How Copycat 'Biosimilars' Could Wrangle $60 Billion From Biotech Giants

Some $60 billion is up for grabs as patents expire on blockbuster biologic therapies from such industry giants as Amgen (AMGN), AbbVie (ABBV) and Roche (RHHBY) — leaving the door open for a whole new class of copycat medications to swipe share.

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These copycats, known in the industry as biosimilars, began launching in Europe in 2006 and in the U.S. in 2015. The U.S. biosimilar market is now in its infant stages but is drawing interest across a wide spectrum of companies, not just biotechnology specialists.

For patients, it’s about time they arrived, says Steven Lucio, associate vice president for pharmacy services at Vizient, a health-care performance improvement company. Just like generic pharmaceutical drugs, their job is to bring down the sometimes otherworldly costs of biologic treatments.

“You’re seeing drugs costing hundreds of thousands of dollars,” Lucio told Investor’s Business Daily. “If we don’t bring into existence and a substantial level of use of these biosimilars to offset some of those expenses, it’s going to be very difficult to maintain the patient access we desire.”

But biosimilars also offer a particularly lucrative opportunity for the world of biopharma. In four years, worldwide biologics will account for some $293 billion in sales. Of that, $115 billion will no longer have patent protection by the following year, according to Credit Suisse analyst Vamil Divan. This leaves “the door wide open for biosimilar competition,” he said in a recent note to clients.

$60 Billion At Risk For Biologics

Right now, $60 billion in biotechnology drugs already have biosimilars gunning for them. Some of the biggest brands are most at risk.

Humira from AbbVie is one of the best-selling biologics of all time, and soon to be vulnerable to competition. It treats several forms of arthritis, psoriasis and Crohn’s disease, and in 2017 brought in $18.43 billion in sales globally. That represented 65% of AbbVie’s total sales.

Under agreements with AbbVie, Biogen (BIIB) and Amgen are set to launch Humira biosimilars later this year in Europe and in the U.S. in 2023. Meanwhile, Novartis (NVS) recently gained a recommendation from European officials for its Humira biosimilar.

Credit Suisse’s Divan calls for a 32% decline in Humira sales outside the U.S. from 2018-20. That’s north of the 18%-20% dip that AbbVie expects. After that, he expects “rapid erosion” of Humira sales in the U.S. in 2023.

Defining Biosimilars

Biosimilars are nearly identical copies of biologic treatments, much like the pharma generics made by the likes of Mylan (MYL) Teva Pharmaceutical (TEVA) and Perrigo (PRGO).

As a whole, biologics tend to be more expensive to produce and cost more to the consumer than conventional drugs. They’re generally geared to tackle harder-to-treat populations of patients with rarer diseases. Pharmaceutical companies tend to stick with common diseases, recouping the costs of drug development through a high volume of patients.

The strictest definition says biologics only come via living systems or organic molecules. Pharmaceuticals largely come from chemicals. Biologics are most commonly injected, while pharmaceuticals frequently come in pill form.

If you want to get scientific, biologics are a class of drugs based on large protein molecules that bind to specific cell receptors. Meanwhile, the name for pharmaceuticals developed by dozens of pharma companies is small molecule drugs.

“Chemical drugs are often more pure and better characterized by current analytical technology than biologics,” according to the Library of Medicine. “A biologic agent’s activity may be affected by the cell system in which it is produced, the fermentation media or operating conditions.”

Crossing The Line

There’s generally a pretty visible demarcation between those who develop patented pharma products and those who make biologic treatments.

Biotech players like Amgen, Biogen, Gilead Sciences (GILD) and Celgene (CELG) generally stay on the biologic side. The likes of Merck (MRK), Pfizer (PFE) and Johnson & Johnson (JNJ) usually stick to pharma.

But that’s not the case with biosimilars. Both biotech and pharma players want a piece of the pie.

Mylan is venturing into biosimilars along with others like Coherus Biosciences (CHRS). Also testing the waters are a number of well-established, nongeneric players.

“It’s not just the traditional landscape of generic (versus) branded pharmaceuticals,” said Vizient’s Lucio. “Some branded companies are completely disinterested. Other brands are jumping full speed into this market.”

Running The Gantlet Of Acceptance

Although physicians and patients widely accept generics today, that wasn’t always the case, Lucio said. The modern era of generics began in the 1980s. In the 30 years since, they’ve faced regulatory, clinical and insurance reimbursement hurdles.

Biosimilars now are running the same gantlet. In the U.S., just 12 approved biosimilars exist. Of those 12, only four are on the market. The others are facing court battles. The U.S. is woefully behind in biosimilar acceptance to Europe, which has approved more than 50 such treatments.

Now, though, they’re getting some help from President Donald Trump — a vocal critic of the pharmaceutical industry’s high drug prices — and Food and Drug Commissioner Scott Gottlieb. Credit Suisse’s Divan says Trump’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs mentioned biosimilars more than 20 times.

“The impact of biosimilars has been underwhelming to date, especially in the U.S., but we believe that will soon change,” Divan said. “Greater use of biosimilars is one of the cornerstones of the Trump administration’s approach to lower drug prices in the U.S.”

Further, the FDA issued an 11-part Biosimilar Action Plan in July to encourage competition among biologics and the development of biosimilars. Among its goals, the FDA plans to implement new review tools for biosimilars. It also wants to establish a new office specifically to support biosimilar developers.

Amgen, AbbVie At Risk

Leerink analyst Geoffrey Porges says the first biosimilar in a geography is most telling. Biologic products in the U.S. will typically lose about 15% of their revenue in the first year of a biosimilar launch. That rises to 47% after three years.

“The first biosimilar entrant seems to be the one that matters, and triggers the erosion,” he said in a June 12 report. “Subsequent biosimilar entrants do not appear to change the trajectory of revenue erosion for the branded drug.”

Vizient’s Lucio sees inflammation and oncology as particularly ripe areas for biosimilars. Among the biggest inflammation biologics, he lists the AbbVie drug Humira, J&J’s Remicade and Enbrel from Amgen.

Roche is particularly at risk with cancer drugs Herceptin, Avastin and Rituxan. That’s likely due to the lofty sales prowess of these drugs. Of those, Rituxan is the second biggest drug. It still brought in $7.5 billion in global sales in 2017. Behind that, Herceptin made $7.12 billion and Remicade generated $6.32 billion.

At least seven pharmaceutical and biotech companies are working on biosimilars of Humira. Remicade and Herceptin each feel the heat from a handful of companies. Amgen’s bone marrow stimulant Neulasta is also getting attention. U.S. regulators just approved Mylan’s biosimilar of Neulasta. Coherus Biosciences is likely to follow.

Biotech Companies Must Diversify

Payer buy-in also is key to biosimilar emergence. If payers begin favoring biosimilars over their traditionally more costly branded counterparts in biologics, revenue erosion could be 16.9% per period, Leerink’s Porges said. Absent that, erosion will likely be closer to 4.5% quarterly in volume.

Biotech companies making biologics will have to become smarter in how they differentiate and diversify, Vizient’s Lucio said. J&J offered massive rebates on Remicade in the face of biosimilar rivalries. Amgen developed a new method of delivering Neulasta to differentiate its version.

“The same comments being said about biosimilars were being said about generics,” he said. “They were new, they were novel and people were concerned that they would be more harmful, that they could not be relied upon to be as (effective) as, say, the branded products.”

He added: “It took many years for that to work itself out, for patients and physicians to accept it. With biosimilars, we’re still in the early stages.”

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