The European Biosimilars Market: Trends and Key Success Factors

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Biosimilars are defined as biological medicines that are essentially similar to reference medicine with respect to quality, safety and efficacy. There has been a prolonged debate about the nomenclature of such medicines, and various other terms such as ‘biogenerics' and ‘follow-on biologics' have been used to refer to them in the past. However, the term biosimilar is now more commonly used in the EU.
The prime difference between generics and biosimilars is that while generics contain the exact active ingredient as in the originator medicine, biosimilars are only "similar" and not "identical" to the originator biopharmaceutical medicine. This difference arises due to the very nature of biopharmaceutical medicines which are highly complex to manufacture. In fact, it is widely accepted that for biopharmaceuticals, the "process" is the "product".

Role of Biosimilars in Controlling Pharmaceutical Expenditure
Beset by numerous challenges such as an ageing population and expensive drugs, pharmaceutical expenditure has been constantly increasing in Europe. Countries like Spain, Italy, France and the United Kingdom spend a significant percentage of their overall health expenditure on pharmaceuticals. A noteworthy trend in this regard has been the emergence of generics as a cost-effective option for cash-strapped European governments.

According to figures by the European generic association (EGA), generic medicines have made a major contribution to affordable and accessible healthcare for over 20 years, saving the European Union (EU) alone an estimated €20 billion annually.

A majority of biopharmaceuticals are currently being used to treat critical diseases - particularly those with a great degree of unmet need. In addition, they are highly priced, and are also expected to be the fastest growing segment in the pharmaceutical industry during the forecast period. Healthcare providers across Europe are expected to spend an increasing percentage of their overall expenditure on biopharmaceuticals. Hence, biosimilars are expected to have as significant a role as generics in reducing the burden on providers, and providing access to affordable and safe medicines.

To illustrate this theory with information provided by the EGA, the five biosimilars that have gained approval in the EU are alone likely to provide savings of approximately $2.5 billion annually. This estimate has been made, assuming a discount of 20% on each of the five medicines in question. However, industry participants mention that, as competition increases, discounts are also likely to increase and this could positively impact the overall savings potential of biosimilars.

Biosimilars in Europe: A Market Waiting to Explode
The establishment of a regulatory pathway for biosimilars has been the first step in creating a market pathway for biosimilars. This has been a long drawn-out process, involving several amendments. The first biosimilars that were launched through the EMEA route were growth hormones - Sandoz's Omnitrope and Biopartners' Valtropin in 2006. Omnitrope had been in development for over eight years, and Sandoz had to work in conjunction with regulators through the period of development, supporting them with sufficient data at every stage.
The European biopharmaceuticals market currently accounts for approximately 45% of the global market, and is expected to grow at over 10% during the forecast period. Biopharmaceuticals have emerged as the fastest growing segment within the pharmaceutical industry due to two main reasons:
  • They are used for critical illnesses such as cancer, diabetes etc.,
  • They address a significant, unmet need in most cases.

Biosimilar development activity is currently underway across all product classes that fall under the category of recombinant proteins. A majority of these drugs were launched during the early to mid 1980s, and their patents have expired over the past 3-4 years, creating a significant opportunity for biosimilar manufacturers. Some of these key product classes include:
  • Erythropoeitins (EPOs), used for the treatment of anemia
  • Granulocyte Colony Stimulating Factor (G-CSFs), used for the treatment of neutropenia
  • Insulins, used for the treatment of diabetes
  • Growth hormones, used for the treatment of growth disorders
  • Alpha interferons, used for the treatment of anti-viral disorders
  • Beta interferons, used for the treatment of multiple sclerosis
Monoclonal antibodies, used for the treatment of various cancers and autoimmune diseases
Monoclonal antibodies currently represent the fastest growing segment within the biopharmaceutical industry. In addition, their initial patents are not set to expire until 2014, thus making them only a long-term target for biosimilar manufacturers. However, monoclonal antibodies are expected to pose several challenges to biosimilar manufacturers, considering their complicated structure and larger size. Moreover, this market is dominated by leading players such as Roche and Genentech, making market entry a difficult proposition for biosimilar manufacturers.

The European biosimilars market is currently in a nascent stage, and features only three products. Two of these are in the growth hormone segment and the last one is in the EPO segment. Sandoz's Omnitrope, the first one to be approved, referenced Pfizer's Genotropin, and was launched in 2006. Swiss firm Biopartners' Valtropin, referencing Humatrop, was also launched during the same year. The third product, Sandoz's Binocrit, referencing Johnson and Johnson's Eprex, received a positive approval from the EMEA in 2007.

Despite the launch of two biosimilars in 2006, the growth hormone segment has not experienced any significant change. This is primarily due to two reasons. Firstly, the reference products in question are very well-established with physicians and patients, and both groups are largely apprehensive about switching to biosimilars, after having used the reference products for years with positive effects. Secondly, the discounts offered were in the range of 20% to 25%, and these cost-savings are not being deemed to be attractive enough for patients to make the switch. Industry participants believe that discounts over 40% are unlikely in the short-term, considering the time taken for them to recover their investments in research, development and marketing.

The following section highlights some of the key challenges and market drivers in the biosimilar industry.

Industry Challenges

Rising D
evelopment Costs make Market Entry a Difficult Proposition
Biosimilar development is riddled with complexities, ranging from regulatory, to manufacturing to marketing, and is one of the most expensive propositions in the pharmaceutical industry. The current industry average cost of bringing a biosimilar to market is around $100-$200 million. This is in addition to a development period ranging from eight to ten years, which is approximately equivalent to that for a biopharmaceutical product. In addition, development costs are expected to increase in the long-term, considering the current state of the pharmaceutical industry. Increasingly, several biopharmaceutical companies are likely to find themselves in a quandary, having to choose between the development of a new product or a biosimilar. Thus, current trends indicate that the sort of resources that will be required for biosimilar development create high barriers of entry, not just for small to mid-sized companies, but even the larger, and well-established generics players, and biopharmaceutical companies.

Clearing the EMEA Regulatory Hurdles is Expected to be an Arduous Exercise
The regulatory guidelines laid down by the EMEA for the approval of biosimilars can be classified into two broad categories. Firstly, there are general guidelines that apply to all categories of biosimilars, and secondly there are specific guidelines that are dependent on the product class in question. Although the regulatory pathway is fairly clear, the sheer volume of data that manufacturers need to submit for an approval is immense. Clinical trials, for instance, are required to compare quality, safety, efficacy, pharmacokinetic and pharmacodynamic data between the biosimilar and the reference product, in addition to a pharmacovigilance trial. Supplementary trials may be required, depending on the complexity and formulation of the product. To illustrate this with an example, Omnitrope required a phenomenal 18,000 syringes of the reference product Genotropin to be imported into Germany every week during the clinical trial process. The logistical complexity of such an activity poses a significant challenge even to the largest generics companies.

Manufacturing Complexities will Continue to Pose Problems
Biosimilars are essentially biopharmaceutical medicines whose characterization requires a series of physical, chemical and biological tests, as well as the availability of the ideal manufacturing facilities, and a clear knowledge of manufacturing procedures. Thus, the manufacture of biosimilars is a highly complex, labour-intensive process. Manufacturers will have to tread the fine line between replicating the reference product as closely as possible, without infringing on any of the patents covering these processes. For molecules with relatively simpler structures, such as EPO and Insulin, this is expected to be a significant challenge that manufacturers will have to counter in the long-term.

Scaling-up to Meet Market Demand is Expected to be a Roadblock for Smaller Manufacturers
Globally, the demand for biocapacity has been increasing steadily over the past couple of years, and the industry opines that, in the long-term, there is likely to be a capacity gap. Capacity can prove to be a serious constraint in markets such as insulin where the top players such as Novo Nordisk, control around 50% of global capacity, enabling them to reduce their production costs by almost three times compared to their nearest competitor. It is almost impossible for a new market entrant to be able to achieve such cost-efficiencies. In addition, the option of building the required capacity, from scratch is expected be in the range of up to $500 million, making it impractical. Thus, small and medium sized biopharmaceutical companies are likely to be severely challenged unless they find the means to scale-up and meet the market demand.

Market Drivers

Key Patent Expiries are Expected to Boost Market Prospects
The key driver to biosimilar development is patent expiries across the leading product classes under the recombinant protein-based therapeutics segment. hGH, which has a global market size of around $2.50 billion, lost patent protection in 2006, and currently features two biosimilars. EPOs, with a global market size of around $12.10 billion, lost patent protection in 2007, and are on the verge of having the first biosimilar launched in 2008. In addition, G-CSFs, insulins, and interferons, are amongst those segments that have lost patent protection and offer a multi-billion dollar opportunity to biosimilar manufacturers. Although a majority of patents have expired in the past three or four years, biosimilars referencing them are only expected to be launched in the next four to five years, considering the development timelines, and the risks involved. By far, this factor is expected to be the most important driver during the forecast period.

Leading Generics Players with Established Market Presence are Spearheading Development
Biosimilar development is a risk-fraught activity that demands significant resources in R&D, manufacturing expertise, regulatory know-how, clinical-trial capabilities, and a high level of financial investment. Sandoz, one of the largest generics players in Europe, was the first company to launch a biosimilar successfully in Germany in 2006. However, even for a major company such as Sandoz, the road to market was not smooth and the product in question, Omnitrope, had to clear several regulatory hurdles before being approved. The success of Sandoz, has, however, been responsible for a number of other leading players expressing interest into this market. Augmenting this trend are the current pressures in the generics industry, which are forcing participants to look for alternatives, and several of them have recognized biosimilars as a lucrative future opportunity. In addition to Sandoz, a number of other leading players such as Biogenerix, Teva, and Bioton are involved in biosimilar development and could play a significant role in expanding the market.
Chart 1.1: Biosimilars Market- Multi-pronged Pricing Strategies Focused on Various Stakeholders. Frost & Sullivan

Payers' Acceptance of Biosimilars as a Means to Reduce Expenditure is Expected to Increase Uptake
Cost-containment is the key concern for all the major European governments, as most of them are experiencing severe pressure to curb rising pharmaceutical expenditure. This is highly relevant to biopharmaceuticals, most of which are expensive, and are reimbursed fully. In essence, one of the key drivers for the uptake of biosimilars will be the attitude of individual country governments in promoting them as an affordable alternative to originator medicines. Although certain countries such as France and Spain have imposed laws prohibiting automatic substitution, market Frost & Sullivan believes that, going forward, payers are likely to favour biosimilars that are backed- up with robust safety. Effficacy and cost-benefit data on a case-by-case basis.

Emergence of Indian Biosimilar Companies to Aid in Market Expansion
In the past decade or so, Indian companies have demonstrated their capabilities in the generics industry and have emerged as leading competitors to major firms. Sensing the opportunity put forward by biosimilars, some of these companies have been actively focusing on development programmes across a range of product classes. These companies have the experience of developing and launching biosimilars in India, and this experience is likely to benefit them in tapping European markets, provided they step up to meet European regulatory standards. Another key development has been the acquisition of manufacturing capacity by Indian generics companies, such as Ranbaxy, Wockhardt and Dr. Reddy's laboratories, over the past five years, or so - particularly in eastern Europe. In addition, there are others, such as Intas, which are focused on the development of biosimilars across various product classes. On the whole, Indian companies are expected to contribute to the market expansion.

Key Success Factors
Although the biosimilars market presents a multitude of opportunities, it is riddled with complexities, and only companies with the necessary financial, technological and marketing resources are likely to succeed. Although the initial successes are expected to be from well-established generics companies with advanced development programmes, several small-to-mid size biopharmaceutical companies are expected to emerge in the long-term.

In addition to choosing the appropriate product class, and backing it with detailed clinical data, companies will need to develop robust pricing models to increase their probability of success. Pricing will need to factor in region-specific market access conditions apart from the impact of external factors. Companies will need to develop multi-pronged pricing and reimbursement strategies to cater to stakeholders at various levels. In the future, Frost & Sullivan expects to see risk-sharing agreements between companies and payers where the clinical success of the product determines the level of reimbursement. Constant clinical support to hospitals/physicians and transparency and safety with patients are also likely to be critical in a competitive and dynamic environment.


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