Pharmaceutical Outsourcing, November 2015
Given that over $60 billion of biopharmaceutical sales will lose patent protection by 2020, it is not surprising that most major biologics manufacturers have established biosimilar development programs. The first approval of a biosimilar in the US in 2015 has raised expectations even further.
Projections of growth for the global biosimilars market are quite healthy, and biopharmaceutical custom manufacturers have high hopes of benefiting. There are issues facing biosimilars in general, and CMO/CDMOs in particular, that may temper, or at least delay, the dramatic growth that so many are predicting.
Growing Interest in Biologics
The global biopharmaceutical market in 2014 was valued at $163 billion and accounted for 20% of the total pharmaceutical market, according to McKinsey & Company. The firm also reported that the 8% growth in demand for biologic drugs is twice that for small-molecule therapies and expected to continue for several years. In addition, each of the top 15 biopharmaceutical drugs on the market have global sales in excess of $2 billion, and some much higher than that (e.g. Humira at > $10 billion). Given these numbers, it is not surprising that many conventional pharmaceutical companies have initiated R&D efforts focused on the development of biologic drugs.
The percentage of respondents to the 2015 Nice Insight Pharmaceutical and Biotechnology Outsourcing survey of over 2,300 outsourcingfacing pharmaceutical and biotechnology executives whose companies are engaged in the development of biologics has increased from 65% in 2013 to 82% in 2015. The percent of outsourcing budgets spent on biologics vs. small-molecule therapeutics has risen from 54% to 58% over the same period. In addition, large and emerging biotech companies are now outsourcing nearly as frequently as big pharma and generally more often than emerging pharma at the Discovery, Preclinical, and Phase I stages of drug development, based on responses of survey participants.
Biosimilars Market Estimations
Predictions for the size of the global biosimilars market vary quite widely, reflecting some of this uncertainty. The lowest value of $4.0 billion, growing at a compound annual growth rate (CAGR) of 15%, by 2019 was estimated by BCC Research in a January 2015 report. In July 2015, Markets and Markets predicted a $6.22 billion market by 2020 (CAGR of 22.1%). RCNOS in an April 2015 report forecast a value of $25.53 billion for the global biosimilars market by 2020, growing at a CAGR of 54.4%. Roots Analysis, meanwhile, released a report in July 2015 predicting a value for the sector of $32 billion by 2025.
Despite the widely differing values, there is general agreement that the biosimilars market will experience double-digit growth in the coming years. Biologic drugs have in general become increasingly popular, particularly for chronic diseases and diseases associated with aging global populations, such as diabetes, arthritis, and heart diseases, because they often work by mechanisms not possible with small-molecule drugs. Many of the earliest biologic blockbusters are now facing the patent cliff. The need to reduce healthcare costs is also driving interest in biosimilars, which can carry significantly reduced price tags by 30% to 50% compared to their often very expensive counterparts. At the same time, people in the growing middle classes in emerging market countries with improved healthcare infrastructure can now not only afford, but also gain access to advanced treatments, including biosimilars.
Europe currently dominates the biosimilars market, which is not surprising since it has had a regulatory approval pathway in place since 2006 and nearly 20 products are currently available in the EU. Asia-Pacific is the second largest regional market, followed by other emerging regions including South America, and biosimilar products have been registered in Australia, Canada, India, Japan and South Korea. Many biosimilar developers have targeted Asia and other emerging markets because the approval process tends to be simpler. Many industry players argue, however, that these products are not true biosimilars because approvals were granted without any requirement to demonstrate comparability to the originator drug, which is a key aspect of the regulatory approval pathways in the EU and US. It should be noted, though, that many countries are in the process of developing specific biosimilar approval pathways or have issues guidelines, including Australia, Malaysia, Brazil, Mexico, Venezuela, Columbia, India, Russia, China and numerous other countries across Asia and Africa.
North America has the smallest share of the market by far, which is also no surprise given that the first US-approved biosimilar, Zarxio, Sandoz’ version of Amgen’s Neupogen (filgrastim), has only been on the market since September 2015. Following the approval of Zarxio in March 2015, FDA also issued several final guidance documents and an additional draft guidance to help drug manufacturers and other stakeholders better understand the issues involved in implementing the abbreviated licensure pathway for biosimilars created by the Biologics Price Competition and Innovation Act (BPCIA) of 2009. Although numerous approvals were expected to follow, to date Celltrion’s application for Remsima (infliximab) has been delayed due to a need for more data, Hospira’s (now owned by Pfizer) application for a biosimilar version of Amgen’s Epogen (EPO) was rejected, and only Sandoz’s Biologics License Application (BLA) for a biosimilar of Amgen's Enbrel® (etanercept) has been accepted under the 351 (k) pathway. Clearly there is still significant uncertainty about the US approval process.
According to BioPlan Associates, there are close to 700 biosimilars under development by nearly 500 different companies. Most target the branded biologic drugs with the highest sales and are in early phases of development. Many companies are waiting for clarity in the US approval process before submitting applications to FDA.
Monoclonal Antibodies are Next
Most biosimilars on the market today are small protein-based drugs such as epoetins, filgrastims, growth hormones, and follitropin alfa. There is much excitement about monoclonal antibodies (mAbs), which include many of those blockbuster drugs that will soon come off patent. Celltrion and Hospira received the first mAb biosimilar approval for their version (Remsima/Inflectra) of Johnson & Johnson’s Remicade (infliximab) from the European Medicines Agency (EMA) in 2013, and Celltrion has since received approvals in several countries, including Korea, Japan, Russia, and Brazil. A large fraction of the biosimilars in development are monoclonal antibodies, and the percentage is only expected to increase in coming years.
The competition to be first to market with mAb biosimilars is quite fierce, however. There are often many manufacturers developing biosimilar products for the same branded biologic–as many as eight for each drug substance. The market will not support all of them, and therefore speed to market is crucial, as only the first companies to receive approvals will realize a measurable market share. Under these conditions, companies with advanced technologies and resources will have a clear advantage.
Role of Partnerships and Alliances
Unlike small-molecule APIs, which are single chemicals that are wellcharacterized and can be synthesized with the exact same structure by different routes, biologics are large, complex molecules that cannot be exactly duplicated, hence the name biosimilar rather than biogeneric. Manufacturers of biosimilars must demonstrate comparability to branded drug with respect to physico-chemical properties, safety and efficacy. As a result, they must have similar production and analytical capabilities to those of branded biopharmaceutical manufacturers. This situation is even truer as the complexity of the biologic increases, such as for mAbs, fusion proteins and antibody-drug conjugates (ADCs). The need to invest extensively in facilities, human resources, and technology also make it quite costly to develop biosimilars.
Participation in joint ventures, licensing arrangements and other types of alliances is a common approach for addressing the need for such a broad array of expertise, particularly for smaller biosimilar developers. Large players are involved, too, however. In the latter case, the alliances often involve manufacturers in developed and emerging markets. Because it is easier to receive approvals in many of these markets, manufacturers find them attractive for launching new products and gaining market experience. Partnership with a domestic pharmaceutical or biotechnology firm is often necessary to gain access. In addition to the Celltrion/Hospira partnership mentioned above, others include Biogen Idec/Samsung Biologics (Samsung Bioepis JV); Biocon/Mylan; Merck/Parexel; Baxter/Momenta Pharmaceuticals; and Amgen/Actavis (formerly Watson). Merck & Co. is also working with Samsung Bioepis to develop and commercialize biosimilars.
In-House Versus Outsourced Manufacturing
Given the high requirements for state-of-the-art facilities and advanced biomanufacturing expertise to develop and produce biosimilars, it should not be surprising that most large manufacturers prefer to conduct the majority of their efforts in-house. According to BioPlan Associates, 30% of branded biopharmaceutical manufacturing is outsourced, and they predict that eventually a similar level will be reached for biosimilars. Even so, it is likely that only small, virtual biosimilar developers will rely completely on contract manufacturing organizations, while a larger portion of vertically integrated biologics companies will choose to develop and manufacture their biosimilar products completely in-house.
Importance of Physician Support
Although biosimilars have the potential to save patients and governments significant amounts of money, they face additional hurdles that small-molecule generics do not: the need to convince physicians, pharmacists, and patients that they are safe and effective. The experience in the EU has varied by country, drug type and indication. Education to increase general awareness about biosimilars and the provision of evidence-based data to support efficacy and safety claims will be crucial for driving further biosimilar adoption. In the US, there is hope that the existence of a single national healthcare system will also be a benefit. Manufacturers have also been proactive, forming the Biosimilars Forum, a nonprofit organization dedicated to expanding patient access to biosimilars in the United States, shortly after the approval of Zarxio. The founding members include Actavis, Amgen, Boehringer Ingelheim, Coherus BioSciences, EMD Serono, Hospira, Merck, Pfizer, Samsung, Sandoz, and Teva.
What Does it All Mean for CMO/CDMOs?
The overall biopharmaceutical outsourcing market has been growing at an annual rate of approximately 10% and is expected to continue to do so for the next several years, according to HighTech Business Decisions. Some of that growth can be attributed to biosimilar projects, and more will take place as additional biosimilars receive approvals and are launched on the market. The most likely customers for biopharmaceutical CMOs include small, newly created biotech companies developing their first products and Big Pharma companies that lack expertise in biologic drug development but who recognize the potential profits presented by the biosimilars market. Growth in demand for contract development and manufacturing services (CDMO) may also increase as producers of the earliest “biogenerics” introduced in emerging markets with less stringent approval processes seek to improve their products in order to compete in major established markets.
On the other hand, only a few of the many companies developing biosimilars for a given branded biologic will actually end up with a measurable share of the market, limiting the number of projects that could potentially be outsourced. These biosimilars will also be competing with the discounted branded drugs, which will in all likelihood be preferred by physicians, at least initially, so production volumes may be quite small for some time to come.
CMOs and CDMOs seeking to attract biosimilar manufacturers need to offer a wide range of state-of-the-art technologies that enable clear demonstration of comparability and the rapid design and development of cost-effective upstream and downstream bioprocesses. Such technologies may include proprietary expression systems; continuous processes employing single-use equipment and high-throughput analytical capabilities. Companies with this high level of expertise also have the potential to produce their own biosimilar actives for licensing, a common practice with small molecule APIs.