Merck's interest highlights potential in biosimilars

Merck & Co’s decision yesterday to pay $130m for Insmed’s pipeline of biosimilar drugs and manufacturing facilities for follow-on biologics not only demonstrates its public commitment to beefing up its presence in the area, but also the wider interest in biosimilars.

For Insmed it was a deal that could not have come soon enough; the group was down to its last $2.4m in cash, which given its $1.2m monthly cash burn would have lasted two months. In a further development in the biosimilar space, Novartis today announced that it had received European approval for filgrastim, its generic version of Amgen’s Neupogen, which last year had worldwide sales of $1.34bn.

Biosimilars are not exact copies of their branded originals, and in the regions where they are approved there has been a requirement to conduct additional clinical trials to prove bio-equivalence, bumping the cost of the drugs up. This has meant that rather than price reductions of up to 80% associated with generic versions of small molecule drugs, biosimilars are expected to have price reductions closer to 30%.

US pathway

To date the only marketed biosimilars are in Europe where there is a defined regulatory pathway for the drugs. Novartis leads the field with three drugs now approved in the space through its Sandoz generics division.

But many believe with increasing drug costs, and President Obama’s stated aim of reforming the healthcare industry, the US could have a regulatory process in place as early as 2010.

Approval of biosimilars in the US will be the trigger for a step change in the industry and companies such as Merck are clearly making their move early to ensure that when a pathway does appear it will have the manufacturing capability and expertise to compete successfully in the field.

In January, Teva Pharmaceutical Industries made a similar advance with its joint venture with Lonza to develop, manufacture and market biosimilar drugs (Teva primed for biosimilar opportunity, January 21, 2009). Additionally, in February 2008, the group paid $400m in cash to acquire CoGenesys, ensuring it will be well placed when US approval happens.

The jockeying for position in the biosimilar development and manufacturing space is driven by the sheer size of the market, which makes the commercial opportunity for biogenerics very clear. Last year sales of biotechnology products are estimated to have reached $108bn. Additionally, the patents for eight of the top ten biggest selling biotech drugs are due to expire by 2018.

Remaining assets

An analysis by EvaluatePharma shows that for other large pharma groups looking to pick up assets in the sector there are only a handful of smaller independent companies that could be acquired, now that Insmed has effectively been bought up by Merck.

Biosimilars in Development
         
  Company Product Generic Name Indication Summary
         
Filed Novartis Filgrastim filgrastim Neutropaenia [Filed]
  Cangene Leucotropin - Cancer adjunct therapy [Filed]; Acute Radiation Syndrome [Phase II]
  Bioton Alpheon interferon alfa-2a Leukaemia, chronic myeloid (CML) [Filed]; Leukaemia, hairy cell (HCL) [Filed]; Renal cell carcinoma (RCC) [Filed]; Hepatitis B treatment [Filed]
         
Phase III Teva Pharmaceutical Industries Filgrastim (G-CSF) filgrastim Neutropaenia [Phase III]
  Hospira Filgrastim filgrastim Neutropaenia [Phase III]
         
Phase I Apotex Neukine filgrastim Neutropaenia [Phase I]
  STADA Arzneimittel Filgrastim filgrastim Neutropaenia [Phase I]
  Insmed INS-19 - Neutropaenia [Phase I]
  Insmed INS-20 - Neutropaenia [Phase I]
         
Pre-clinical Bioton EPO erythropoietin Anaemia, chemotherapy-induced [Pre-clinical]; Anaemia, other [Pre-clinical]
         
Research project Bioton G-CSF filgrastim Neutropaenia [Research project]
  Bioton GM-CSF sargramostim Neutropaenia [Research project]

Hospira and STADA, which have market caps of $4.2bn and $1.4bn respectively, as well as being relatively expensive do not have an exclusive focus on biosimilars, making them less attractive as acquisition candidates.

This leaves the much smaller players. Cangene, which is developing cancer drug, Leucotropin, is part of privately owned Apotex, which itself has a version of Neupogen in phase I trials. As Apotex is private it is hard to know how willing the company would be to sell off Cangene, which is listed in Canada with a market cap of $309m.

The company with the highest number of products in development, and therefore potentially the most attractive, is Polish company, Bioton. The group has filed a version of Genentech’s leukaemia drug, Roferon A.

While the drug is one of the most advanced biosimilars, the rest of Bioton’s follow-on biologics pipeline is relatively early stage, comprising one pre-clinical and one research project. This immaturity might not be a barrier to acquisition, given that Insmed’s two products had yet to enter phase II proof of concept trials.  With a market cap of $230m the company could easily be bought by a larger player.

India’s Biocon also has a version of Epogen on sale in India under the brand name Erypro and is developing a generic version of Neupogen, making the company, with its stated focus on biosimilars and $432m market cap, another attractive acquisition candidate. 

If, as many believe, biosimilars could be a reality in the US within two years, this and the relatively high barriers to entry for developing and manufacturing biosimilars, could mean that this fairly short list of companies might over the coming months get a lot shorter.

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