The five forces that shape the biosimilar pipeline

Since Sandoz’s Zarxio (filgrastim) became the first biosimilar agent to be approved through the Food and Drug Administration’s (FDA) streamlined pathway for biosimilars in March this year, other signs have emerged that the biosimilars pipeline could be shortening as it continues to run, flush with new products, Aaron “Ronny” Gal, PhD, told a gathering of biosimilars stakeholders at the recent Biosimilars 20/20 conference held in Philadelphia. Gal is a senior analyst with the investment research organization Sanford C. Bernstein & Co.

In the wake of Zarxio’s approval, Gal said, he expects to see other filgrastim biosimilars receive FDA approval by the end of 2017, depending on the legal and regulatory process.

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Five market forces will influence the development of biosimilars in the coming years, said Gal. They include reasonable manufacturing costs, a less obstructive regulatory path, development of data on adoption of existing biosimilars, a growing number of competitors, and a favorable profitability profile.

Manufacture made easier

“It is reasonably clear that the capital expenditures and manufacturing costs of biosimilars have dropped dramatically in the past 20 years and are no longer a barrier for most biosimilars,” Gal said. Manufacturing costs for biosimilars now stand, on average, at around $200 per gram of product manufactured or less, he said, and those lower costs coupled with higher prices mean higher margins.

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Companies entering the biosimilars space have taken three paths to obtain manufacturing capacity, Gal said.

Large reference drugmakers in the generic markets - a group that includes companies like Amgen, Pfizer, Novartis, and Merck - are using excess capacity, because their existing products are providing high yields.

Well-funded biosimilars companies are building their own capacity, usually on a smaller scale than the large innovators would employ or by using what he called “disposable” manufacturing. Their other approach is to rent capacity from companies with an excess, such as the former arrangement between Teva and Lonza or the existing cooperation between Human Genome Sciences Inc. and Hospira.  

“Capital expenditures costs are also lower today for biosimilar manufacturers, because they do not need to satisfy the entire global market. Reaching 20% to 25% of the market will do,” Gal said. Further, sponsors of biosimilar agents do not have to be in the lowest-cost position, “as long as they are within 1.5 times the cost of innovator drugs,” he said.  

But once producers of biosimilars make the capital investment in manufacturing capacity, they do need to be flexible enough to use the same facility to make multiple products, and they need to keep their carrying costs low when the facility is underused, he said.

A clearer development pathway

The approval pathway that Sandoz used to obtain approval of Zarxio was established under the Biologics Price Competition and Innovation Act (BPCIA) of 2009, which is part of the Affordable Care Act. Gal called the BPCIA route a “stepwise process” similar to that used for approving generic drugs.

FDA and the European Medicines Agency (EMA) use similar approval processes for biosimilars, Gal said. The processes emphasize early quality data and accommodate regulators’ comments at each phase from physiochemical characterization to pivotal studies.

“The goal at each step is to reduce ‘residual uncertainty,’” he said. “The best products will likely have the least clinical trial burden. By the time of the BLA [biologics license application] review, it’s not the first time they’ve looked at the data.” The BLA review is the equivalent of a new drug application for a reference drug.

FDA’s biosimilar pathway is like an “inverted pyramid” compared to the pathway for reference biologics, Gal said. Whereas the biosimilar pyramid places greater emphasis on biological and physicochemical characterizations and less on clinical studies, the reference biologic structure emphasizes Phase II and III trials and places less importance on molecules.

Encouraging adoption data

If the European experience is any indication of how the United States will adopt biosimilars, then adoption habits will vary depending on the molecule, Gal said. He shared data from Bernstein that showed Amgen Inc.’s Neupogen (filgrastim) had achieved a 78% share adoption rate in the European Union (E.U.) by the fourth quarter of last year, compared with 44% for Hospira’s erythropoietin (EPO) biosimilar.

Meanwhile, early data for Janssen Biotech’s Remicade (infliximab) shows encouraging adoption trends, he said. Deep discounts have driven the uptake for Remicade; they’ve increased from 39% to 69% over the past year, Gal said. “Norway, for example, incentivizes hospitals to adopt biosimilar Remicade,” he said.

Gal noted another positive sign for acceptance of biosimilars in the E.U. “Each successive product in the European Union did better than the earlier one,” he said. “Payers, administrators, and hospital pharmacy chiefs in the EU are now largely convinced about the value of biosimilars.”

The bellwether, said Gal, is Remicade. “Physicians using it successfully will be more willing to use Enbrel (etanercept; Amgen) and Humira (adalimumab; AbbVie) biosimilars if the incentive structure is there,” Gal said.

Emerging competitors

Today, 57 different biosimilar development programs are moving through the pipeline, Gal said - up from 22 just two years ago - and the late-stage pipeline is expanding rapidly.

Major pharmaceutical manufacturers such as Novartis, Pfizer, Actavis, and Boehringer Ingelheim are developing a robust portfolio of monoclonals. Gal enumerated 22 programs in four oncology biosimilar groups - herceptin (trastizumab; Roche), Avastin (bevacizumab; Roche), Rituxan (rituximab; Roche/Biogen Idec), and Erbitux (cetuximab; Bristol-Myers Squibb/Merck). Thirteen of these programs are in pivotal phase trials due in the next two years. Gal said he expects the first of the oncology programs to hit the market in 2018 or 2019.

He also listed 28 programs across three classes of anti-tumor necrosis factor (aTNF) agents - Humira, Enbrel, and Remicade. Among the major pharmaceutical manufacturers, Hospira is the only company with an application before the FDA, for its Remicade biosimilar, Inflectra, which has already been approved in Europe. Twelve aTNF programs are in the pivotal phase, and Samsung Bioepis has biosimilars applications pending in Europe for Enbrel and Remicade.

Smaller companies, on the other hand, often develop nonstandard biologics. Four filgrastim biosimilars have been approved: Sandoz Pharmaceuticals’ Zarxio, approved by both FDA and EMA; Hospira’s Nivestim, by the EMA; Apotex’s Grastofil by the EMA; and Teva’s Granix, approved in both the United States and Europe. Apotex has FDA applications pending for filgrastim and peg-filgrastim biosimilars, while Hospira has submitted an FDA application for its erythropoiesis-stimulating agent (ESA) biosimilar of Amgen’s Epogen (eopetin alfa), which is already approved in Europe (along with Sandoz’ Epogen biosimilar).

In all, 13 companies are pursuing 25 programs in nonstandard biologics across seven classes, including two insulin products; 13 of those programs are in either pivotal or bridging phases, Gal said.

Gal said he expects to see multiple approvals in the United States of filgrastim biosimilars by the end of 2017, depending on the legal and regulatory process.

“We have an FDA that’s a bit cautious,” he said. The insulin biosimilars would be an “isolated niche with three or four generics,” whereas the gonal-F - also known as follicle stimulating hormone (FSH) - biosimilars market for fertility agents would imitate the human growth hormone market (hGH), “with one or two competitors and modest adoption,” he said.

Profitability profile

The financial outlook for biosimilars in the United States shows a lot of promise today, Gal said, but that growth has a ceiling on it. He expects biosimilars to eventually match generics in market penetration, at around 80%-90%. “Adoption for oncology products and sensitive populations, such as hGH, FSH, and orphan drugs, will be lower,” he said.

He also expects prices of biosimilars to erode faster than expected, again matching generics in terms of discounts compared to the reference branded drugs in the 80%-90% range. He forecast the discount on biosimilars to increase from 30% to 85% of reference biologic prices over that time.

The biggest risks for the biosimilar market are obsolescence, he said, citing the example of Roche’s Lucentis (ranibizumab), and the extent of the competition.

“We do not believe that in most drug/market combinations, differentiation between biosimilars will be an effective strategy,” Gal said. 

Richard Mark Kirkner is an independent healthcare journalist based in the Greater Philadelphia area.