and the biotech Indian company Biocon for worldwide commercialization for biosimilar versions of insulin.
• Changes in the regulatory landscape. Europe is leading the way in establishing supporting laws and regulations for biosimilars. Canada, South Africa, Malaysia and Australia have approval mechanisms in place. The United States, Japan, China and India as yet have no formal regulatory framework for biosimilars; however, the U.S. has initiated efforts to attack the issues.

Challenges still exist

Despite a market with high potential, a number of challenges suggest caution. The scientific nature of biologic drugs indicates sizeable investments in time and expertise will be associated with biosimilars development. In addition, manufacturers will experience fundamentally higher levels of cost and risk than with generics. Legislative restraints in the United States and a recently established regulatory framework in the European Union may also be problematic. Another barrier relates to expensive clinical trials and whether approval for biosimilars will be transferable across indications or substitutable as generics are. Finally, Indian and Chinese product pipelines indicate that they are ready to provide competition in this market on a global scale.

Highlighted at the top of the list for biosimilars are Rituxan, Remicade and Enbrel. However, high development costs, complex manufacturing and legal hurdles are holding back smaller players seeking to copy expensive biotech medications nearing the end of their patents. Deep pocket pharmaceutical giants, especially those with access to world-class R&D facilities, have the advantage.

Source: Dialog business databases (Wall Street Journal, Reuters, BusinessWire)

Conclusions

The biologics market presents a complex but promising opportunity for pharmaceutical, generics and biotech companies. In order to ensure that new pioneer biotechnology products continue to reach patients and physicians, approval criteria for both biologics and biosimilars must protect patient safety and preserve incentives to innovate. This will lower costs through increased competition, expand access to lifesaving medicines, protect patient safety and promote further biomedical innovation. The high prices of biologic therapies make it imperative that generic or off-patent products be marketed as options for consumers after patent and patent protections for manufacturers have expired.

Some estimates show the market growing from $66 million in 2008 to $2.3 billion in 2015. Others see sales exceeding $5.6 billion in 2013. Whatever the forecast, there remains a $50 billion potential for biologics and biosimilars; however, the opportunity depends on legislation, substitutability and originator strategies. The money could be big but sorting out the issues is as yet ongoing.

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