These are exciting times in biologics. While the pharmaceutical market is still dominated in terms of numbers and total revenues by small molecules, 2014-2016 saw record levels of 11, 12 and eight Biologics License Approvals (BLAs), respectively, being issued, after over 20 years of the total never topping six. Meanwhile, new molecular entity (NME) approvals saw a 20-year low of 14 in 2016.1
The success of these biologic drugs reflects their ability to treat major chronic diseases, notably certain forms of cancer and autoimmune diseases, better than existing alternatives and with fewer side effects. This, combined with an aging population that will be more susceptible to such diseases, is driving the growth of the global biological drugs market, according to Transparency Market Research (TMR).2
Biopharma launches are being particularly facilitated by FDA’s use of expedited programs for approval. The 21st Century Cures Act, which former President Obama signed off on December 13, 2016, should help to speed up drug development in general, but biologics even more so, because of their more common applicability to unmet needs.
Biologics actually accounted for six of the top eight drugs by revenues in 2016. AbbVie’s Humira® (adalimumab) for rheumatoid arthritis, psoriasis, Crohn’s and other autoimmune diseases led the way, with an astonishing $16 billion in sales.3 Humira has also been the fastest-growing biological in recent years.2 The others in descending order, each with over $6 billion in sales, were:
Enbrel® (etanercept), Amgen and Pfizer’s indication for rheumatoid arthritis; polyarticular juvenile idiopathic arthritis in patients aged two years or older; psoriatic arthritis; ankylosing spondylitis; and plaque psoriasis in patients aged four years or older
Rituxan® (rituximab, MabThera), by Roche (Genetech) and Biogen, is a monoclonal antibody (mAb) for leukemias, lymphomas and some autoimmune diseases
Remicade® (infliximab), from Johnson & Johnson and Merck, has a similar mechanism to Humira and treats multiple autoimmune diseases, including psoriatic arthritis, Crohn’s disease, rheumatoid arthritis and plaque psoriasis
Avastin® (bevacizumab), sponsored by Roche (Genetech), is a chemotherapy treatment for colorectal,lung, glioblastoma, kidney, cervical and ovarian cancer
Herceptin® (trastuzumab), also by Roche (Genetech), is prescribed for early-stage breast cancer (HER2+), metastatic breast cancer and gastric cancer or gastroesophageal (GE) junction adenocarcinoma
Biologics have historically enjoyed better approval rates than traditional drugs but also take longer to approve, due to stringent manufacturing processes and regulatory pathways as well as various product parameters. They typically go through about five times as many in-process tests during development. The high initial capital outlay required has deterred many small companies from entering the market.
A Growing Allure
The attraction of biologics for major pharma companies is obvious. Many, including Eli Lilly and Company, Bristol-Myers Squibb, Novartis, AstraZenca and GlaxoSmithKline (GSK), have invested billions of dollars in biologics in order to have prime mover advantage. A key example is Novartis’ $500 million cell-culture-based manufacturing facility in Singapore.
The first biosimilar, Sandoz’s Zarxio®, was approved in September 2015 and others have since been approved for Rituxan® and Lantus®. In contrast with small molecules, some originators of major biologicals remain active — AbbVie is defending Humira® against biosimilars to preserve its cash cow until full patent expiry in 2022 — and other major players, including Lilly, Boehringer Ingelheim, Pfizer and GSK, are developing biosimilars.3,4
TMR values the global biologic drugs market at $209.8 billion in 2016. It forecasts that the market will see a compound annual growth rate (CAGR) of 10.1% to 2020 when it will reach $287.2 billion, and 10.9% over the whole period to 2024, making it $479.8 billion.2 This is reasonably close to another report by BCC Research, which puts the total at $200.6 billion in 2013, rising to $386.7 billion by the end of 2019, with a CAGR of 10.6%.5
North America remains both the largest single regional market, with a 44.9% share of the total, and is expected to grow at a CAGR of 9.6% from 2016 to 2024. Heavy R&D investment has taken place in the U.S., and is expected to accelerate further still in the coming years.
Other developed regions are also projected to see strong growth as biologics address fundamentally similar market needs. However, Asia-Pacific, with its huge patient base, will have a CAGR of 15.6% and will eclipse Europe. Because of its skilled workforce, lower overall costs and changes in the regulatory scenario, this region is also increasingly seen as the most attractive for manufacturing.
Defining the Market
mAbs are clearly the single most important part of the biologics market, accounting for $90.2 billion or 43% of the market in 2016, according to TMR. They are projected to enjoy an 11.9% CAGR over the next seven years, rising to be 46% of the total market. Indeed, seven of the eight BLAs approved in 2015 were mAbs.2
A separate report by Grand View Research puts the global mAbs market at $85.4 billion in 2015, rising to $138.6 billion in 2024. This will be driven by intensive R&D, coupled with supportive government initiatives to support cost-effective production, notably in the U.S. and China, and the concurrent drive to personalized medicines. The human-based mAbs segment is projected to show particularly strong growth, while the trend will be increasingly towards in vitro rather than in vivo production, due to its greater cost- and time-efficiency.6
The second-largest part of the market is vaccines, which Grand View projects at $77.5 billion by 2024. This is more than what TMR values the vaccine market, at about $70 billion and falling as prices decline and major vaccines go off patent. Vaccines are generally basic treatments for conditions more prevalent in less developed countries, but cancer is expected to be the fastest-growing therapy.
Major players are involved here, drawing on established technologies to develop new forms. Pfizer, for instance, is developing vaccines to prevent severe infections caused by bacteria such as Meningococcal B, C. difficile and S. aureus. Government-sponsored vaccination programs, notably in India and Australia, offer other opportunities. In December 2015, for example, Sanofi Pasteur launched a new trivalent, inactivated polio vaccine in India.7
Third comes recombinant hormones and proteins, at about $50 billion. TMR projects a 14.5% CAGR for this segment to 2024 and a slight rise in its global market share, thanks to sustainable sales in developed and emerging markets. The other major segments are cell therapy and gene therapy, currently valued at around $15 billion and $10 billion, respectively.2
Outsourcing of manufacturing is perhaps not as well established in biologics as in small molecules, but the trend is definitely in that direction, according to the 2017 Nice Insight Contract Development and Manufacturing Survey. The 700+ survey respondents from pharma and biotech companies of all sizes in North America, Europe and Asia included companies developing vaccines, blood factors, hormones, growth factors, antibody-drug conjugates, mAbs, interleukin-based products, interferon and TNF factors.8
Of those who outsource drug substance services for large molecule APIs, 44% mentioned R&D, 56% clinical-scale manufacturing, and 35% commercial-scale manufacturing. Outsourced biomanufac-turing services include microbial cell line–based development and biomanufacturing (by 48% of those who outsource), vaccine development and manufacturing (46%), mammalian cell line–based development and biomanufacturing (43%), cell and gene therapy services (37%) and advanced antibody-based products (23%).8
Generally, biologics treatments cost about 22 times more than small molecules and can generate profit margins of up to 40%. Indeed, Express Scripts estimates that only 2% of people in the U.S. have used biological drugs, yet they account for 40% of prescription drug spending.2 The question must arise as to how long the market, however one defines that term, will bear such premiums.
Nonetheless, even though 2016 saw the brakes applied firmly to the pharma M&A boom of 2014 and early 2015, some significant deals were completed last year. As of the end of November, the total value of all biotech M&A rose from $82.5 billion in the same period of 2015 to $85.8 billion, while the total number of deals fell from 1,336 to 1,231, meaning the average deal value increased from $61.8 million to $69.7 million.9
Five biopharma-related deals topped $4 billion. The single largest saw Shire acquire Baxalta for $32 billion to create a giant in rare diseases and other specialized disorders. Pfizer bought Medivation for $14 billion, motivated mainly by its marketed prostate cancer drug Xtandi® and strong oncology pipeline. Pfizer also strengthened its inflammation and immunology pipeline by acquiring Anacor Pharmaceuticals for up to $5.2 billion.9
Oncology was also the mover in AbbVie taking Stemcentrx, with its late-stage small-cell lung cancer candidate rovalpituzumab tesirine (Rova-T, another mAb) for up to $9.8 billion. Likewise, AstraZeneca buying Acerta, originator of the irreversible oral Bruton’s tyrosine kinase (BTK) inhibitor acalabrutinib, currently in phase III development for B-cell blood cancers and phase I/II clinical trials in multiple solid tumors for up to $4 billion.9
And both the biopharmas and Big Pharma continue to invest in drug candidates. This is one emerging trend — beginning in 2010 — that has not changed, and probably will not. From 2006 to 2015, according to Biotechnology Innovation Organization (BIO), $98.4 billion was invested in U.S. emerging therapeutic companies through venture capital (42%), follow-on public offerings (41%) and initial public offerings (16%), while larger biopharma companies spent $161.7 billion on market-stage acquisitions.10
Meanwhile, 2015 saw a huge rise in the number of biotechs being funded by venture capital (nearly 350) and the total invested ($6.8 billion). This followed six years of steady increases but was unprecedented in its scale. It included seven of over $100 million and the single largest venture capital investment in biotech history, at $446 million.10 This may, of course, be another ‘biotech bubble,’ but at present, it looks like the pump is being primed for a continuing boom in biologics.
- “New Drugs at FDA: CDER’s New Molecular Entities & New Therapeutic Biological Products.” U.S. Food & Drug Administration. Web.
- Biologics Market - Global Industry Analysis, Size, Share, Growth, Trends & Forecast 2016–2024. Rep. Transparency Market Research. 5 Oct. 2015. Web.
- Philippidis, Alex. “The Top 15 Best-Selling Drugs of 2016.” GEN News. 06 Mar. 2017.
- Stanton, Dan. “Amgen Knocked Over by Humira IP Decision but Fight with AbbVie is Far from Over: Lawyer.” Biopharma Reporter. 19 Jan. 2016. Web.
- Highsmith, Jackson. Biologic Therapeutic Drugs: Technologies & Global Markets. Rep. BCC Research. Jan. 2015. Web.
- Monoclonal Antibodies Market Size Worth $138.6 Billion By 2024. Rep. Grand View Research. Nov. 2016. Web.
- Vaccine Market Size Projected to Reach $77.5 Billion By 2024. Rep. Grand View Research. Aug. 2016. Web.
- 2017 Nice Insight Contract Development and Manufacturing Survey.
- Philippidis, Alex. “Top 10 M&A Deals of 2016.” Genetic Engineering & Biotechnology News (GEN). 23 Jan. 2017. Web.
- Thomas, David, Chad Wessel. Emerging Therapeutic Company Investment and Deal Trends. Rep. Biotechnology Innovation Organization (BIO). Aug. 2016. Web.