Life Science Leader Magazine

NOV 2014

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BIO INNOVATION NOTES REPORT LIFESCIENCELEADER.COM NOVEMBER 2014 20 THE BIOSIMILARS OPPORTUNITY: 4 YEARS OF WAITING The Biosimilars Opportunity: 4 Years Of Waiting iosimilars have been approv- able in the U.S. since the 2010 passage of biosimilars- enabling legislation. However, no product applications have been approved. A few have been filed, but the industry largely remains on hold as the FDA waits to release needed guid- ance. Now, even the U.S. Senate is push- ing the FDA to release guidance docu- ments on biosimilar drug approvals. A group of senators in August wrote the HHS (Department of Health and Human Services) about the implementation of the Biologics Price Competition and Innovation Act (BPCIA), enacted to push the FDA to develop a framework to review and approve biosimilars. This delay has heightened concerns about just exactly how biosimilars will affect patients, insur- ers, drug companies, and even suppliers. BioPlan has evaluated this industry for over 25 years, and out of the roughly 4,500 biopharmaceutical candidate products in the pipeline, around 20 percent (approxi- mately 900) are follow-on biopharmaceu- ticals, mostly biosimilars (>500), but also biobetters. In our studies, we outline that only a percentage of these will make it to the market. Of interest are questions about how expensive biosimilars will be, how they will be marketed, and whether more effi- cient (cheaper) manufacturing for bio- similars could ultimately improve bio- manufacturing for all products. Other unanswered questions include concerns regarding the extent of competition. As new industry entrants emerge, some will be more concerned with getting U.S. approvals than with actual revenues and profits. This may result in disruptive pricing that could affect other areas of biologics as well. EXPECT MORE SMALLER PLAYERS TO ENTER THE MARKET There are some undisputed trends accom- panying the growth of biosimilars. We can expect many new companies to this industry of all sizes and types — including generic drug and foreign companies. We will find emerging geographies seeking to establish themselves in the mainstream biopharmaceutical industry via a biosimi- lars route. This will continue as the indus- try matures and more products come off patent. For many biosimilar/biobetter devel- opers, profits or capturing market share in major markets such as the U.S. and EU might not be a primary goal. Instead, it's likely that they'll view U.S. product approval — even if just for a biosimilar — as validation, and regulatory acceptance of that product for sales in lesser- regulated markets around the world. These entrants may also see gains in com- pany valuations, after U.S. or EU product approval. If you want to learn more about the report, please go to bioplanassociates.com By E. Langer E R I C L A N G E R President and Managing Partner BioPlan Associates, Inc. THE U.S. MARKET TAKES SHAPE The U.S. will most likely still be the domi- nant biosimilar consumer market. Even compared to the EU, the U.S. has a large population and an insurer base moti- vated by cheaper biosimilars. It's there- fore likely that the U.S. will become very competitive and perhaps overcrowded, as dozens of new and established com- panies jockey for market share. Profit margins may be driven down as a result. Despite this, the U.S. biosimilars oppor- tunity is attractive. Indeed, as the chart on page 22 shows, biosimilars will soon be able to compete with reference prod- ucts that boast cumulative annual rev- enue of roughly $100 billion. KEY BIOSIMILARS TRENDS Biosimilars Will Not Expand Product Markets: The number of companies, manufacturing activity, and products that form the follow-on product market will most likely not expand the market's overall value, and may instead contract it. Biopharmaceuticals are a zero-sum market. Making them a little cheaper will not expand their use. Biosimilars will maintain a constant number of units sold, but will reduce the combined sales value for reference products and their biosimilar versions. This overall market tightening (in dollar terms) can readily be seen with generic small molecule drugs, where deeply discounted generic prod- ucts can capture up to 90 percent market share in a matter of weeks. Biosimilars are expected to be discounted to a lesser degree (≤30 percent) than generics, but a similar market dynamic will likely play out. Expect to see the number of players increase as markets become more fragmented.

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