Biosimilar industry: Opportunities & challenges

Rising drug costs, limited healthcare budgets across the world and patent expiries of biotechnology drugs have created a huge opportunity for biosimilar manufacturers. This article maps the overview of biosimilar industry (current and future scenario), SWOT analysis and different strategic options Indian companies should tap for growth.

Biosimilars in India have taken a fresh stimulating path since biologics with sales totalling US$ 25 billion will go off patent by 2016 which in tum will contribute to higher growth rate of biosimilars market in India. It is also expected that with 650 biotechnology medicines in development in 2010 for more than 100 diseases, half the new drugs approved in 2015 will be biologics. In order to tap this opportunity companies need to build up their capabilities as they will face numerous challenges in terms of barriers to entry, regulatory, sizeable investments and expertise associated with biosimilars development.

Understanding biosimilars:
Biosimilars are the officially approved subsequent versions of innovator biopharmaceutical products, manufactured after patent and exclusivity expiry of the innovator product (Biologics). The high cost involved in the manufacture of biologics and patent expiry of some of the older recombinant protein molecules has created an opportunity for companies to produce me-too versions of the molecules. Find below the broad categories of biosimilars.
n    Monoclonal antibodies: MAbs specifically bind to target cells, stimulating patient's immune system to attack target cells. Used for diagnosis (ELISA, Imaging), Immuno purification&therapy (e.g. cancer)

• Interferons: IFNs are proteins that trigger protective defenses of the immune system that eradicate pathogens/tumours. Used as antiviral agents &can fight tumours.
• Insulin: Central to regulating carbohydrate and fat metabolism in the body
• Erythropoietin: Used to treat anaemia associated with kidney disease and cancer therapy
• Thrombolytic agents: Agents that dissolve a clot (thrombus) & reopen an artery /vein. Used to treat a heart attack, stroke, deep vein thrombosis, pulmonary embolism, etc.
• Growth hormones: GH is a protein-based peptide hormone that stimulates growth and cell reproduction & regeneration in humans. Used to treat children's growth disorders, adult GH deficiency

Market facts
The global market for biologics is worth $120 billion, and that for biosimilars is valued at $ 1.2 billion, growing at a CAGR of 41.79 per cent . It is expected to reach $ 19.6 billion by 2015.

The Indian biologics market is valued at US$ 1.7 billion, whereas biosimilars are valued at US$ 0.36 billion, which comprises 21.2 per cent of the biologics market value. The Indian biosimilars market is projected to grow at a rate of 74 per cent  over the next 5-6 years .

This strong growth will be attributed to a global rise in levels of disease such as oncology, rheumatoid arthritis, diabetes, and cancer. Biosimilars will spell big opportunities in India as well, especially for companies like Dr Reddy's Labs, Ranbaxy, Biocon, Shantha Biotech and Intas Biopharmaceuticals, all of which are aggressively trying to establish their presence in this space.

Approval path for biosimilars
India is a semi-regulated market with respect to biosimilars. On an average it takes a year's time for approval. The stages involved in getting approval of a biotech product are mentioned below.

Stage 1 - Approval from the Department of Biotechnology for animal toxicity studies.

Stage 2 - Approval from the Drug Controller General of India for clinical trials & for marketing of final product.

Stage 3 - Approval from the Food and Drug Control Administration, a state governing body, to obtain the manufacturing license based on a Good Manufacturing Practices audit.

Approval for Phase I-II trials is not required in India. Phase III trials with a minimum of 100 patients are mandatory for establishing bioequivalence. Further, equivalence has to be shown in clinical trial subjects in randomized double-blind studies with placebo, licensed products, and new products. The total cost to develop a biosimilar in India can range from $10 to $20 million; Indian companies thus have an edge over others as they can offer their products at a price that is 25-40 per cent cheaper than that of the original biologics.

Assessing threats & opportunities
The current environment pertaining to biosimilars is challenging, but, at the same time, it throws up several new opportunities for Indian Pharma companies. Asia is the primary market for biosimilars, accounting for 34.1 per cent of sales. The factors driving this demand include increasing user acceptance, low costs, large application area, increasing governmental initiatives, and the emerging Indian and Chinese economies. The biosimilars market will grow across the seven major markets – 3 mature (US, Germany, and UK) and 4 immature (France, Italy, Spain, and Japan) - by 2014 following key patent expiry of epoetin alpha, filgrastim, interferon beta la, interferon alpha, human growth hormone (HGH), and insulin-glargine.  The fact that biologics with sales totalling US$ 25 billion will go off patent by 2016 will also contribute to the higher growth rate of biosimilars.

Let us now look at a SWOT analysis of the Indian Biosimilar market. Lack of well-defined regulatory pathway in the US & EU can act as a barrier for Indian companies to enter these markets. In the US, the House of Representatives passed two healthcare bills to create an approval pathway for biosimilars in March 2010 as a part of the healthcare reform legislation. Amongst the Indian players entering the Western  marketplace, only those who are able to develop cost-effective, high-quality molecules that meet EMA & FDA standards are likely to sustain. Those companies that already have in-house competencies will be in top position. Considering the high cost of any partnering/acquisition efforts & limited penetration of biosimilars, there seems to be no guarantee of return on investments in the short to mid-term.

Strategic alternatives for Indian players
Greater collaboration will be mutually beneficial to both Western and Indian companies and is being greatly supported by both the Indian government and India's biotech sector.

India's largest listed biopharmaceutical firm Biocon Ltd forged a strategic deal with Pfizer Inc. in October 2010 for worldwide commercialization of four insulin products, seeking to address a market worth a combined $14 billion. Pfizer has entered into deals with Aurobindo Pharma Ltd, Strides Arcolab Ltd, and Claris Lifesciences Ltd. Other multinational drug firms that have struck similar deals with Indian generic manufacturers are GlaxoSmithKline Plc with Dr Reddy's Laboratories Ltd and AstraZeneca Plc with Torrent Pharmaceuticals Ltd, Aurobindo Pharma, Abbott Laboratories Ltd and Cadila Healthcare Ltd.

A few strategic alternatives for Indian Biosimilars are

1. TECHNOLOGIES (Recombinant DNA, monoclonal antibodies, protein sequencing, bioassay, nuclear magnetic resonance).
2. PRODUCTS (Peptides, recombinant glycosylated proteins, recombinant nonglycosylated proteins & others).
3. SERVICES (Drug development, contract research, manufacturing services and clinical trials services).
4. APPLICATIONS (Oncology, infectious diseases, chronic & autoimmune diseases).
5. Indian players should build competencies in the areas of collaborative research, contract research, contract manufacturing, effective merger & acquisition strategies, technology transfer, talent management, innovative ways of global marketing, novel business models and apt skill sets.

Indian biotech companies like Biocon, Dr. Reddy's, Intas, Ranbaxy, Reliance LifeSciences, Wockhardt, LG Life Sciences, Sandoz and Teva have started undertaking measures to improve their efficiencies & competencies and will emerge as the key players in the sector.

In a nutshell
The fast penetration of novel biologics and the gradual expiry of their patents will create significant market opportunities for developers of biosimilars. The decision to enter the market should only be made on the basis of a clearly defined long-term biosimilar strategy. Indian biosimilar players should have deep pockets in order to finance the unanticipated and should proactively shift their focus from independent R&D to strategic partnerships to save costs & enrich their drug pipelines.

Taking advantage of price differentials & collaborative efforts, Indian players will surely make a mark in local as well as global biosimilar markets.