A number of biologics with huge markets are going off-patent in the US. Do Indian pharmaceutical companies have it in them to play this high-cost, high-risk game of launching biosimilars?
Biotech drugs are the future. One in every three new drugs approved in the global market is a biotech drug. This, by itself, makes it an obvious space to be in, but for Indian companies, there are other compelling reasons, too. Their traditional stronghold of generic synthetic or small molecule drugs is under siege globally due to low bargaining power, pressure on margins and increased competition, especially in the crucial US market. Biotech drugs can be their next growth engine, especially as drugs with markets worth millions of dollars go off-patent in the next few years, opening immense opportunities for the launch of biosimilar versions of these original biotech drugs. The big Indian pharma players, the prominent among them being biopharmaceutical maker Biocon, are doing exactly that - chasing this opportunity in biosimilars that is estimated to be worth $5 billion globally and $1 billion in India.
However, the space is not for the faint-hearted, not just because developing a biosimilar is costlier than making a generic version of a chemical drug, but also because the market is increasingly getting tough globally. Developing a biosimilar costs around $100 million, while with generics, it is possible to file 20 "abbreviated new drug applications" for the same amount. "These are expensive investments but Indian pharma will have to make them," says Kiran Mazumdar-Shaw, Founder, Chairperson and Managing Director of Biocon. "We invest about 15 per cent of our revenue in research. Almost all of it goes into biologics, with about 70 per cent in biosimilars." Companies, both innovators and biosimilar makers, after having taken an early lead, are leaving no stone unturned to leverage their strengths.
Getting approvals is another challenge, though Pankaj R. Patel, Chairman, Zylus Cadila, believes that with more countries defining their regulations, the situation is easing. "Globally, this is a space that needs substantial investments and clinical trials," he says. "Now, with the regulations becoming clearer, people have started taking the risk to invest."
Nimish Chudgar, CEO and Managing Director, Intas Pharmaceuticals, says regulatory approval is only the first step to making a dent in the market. "It is a slow process as one has to promote the drug, too," he says. Promotion is very important because margins are not the same as in chemical drugs. The price differential between branded and generic drugs can be 80-90 per cent, which enables the generic player to capture the bulk of the market once the patent expires, though it is getting tougher. In biosimilars, the price differential from the innovator drug is 40-70 per cent. Every company selling a biosimilar will need to create its own market and enter the mindspace of patients and doctors, accustomed largely to the innovator's product. But then, Chudgar of Intas is hopeful. "Going by the trend among most countries keen to cut down their insurance bill, we seem to be moving into times when an auto-switch to a biosimilar from an innovator product, like in generics, may happen."
But then, there could be increased competition from the innovator companies themselves as nothing stops them from making biosimilars or adopt a product lifecycle approach and either redesign or launch a different version of their own biotech drugs. The trend is already visible - Roche's Herceptin is injected intravenously, but it has also created a version which is applied subcutaneously. The US biopharma giant Amgen, which formulated the biotech drug Filgrastim - available in vials, has also made a pre-filled syringe version.
And, there is one more dimension. While US and European dominance was expected, with companies like Amgen, Pfizer, Momenta, Novartis and Sanofi leading the way, South Korean companies such as Celltrion and Samsung Biologics have also made headway in the area. They have huge manufacturing capacities. "We are all a little behind and need to catch up," says K.V. Subramaniam, President, Reliance Life Sciences.
"South Korea embarked on biosimilars earlier," says Utkarsh Palnitkar, Founder and Managing Partner, at Aarna Corporate Advisors and formerly with KPMG and Ernst & Young India. Palnitkar, who has studied the sector extensively, says: "In the case of India, most pharma companies have only recently grown biotech branches on a generics tree." He feels there is room for much more investment and courage by the Indian companies in biotech, including research-heavy companies like Biocon and others. All in all, adding a biotech branch is seeming a value worth chasing. Look up any leading Indian pharma maker - Biocon, Intas, Lupin, Dr. Reddy's Laboratories, Zydus Cadila, Reliance Life Sciences, Emcure, Glenmark, Aurobindo and Alkem Laboratories - all are looking to make a dent in this space.
Leading the Way
The loudest bang so far has been by the country's biggest biopharmaceutical maker, Biocon, which has Mylan as its partner. In December 2017, Bengaluru-based Biocon informed the bourses that the US drug regulator (USFDA) had approved a biosimilar for Herceptin, Ogivri, manufactured by Biocon jointly with global major Mylan (now called Viatris). It turned out to be the second anti-cancer biosimilar the USFDA had ever okayed. In March 2015, Sandoz, a Novartis company, had become the first company to receive a biosimilar approval in the US. Biocon's stock on the bourses got a big fillip. Since then, Biocon has been in the limelight for much of the time on the bourses and its shares are trading at a much higher price to earnings multiple than other pharma stocks.
Kiran Mazumdar-Shaw, Chairperson and MD, Biocon
A month after that news in 2017, Biocon also announced a partnership with Sandoz, a division of the Swiss pharma giant Novartis, to address biosimilar opportunities beyond the ones it was exploring with Mylan. Biocon has not looked back since then. Last year, Fulphila - a biosimilar pegfilgrastim (a white blood cell booster) co-developed by Biocon-Mylan - was successfully launched in the US. It has already captured 21 per cent volume share in the pegfilgrastim (pre-filled) syringe market in the US. Biocon and Mylan also got their biosimilars insulin Glargine and Trastuzumab approved and launched in Europe and Australia. With three biosimilars approved in the US, Europe and Australia and others in the pipeline, Biocon is looking forward to $1 billion biologics (largely biosimilars) revenue by FY2022.
Hyderabad-based Aurobindo Pharma is the latest entrant into this field. It made a foray in 2017 and set up a 1,40,000-sq.ft. manufacturing facility covering mammalian cell culture, microbial fermentation, capabilities to produce both vials and pre-filled syringes in their fill and finish facility apart from quality control laboratories at Pashamylaram on the outskirts of Hyderabad. "We expect to have the first filing of our oncology biosimilar in Europe 12 to 15 months from now, followed by a sustainable product portfolio across therapeutic segments in oncology and auto-immune disorders for markets like Europe and the US with at least one filing every year from 2021," says Satakarni Makkapati, President and Business Head, Biologics, Aurobindo. "What differentiates us is that we have in-licensed five high quality biosimilars and cell line technology platforms that allow us to compete in developed markets on both quality and cost effectiveness," he says. Makkapati is excited about the emerging opportunities.
"Among the top 50 molecules globally, half are biotech with total revenues of $170 billion. The balance 25 are small molecules with total revenues of $40 billion. Today, biotech drugs are growing at 12 per cent globally against only 2 per cent growth registered by synthetic drugs," says Chudgar of Intas Pharmaceuticals. He says in biotech, the major growth segments are critical care areas like oncology or cancer care and multiple sclerosis. Intas was the first Indian company to get a biosimilar registered - that of the biotech drug Filgratsim, under the brand Accofil - in the EU in February 2015. "We launched pegylated granulocyte-colony stimulating factor biosimilar in Europe last year. We have three more in the pipeline for Europe and two for the US. Of these, we are hopeful of getting our first biosimilar approved in the US in the next eight months or so," he says.
Research firm EvaluatePharma's report World Preview 2018, Outlook for 2024 predicts that biotechnology products will make up 31 per cent pharma market by 2024, from 25 per cent in 2017. People in the industry estimate the global biotech market at over $200 billion - US alone at $85-100 billion - and expect it to double by 2024. There is limited competition in biotech drugs, higher pricing - 50 to 100 times that of chemical drugs in markets like the US (though the two cannot be strictly compared) - but developing biosimilars also calls for a much heavier investment.
Biosimilars add up to a small sliver of the biotech market - about $5 billion, including $1 billion in India. The EvaluatePharma report predicts they will comprise 52 per cent sales of top-selling 100 pharma products by 2024, up from 49 per cent in 2017.
Nimish Chudgar, CEO & MD, Intas Pharmaceuticals
But biosimilars, by their very definition, are not an easy space to be in. A biosimilar is copy of an innovator company's biotech drug. Biotech drugs comprise complex large molecules - unlike the small molecules of chemical drugs - which can be proteins or antibodies, derived from living sources such as plants, bacteria or mammalian cells. Since these are living sources, their characteristics vary. Such a drug manufactured by one company is never an identical copy of that made by another, and hence is called a 'biosimilar', rather than a 'generic'.
Generics, in which Indian pharma is an important supplier to global markets, are made from chemicals created in the laboratory. Biotech drugs require understanding of living organisms. Their molecules are much heavier, with complex structures that can change depending on the process used to produce them and the environmental conditions in which they are made. Just as, in the making of curd, the process employed affects the taste, even though the end-product is the same, so too the process is as important as the product in biosimilars.
This means getting acceptance and setting regulations for biosimilars has not been easy despite biotech drugs (made by the innovator companies) having been around in the US for a long time now - an early example is Herceptin (used to treat some forms of breast and stomach cancer), manufactured by Genentech, a subsidiary of Roche Holdings, which got USFDA approval in September 1998. Europe has been well ahead of the US in formulating regulations for biosimilars with the European Medicines Agency, introducing the relevant guidelines in 2006. The US passed its Price Competition and Innovation Act in 2010.
"In India, the biosimilar segment is growing at 25-30 per cent in volume terms, mainly cancer care molecules, and 15 to 20 per cent in value terms in the domestic market," says Chudgar of Intas. One could argue that the growth rate seems high because the base is small. Nonetheless, this is against 9-10 per cent growth in chemical-based medicines in India, which at best is expected to stabilise at 10-12 per cent. While Indian companies are making their presence felt in India, it is making an impact globally, especially in the markets of US and Europe, that holds the big attraction.
One of the major players from India is Reliance Life Sciences, part of Mukesh Ambani's Reliance Group. "We have 18 biosimilars in the Indian market, the highest number from a single company in the world," says K.V. Subramaniam, President, Reliance Life Sciences. "Of these, six are monoclonal antibodies, which are more difficult to develop. We also have the largest number of biosimilars under development, around 20. We have the biggest mammalian cell culture manufacturing facility in the country as well." Reliance has preferred to focus on India and markets other than the US, Europe, Japan and Australia, but does intend to go into the US and Europe through marketing partnerships over the next two to three years. Others have also been adding numbers in India. For instance, Intas talks of 14 biosimilars, while Biocon has nine products in all, including seven biosmilars and two novel biologics. Zydus announced in September that it has received marketing authorisation for TwinrabTM (RabiMabs) from the Drug Controller General of India. It is billed as a novel biologic for rabies.
Partners in Profit
As leading biotech drugs go off-patent, they continue to open doors for biosimilar makers, including Indian companies. Filgrastim, which Intas's subsidiary created a biosimilar of, went off-patent in 2013 and Pegfilgrastim, whose biosimilar Mylan launched in US and Intas in the EU, in 2015. Another 20-odd, with total sales estimated at over $35 million, including blockbuster ones like Herceptin, Avastin and Humira, will go off-patent between 2019 and 2028. (See The Biologics Opportunity.) With Herceptin, Mylan and Biocon were able to register their biosimilars even before its patents expired following a settlement and licensing agreement with its manufacturer F. Hoffman-La Roche in March 2017.
Given the large investments involved, partnerships become critical. Some Indian companies have been entering into tie-ups with those in the West, either for product-specific R&D or for marketing. Like Biocon with Mylan and Sandoz, Intas worked with Canadian pharma major Apotex to develop the Filgrastim biosimilar. While Zydus Cadila is going for a partnering approach based on product and geography, Dr. Reddy's, which has Fresenius Kabi as a partner, is choosing partners based on product and geographies. Apart from the West, there are also opportunities in emerging markets, including the domestic one. "Some Indian companies have been early adopters of biosimilars, which is why India has over 50 biosimilars in the market today," says Palnitkar. But the real value is markets like the US and Europe, where many have not yet been able to make a dent.
Are Indian companies missing the opportunity? "It's not right to say we have missed the bus," says Palnitkar. "But it could be argued that Indian companies are running the risk of losing out on an opportunity we thought we would capture," he says. Other than leading companies from South Korea and China investing huge sums in biosimilars, he says, global majors are also moving to the next level of precision medicine. Advances in genomics - used in gene editing - can completely disrupt the way diseases are tested and treated, and it is important for Indian companies to engage with them.
Subramaniam of Reliance agrees. "Biosimilars is still at its infancy and is a huge space with enough opportunity for a number of players," he says. Will Indian pharma companies leverage this, or will they let it pass?