It wouldn’t be accurate to say the era of biosimilars in the United States is being ushered in with great fanfare.
On the one hand, only one’s been approved thus far, and the handful others that are close to Food & Drug Administration approval requests are already hitting new legal and regulatory headwinds.
On the other hand, 2015 is still going to be a subtly pivotal year for the pharmaceutical industry, as biosimilar drugs finally make their way into the landscape.
With that said, what exactly are biosimilars, how disruptive might they be and what companies are positioned to win or lose the advent of this new category of drugs?
The answers to those questions might be a bit surprising, in good and bad ways.
What Are Biosimilars?
It’s a misnomer to think a very specific molecular structure for a drug is the only one offering a particular therapeutic effect. In many cases, a similar molecule is “close enough” in the FDA’s eyes, provided a biotech company verifies its drug’s comparable efficacy in a trial.
Comparisons to generics are often drawn, and, to be fair, there are some parallels. Referring to biosimilars in the same breath as generics, however, doesn’t do biosimilars justice.
Whereas generic versions of drugs are exact copies of previously created, chemically-synthesized medicines that have lost patent protection, biosimilars tend to be near-copies of complex molecules created by living cells.
Whereas generic versions of simple, chemically-manufactured medicines can be made on the cheap, the introduction of these drugs can and often will pull the price of the branded version of the same drug down 80% or more. Not so with biosimilars. Biologic drugs are complicated and often expensive to produce, and even a close copy of these complex drugs isn’t easy or cheap to create. As such, the introduction of biosimilars may only create a 25% to 30% decrease in the price of the original, branded version of the drug.
Still, any cheaper alternative to a popular biologic drug is clearly marketable. Moreover, these alternatives are now here.
What’s the Market Opportunity for Biosimilars?
Although biosimilars have been winning approval in Europe since 2006, the FDA only approved the United States’ first biosimilar in March: a biosimilar copy of the Amgen (AMGN) drug Neupogen, called Zarxio, made by Novartis (NVS) subsidiary Sandoz to prevent infections in patients undergoing chemotherapy.
A few more biosimilar drugs could be on the market in the U.S. before the year is over, and by 2020 the biosimilar industry could be truly disruptive within the United States. Some analysts expect sales of biosimilar drugs to reach $35 billion by then.
Even without the FDA’s approval, though, biosimilars are already creating a headwind for U.S. pharmaceutical companies.
While Johnson & Johnson (JNJ) managed to top its second quarter earnings estimates, sales of its anti-inflammatory drug Remicade were down 25% on a year-over-year basis almost entirely because a biosimilar version of the same was introduced to Europe in February.
Hospira (HSP) and a company called Celltrion jointly make and market the alternative to Remicade in Europe — infliximab — but the same drug is also a candidate for approval in the United States. The FDA postponed the review of this biosimilar drug in February, and although it didn’t specifically explain the delay, it was likely a logistical and/or legal issue rather than a safety or efficacy concern.
It would be, after all, the United States’ first biosimilar monoclonal antibody. The FDA may simply want to be sure it gets everything right.
Who Else Makes Biosimilar Drugs?
While Zarxio, made by Novartis’ Sandoz, and infliximab, jointly made by Celltrion and Hospira, are in the biosimilar spotlight right now, these aren’t the only familiar names entering the biosimilars race.
Merck (MRK), incredibly enough, is one of those names that drug companies should worry about.
In partnership with an outfit called Samsung Bioepis, Merck has developed an effective alternative to the AbbVie (ABBV) biosimilar, Humira. That is no small matter. Humira generates more than $12 billion in annual sales, but is poised to lose U.S. patent protection in 2016, and will lose its European patent in 2018.
Merck and Samsung Bioepis are also taking aim at Amgen’s Enbrel and Johnson & Johnson’s Remicide by developing biosimilar copycats of those two key drugs. That being said, Amgen is more hunter than hunted, despite competitors working on biosimilars to rival Enbrel and Neupogen. AMGN has six biosimilars of its own in development, and expects to start launching these drugs beginning in 2017.
With answers to cancer drugs rituximab and trastuzumab in that portfolio, Amgen may be best poised to disrupt the industry’s most iconic biosimilars.
Of course, most major pharmaceutical companies are doing biosimilar development, and once the United States gets the first handful of such drugs approved, R&D heat could crank up fast.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
