The future of the biosimilars industry

Origins and future of the biosimilars industry

3. DVFA Life Science Conference

Frankfurt, 8. June 2010

Introduction

Market assessment

Growth barriers, drivers, key success factors

Emerging biosimilar business models

Agenda

Copyright © 2010 Capgemini Consulting. All rights reserved.

2DVFA_100607_ORIGINS FUTURE BIOSIMILARS INDUSTRY_RE.PPTX

Introduction

Market assessment



Agenda



Definition(s)

The various countries worldwide are using different names



In Europe, a biosimilar medicine

• is a medicine which is similar to a biological medicine that has already been authorized

• is marketed by an independent applicant following expiry of patent and market exclusivity

periods of the reference product

• is authorized for marketing through a procedure based on the proof of similarity to the

reference product using pre-existing scientific and regulatory experience

• is similar in terms of quality, safety and efficacy

Different names and classifications in various countries:

• EMA: ‘Similar Biological Medicinal Product’ (Biosimilar)

• FDA: ‘Follow-on Protein Product’ (FOPP), ‘Follow-on Biologic’ (FOB)

• Health Canada: ‘Subsequent Entry Biologic’ (SEB)

• Japan: ‘Follow-on Biologic’

Difference between generics and generics

A biosimilar is a protein therapeutic with a high level of similarity and

comparable structure and efficacy to its branded reference product



Protein therapeutics

?

Original protein Biosimilar

As true replication of the existing protein drug cannot be established

High level of similarity and comparable structure and efficacy to their branded reference product

Developed by genetically engineering methods

Produced in cell lines

Small molecule

GenericOriginal molecule

Usually manufactured using chemical synthesis

Majority of pharmaceuticals in the market are small molecule drugs

Has the same active ingredients and proven bio-equivalence as an original small-molecule drug

http://www.ebi.ac.uk/pdbe-srv/view/images/entry/1eer600.png

http://www.ebi.ac.uk/pdbe-srv/view/images/entry/1eer600.png

How much variability is acceptable and what approaches need to be followed to measure it so as to

get approval? Falk Ehmann´s talk

The complex nature of biologics results in a specialized and sensitive

manufacturing process



Comparison of small molecule and biologic drugs

Parameters Small molecule drugs Biologic drugs

Manufacturing

& Product

Quality

Drug production By chemical synthesis By genetically engineering methods

Produced in cell lines

Product

characterization

Well characterized Difficult to characterize the product as they tend to be produced as diverse mixture of molecules which are very slightly different from one another

Purification,

contamination

possibility

Easy to purify

Contamination can be generally avoided, is easily detectable and often removable

Lengthy and complex purification process

High possibility of contamination, detection is harder and removal is often impossible

Lab analysis Easily analyzed with routine lab tests

Current physico-chemical analytical methods or bioassays cannot detect all product variations

Susceptibility to

environmental or

process changes

Not affected by environmental changes or any changes in the steps of production process, hence product is more important than the process

Highly susceptible to slightest changes in environment, cell strains or the manufacturing process, hence it remains the most essential aspect of manufacturing

EU biosimilars approval pathway

Regulatory guidelines for approval of biosimilars are in place in the EU,

however, there is additional legislation and other contentious issues

that shape the market in the EU

Allows biosimilar companies access to the technology of a patented drug even when

the patent is valid

Companies can start R&D activities long before the patent expiry and biosimilar drugs

could be launched as soon as the innovator drug’s patent has expired

Directive 2004/27/EC

- Bolar provision

Additional

legislationsDetails

Impact on

Biosimilars

Generics are given the same INN as the innovator drugs

Naming of the biosimilars is highly controversial with no legislation still in the US and EU. In

Europe approved biosimilars are allowed to use the same INN as the reference product

Assigning the same INN will aid physicians switch between branded drugs and biosimilars

International

Nonproprietary

Name (INN)1

Biosimilar

contentious issues

1 INN is the scientific or molecule name of an active substance. The INN is a unique and universally accessible name assigned by WHO.

Each EU country regulates automatic substitution with biosimilars independently of the

EMA. A number of member countries do not have a substitution policy for biosimilars

(i.e. a pharmacist cannot substitute a biologic with a biosimilar)

Absence of automatic substitution status will necessitate physician detailing and

specialized sales forces resulting in significant marketing and promotional expenditure for

biosimilar companies

Automatic

Substitution with

Biosimilars

Many more legal issues Adem Koyuncu´s talk

Introduction

Market assessment



Agenda



Biosimilars in Europe

Up to now 14 biosimilars (four INN) from nine companies were approved

in Europe



Source: European Medicines Agency, Capgemini Research

Biosimilar INN1 Company Approval year

Omnitropesomatropin

Sandoz2006

Valtropin Biopartners

Binocrit

epoetin alfa

Sandoz

2007

Epoetin alfa Hexal Hexal

Abseamed Medice

Silapoepoetin zeta

Stada

Retacrit Hospira

FilgrastimRatiopharm

filgrastim

Ratiopharm

2008Ratiograstim Ratiopharm

Biograstim CT Arzneimittel

Tevagrastim Teva

Filgrastim Hexal Hexal2009

Zarzio Sandoz

Nivestim Hospira 2010

1

1

1

1

1

2

2

2

3

Biopartners

Stada

Sandoz

Ratiopharm

Hexal

Hospira

Teva

Medice

CT Arzneimittel

1 International Nonproprietary Name

Biosimilars in regulated markets

The biosimilars market in regulated markets is currently quite small with

less than twenty approved products launched

Source: The pharmaceutical company outlook to 2011: Datamonitor, Dec 2006; Benchmarking the key players: Datamonitor, Dec 2006; Parexel’s Bio/pharmaceutical R&D Statistical Sourcebook

2008/2009; The top 10 biosimilar players report, Business Insights, 2009

Off-patent biologic therapies

Global sales 2007 ($ billion)

US/EU patent expiry

Biosimilars approved in US / 5 major EU markets

Top 3 biosimilarcompanies

Erythropoietin 12.92014/

Expired6

Sandoz, Intas, Wockhardt

Insulin 10.2 Expired 1Bioton, Biocon, Wockhardt

Interferon Beta 5.4Expired/

20120 -

Granulocyte-Colony Stimulating Factor (G-CSF)

4.8 Expired 5Teva, Hospira, Intas

Human Growth Hormone (HGH)

2.6 Expired 2Sandoz, Teva, LG Life sciences

Interferon Alpha 2.7 Expired 2Teva, LG Life sciences, Ranbaxy

Less than twenty approved biosimilar drugs are currently marketed in regulated markets (EU, US)

Majority of the biosimilars have been launched in two therapy areas -Erythropoietin and G-CSF

Worldwide leading biosimilar players

The biosimilars market is highly fragmented with the top ten players

representing under 15% of the market

CompanyCompany type

Biosimilars launched

Global sales 2007

($ million)

Global sales 1H 2008

($ million)

Market share

1H2008Regions

SANDOZ Large generic 5 9 23 4.1% EU,US

BIOTON / BIOPARTNERS

Large biotech 8 23 15 2.7% EU

TEVA / BARR / PLIVA Large generic 9 15 12 2.1% EU, US, ROW

LG LIFE SCIENCESKorean biotech

12 26 11 1.9% ROW (Korea)

WOCKHARDT Indian biotech 6 5 4 0.7% ROW (India)

BIOCON Indian biotech 3 3 2 0.4%EU, US, ROW (India)

INTAS BIOPHARMA Indian biotech 5 3 2 0.4% ROW (India)

OTHERS - >50Each <1 million

Each <1 million 87.7% EU,ROW (India)

Source: The Top 10 Biosimilar players report, Business Insights, 2009

Sandoz has shown exceptional growth since 2007 on account of the successful approval and launch

of Omnitrope (HGH) and Epoetin alpha hexal and Binocrit (both epoetin) in the EU.

Worldwide biosimilars market

Current market share of Biosimilars is only a fraction of the sales

volume of biologics gone off patent

Market share of biosimilars in the off patent biologics market

Off patent biologics23%

Patented biologics

77%

Source: The pharmaceutical company outlook to 2011: Datamonitor, Dec 2006; The top 10 biosimilar players report, Business Insights, 2009

Global biologics market sales 2007: $86 billion

Biosimilars <5%

(< $ 1 bn)

Innovator

biologics

>95%

Since 2005, 23% of biologic drug sales have gone off patent. This translates to an opportunity of over $20 billion sales for biosimilars

Apart from European and US biosimilar manufacturers, there are a host of Indian and Chinese manufacturers who have launched over 50 biosimilar products

The future case for biosimilars

Through 2015, 45 biologic drugs worth more than $60 billion in global

sales will lose patent protection, presenting a major opportunity



Number and value of biologic drugs set to lose patent protection

per year through 2015

Source: Biosimilar series: Forecast analysis: Datamonitor, June 2009; Biosimilars 101, Credit Suisse, August 2009

60

55

50

5

45

40

35

30

25

20

15

10

2015

20

2014

9

2013

17

2012

8

2011

1

2010

2

16

7

9

32

4

2

8

6

4

16

14

12

10

Number of biologics going off-patent

Bio

logic

s g

oin

g o

ff-pa

tent

An

nu

al g

lob

al sa

les (

$ b

n)

Annual biologics sales

BiologicGlobal

sales 2008 (bn $)

US/EU patent expiry

Enbrel 6,5 2012

Remicade 5,3 2013

Rituxan 5,5 2015

Blockbuster biologic drugs set to lose

patent protection per year through 2015

Estimates for the biosimilars market (2015)Expected Biosimilar market split in 2015

Expected revenue split

By 2015, the US/EU-market size could reach US$10 bn - most revenues

are expected in the monoclonal antibody (mAb)-segment



8%

9% 36%mAb

12%

Enbrel11%

EPO

10%

Insulin

10%GCSF

Interferon 4%

HGHOthers

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

HGHEPO Insulin Interferon GCSF mAb Enbrel Others

($ bn)

0

5

10

15

20

25

(%)

Source: Biosimilars 101, Credit Suisse, August 2009

Biosimilars as % of marketBiosimilar opportunity

Revenues from mAb (Remicade, Rituxan) are expected to represent the biggest share of the biosimilar market

Market penetration is expected to vary between products, e.g., a low penetration for insulin is expected because the market is dominated by three originator companies and Insulin needs a range of advanced injection systems

US/EU biosimilar market sales 2016:

$10 billion

Comparison of biosimilars with biosimilar antibodies

Whereas biosimilar antibodies are expected to have higher regulatory

requirements and will show higher development costs, the ROI is also

expected to be higher



Regulatory requirements

Financial requirements

CompetitionDevelopment

costsDevelopment

risksInvestments ROI

Biosimilars

Biosimilar antibodies

/

low medium high

• Regulatory landscape for biosimilar Ab is in

discussion

• Long clinical trials in oncology

for biosimilar mAbs versus

short clinical trials

More information about manufacturing costs? panel discussion with Ronny Gal

• High prices for

mAb

Introduction

Market assessment



Agenda



Growth barriers for the biosimilars market

Uncertainties in regulatory frameworks and greater manufacturing and

clinical development complexities have limited the growth of the

biosimilars market

Complex regulations

Currently long approval times (Japan nearly three years, EMA also quite slow in the

past)

The US (the largest biologics market) just recently introduced a legislative framework for

biosimilar

Regulatory framework

Physicians reluctance

to prescribe

Biosimilars are not granted automatic substitution (i.e. a pharmacist cannot

substitute a biologic with a biosimilar)

Traditionally, physicians opposed to biosimilars on efficacy and safety grounds

Sales forces have been only partially successful in initiating medical discussions and

promoting the uptake of biosimilars

Higher manufacturing

complexity and cost

Manufacturing is complex and needs investments comparable to original biologics

Higher costs for pre-clinical and clinical studies

EMA requires post marketing studies to observe immunogenicity

Growth barriers Commentary

Biosimilars prescribing and uptake

Lack of experience and concerns on safety and efficacy of biosimilars

have acted as barriers to widespread physician acceptance

Outcome:

Modest sales

of Biosimilars

Tender business

Outcome of a North London tender showed, that the discount

offered by a biosimilar Epoetin failed to win the bid

While the price of the biosimilar drug was the lowest, the

consortium awarded the contract to a branded biologic

The committee stated that it weighed the risks of a product

that had been around for 20 years that was a fraction more

expensive than the cheapest biosimilar product

Omnitrope

Despite being offered a 25-30% discount, Omnitrope has

achieved only modest sales

Omnitrope is the lowest selling HGH product with only 0.13%

market share in Germany where high generic usage is

prevalent

The generic erosion for Omnitrope is much lower, <1% as

compared to the average erosion caused by the launch of

generics post patent expiry (40% in Germany) after a year of

generic entry

Two examplesSafety and

efficacy

concerns

Lack of

information

Lack of

experience

Inability to

establish trust

PH

YS

ICIA

N

CO

NC

ER

NS

Growth drivers for the biosimilars market

Potential cost savings for healthcare providers and patent expiry of

blockbuster biologics are the key drivers

Biologics have managed to leverage higher prices: average price for biologic is

$16,425 p.a. - more than 20 times the cost for small molecule drugs

Increasingly difficult to maintain high prices, e.g. NICE has issued

recommendations against a series of key mAb based on the lack of cost-effectiveness

Prices of biosimilars are approximately 20-30% lower than the original biologics,

(potential cost savings in US $25 billion for 2009-2018, equivalent to 0.5% of total

pharmaceutical spending)

Healthcare cost

savings

Increased regulatory

approvals

Higher rate of approval of biosimilars

Growth drivers Commentary

D

E

M

A

N

D

More information about cost saving potential? panel discussion with Bertram Häussler

Biologics patent

expiry

Continuing expiry of biologics patents

More companies are expected to enter biosimilar spaceS

U

P

P

L

Y

Key success factors for biosimilars players

The capabilities needed for success in the biosimilars market are

significant and will limit the number of entrants in the near to mid term

Manufacturing

capabilities

Key success

factors

Operational capabilities

Company specific

commitments

Manufacturing process

Manufacturing capabilities

Tests to control quality

Robust supply chain

Clearly defined long

term biosimilar

strategy

Long term commitment

Longer considerations for investments, marketing, development and manufacturing

Competitive intelligence on biologics and competitors

Significant upfront

capital investments

Significant upfront investments for manufacturing sites

Combination of high manufacturing costs, lengthier clinical trials, slower approval rates and high promotional costs

Long gestation period with high risk ofrejection by regulatory bodies

Clinical development

experience and

regulatory know-how

Select the right molecule (high sales potential)

Infrastructure and knowledge for clinical trials

Deep understanding of regulatory guidelines

Customized sales &

marketing skills

Customized sales and marketing team

Sales force detailing to include medical discussions with key opinion leaders and physicians

Continuous scientific communication and marketing activities

Introduction

Market assessment



Agenda



Categories of biosimilars players

There are five categories of players currently operating in the

biosimilars market

Large Generics

Low High

High

Developmental expertise in biosimilars

Inve

stm

en

t c

ap

ab

ilit

ies

(Manufacturing, Clinical development, Regulatory)

Big Pharma

Emerging market Biosimilar players

Small Biotech

CMO1

1 Contract Manufacturing Organisation

Characteristics of Biosimilar players

Currently large generic companies seem best positioned to succeed in

the biosimilars market

Large Generics Big PharmaEmerging

market playersCMOs Small Biotech

Financial strength

R&D capabilities

Manufacturing

capabilities

Clinical development

expertise and

regulatory know-how

Distribution network

and marketing skills

Large generic companies have a strong financial position, the experience to deal with the regulatory agencies as well as an extensive distribution infrastructure

BigPharma is also well positioned, however is often lacking the experience required for the production of biologic products

Emerging market players, CMOs and small biotechs have much weaker financial positions and are lacking experience in clinical development, regulatory affairs as well as promotional and launching marketing campaigns and have no distribution network

low medium high

Strategies to build capabilities in the biosimilars market

There are a range of strategies companies can be used to build

capabilities in the biosimilars market

Building

manufacturing

capabilities

Successful

commercialization of

biosimilar products

Collaborations

• With companies with expertise in biosimilars and access to production

technologies

• With companies of emerging markets; because of the unregulated market

conditions many companies in these regions are already manufacturing

biosimilars, e.g., Ranbaxy with Zenotech Laboratories

Regulatory

collaboration

• Access to expertise in regulatory approval by collaborating with CROs

• It will be beneficial in the long term to build these capabilities in house

Acquisitions

• Of biopharmaceutical companies, having a biosimilar pipeline, e.g., Teva’s

acquisition of Sicor, Pliva/Barr

• Of companies with large scale production facilities like CMOs which also

have experience in biopharmaceutical production

Scaling up operations

by using existing

synergies

• With past experience in biotechnology, ramping up of the R&D and

manufacturing capabilities to make a logical extension to the existing

business, e.g., Sandoz

Building specialized

sales and marketing

teams

• Difficult to gain access to sales and marketing capabilities through

collaborations

• Companies need to build these capabilities in house

It has been easier for generic companies to build manufacturing capabilities through collaborations

than build commercialization capabilities.

Companies Commentary

Success strategies of generic players

Some big generics player have been quite successful in entering the

biosimilars space

Organic growth strategy (investing in R&D and manufacturing capabilities)

Build on its extensive production know how (production of 25+ different recombinant human proteins for Sandoz, Novartis and many other pharma companies)

Strong R&D capabilities and expertise

Has 25 biosimilar development projects as of November 2008

More information about Sandoz´ and Teva´s strategy? Talks of Christopher Klein and Frank Pieters

Acquired biotech companies and CMOs, e.g. Pliva/Barr, CoGenesys, Sicor

Collaborated with biotech companies and CMOs, e.g., Lonza, Protalix

Recently announced recruitment of patients with rheumatoid arthritis for a clinical trial comparing its biosimilar with Roche´s Rituxan


Success strategies of BigPharma

Large pharmaceutical multinationals have also leveraged their biotech

acquisitions to build manufacturing capabilities

Formed BioVentures division in 2006 to focus on biosimilar products

Acquisition of biosimilar company Insmed in February 2009 for $130m (manufacturing facility and biosimilar pipeline including G-CSF, pegylated G-CSF, interferon beta, EPO

Plans to have at least five biosimilar products in late-stage development by 2012 and to launch six products during 2012-2017 (stopped in May, 2010 its PEGylatederythropoietin biosimilar candidate)

Announced plans to enter biosimilar space in December 2008

Planned to leverage expertise of MedImmune to enter the biosimilars market

Announced plans to enter the biosimilars market in December 2008

Has built biosimilar capabilities with its acquisition of Imclone, which it may leverage to develop products

In addition, big players can enter into agreements with CMOs like Boehringer Ingelheim, Lonza,

Richter-Helm and DSM with expertise in low cost production of biotechnology-derived products.

Announced plans to enter biosimilar space in December 2009

May sell its biosimilar Epogen or Lovenox in 2014

Plans to market 10 to 15 biosimilars

Success strategies of emerging market players

Emerging market players lack the resources and expertise to

commercialize their biosimilar products players in the more regulated

markets


Canadian biotech company, China as primary market

Intended to market biosimilar epoetin in Europe in 2007 - currently markets the product in China

Postponed the launch plans of epoetin in Europe due to needed extra investments

Indian biopharmaceutical company which markets biosimilar Insulin and epoetin

Acquired 70% stake in AxiCorp, a German pharmaceutical company, which is believed to help its entry into the European biosimilars market for recombinant human insulin

In June 2009 allied with Mylan to develop, manufacture, and commercialize biosimilars

Subsidiary of Intas, an Indian pharmaceutical and healthcare company - focuses primarily on manufacturing and marketing of oncology biosimilars

Collaborated with Austrian Kwidza pharma to conduct clinical trials for G-CSF products in Europe

Signed an agreement with Canadian Apotex for the co-development and distribution of Neukine in North America

Emerging market players will need to form alliances with larger players and sign deals for

development and manufacturing.

Last thoughts



Prices of biosimilars will generally be 20%-30% lower than those of the

corresponding innovator products

30% sounds modest compared with a 90% saving from generics

but given that a biologic treatment for metastatic cancer can cost as much as

$200,000 a year, a 30% price saving amounts to much more than a 90% savings on

a drug that costs $1,000.

Governments, payors and patients want to see a vibrant biosimilar sector driving down the

cost of expensive biologic agents.

As far as patients are concerned, we believe that a proportion of the patient population

will consider that the risk attaching to biosimilars is acceptable at the outset.

"It's a different ball game and we

expect a much lesser penetration of

biosimilars,“ Severin Schwan, Roche

www.capgemini.de/consulting

Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group Copyright © 2010 Capgemini. All rights reserved.

Vielen Dank für Ihre Aufmerksamkeit!

Dr. Ralf Emmerich

[email protected]

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The future of the biosimilars industry