Gauging the CMO Biosimilar Opportunity

  The establishment of a regulatory pathway for approval of biosimilars in the United States has generated a great deal of excitement within the CMO industry. The passage of the Biologics Price Competition and Innovation Act (BPCI Act) in 2010 and issuance of related FDA guidance unleashed a flurry of biosimilar development activity: 40 biosimilar investigational new drug applications (INDs) had been filed through September 2014. In July 2014, Novartis’s Sandoz unit became the first company to file for a biosimilar in the US when FDA accepted its submission for a biosimilar version of Amgen’s filgastrim (Neupogen) via the 351(k) pathway; an FDA advisory committee recently recommended that product for approval.    For the CMO sector, participation in this burgeoning market could prove highly lucrative given the magnitude of the opportunity, but there are significant hurdles to CMO success in biosimilars. Whether CMOs benefit in a big way will depend on where they are in the value chain, and how successful their clients are in the end market, but a new analysis by PharmSource suggests that expectations should be modest (1).   European experience   Some insight into what the CMO industry might expect can be gained from studying the European experience. The European Medicines Agency (EMA) first approved a biosimilar product in 2005, and there are currently 20 products available in European markets. The approved biosimilars are mostly first wave biologics including growth hormones (e.g., Somatropin) or recombinant proteins to treat side effects of chemotherapy such as Epoetin. In 2013, the first biosimilar monoclonal antibody (mAb) was approved, a version of Johnson & Johnson’s Remicade developed and manufactured by Hospira and Celltrion.   According to IMS, market penetration of biosimilars has varied considerably across the European Union (2). Biosimilar penetration for drugs given in clinical settings, like the biosimilar epoiten and filgrastim, has been significant. By contrast, for human growth hormones, a treatment for a chronic condition in which physician preference plays a considerable role in the prescribing decision, the biosimilars penetration is barely above 10%.   Global and large regional generic-drug companies dominate the roster of first-wave biosimilars approved in Europe, including Teva, Sandoz, Stada, and Hospira. Those companies account for more than 70% of the biosimilars approvals, while small commercial companies account for only 25%. That dominance of the large firms reflects the high cost of developing biosimilars as well as the need for established sales infrastructure and experience to generate sales.   CMOs are participating in varying degrees in the emergence of biosimilars with significant differences between drug substance and drug product supply. Among the first wave of biosimilar approvals in Europe, only two products (10%) are using a CMO for manufacture of the API, but six (30%) are using a CMO for fill/finish including Novartis/Sandoz for multiple products.
  The API for two-thirds of the 20 approved biosimilars in Europe is manufactured in-house, while 45% of the fill/finish is also performed in-house.   Partnering arrangements, including joint ventures and licensing deals, have become an important element of biosimilar development and marketing. The licensor or joint venture partner is responsible for manufacture of the API and/or the finished drug product for a quarter of biosimilars approved in Europe.    The second wave   A second wave of products loses patent protection in the period 2015-2019 and will start coming to market this year. These are products of increasing technical complexity including mAbs and fusion proteins, and include high profile products for the treatment of cancer and chronic conditions including autoimmune diseases and diabetes. Most of these are big products including well-known brands like Humira, Herceptin, and Remicade.   At least 70 of these second-wave candidates are in clinical development, led by Adalimumab (Humira) with 15 candidates, and 40% are in Phase II or beyond. The candidates are equally divided among global biopharma, generics, mid-size, and emerging biopharma companies.    For the second wave of biosimilars, manufacturing arrangements are still somewhat speculative because manufacturing arrangements are often not revealed until the candidate receives regulatory approval. Still, for second-wave biosimilar candidates identified, the sponsors for more than half (55%) possess large molecule API capability, while nearly one-third involve a joint venture partner or licensor that has manufacturing capability. Notably, many of the announced joint ventures involve partners with manufacturing assets in Asia, including Mylan with Biocon (India), Hospira with Celltrion (South Korea), Biogen/Idec with Samsung Bioepsis (South Korea), and Oncobiologics with Strides Arcolab (Malaysia).   The PharmSource analysis of the biosimilars opportunity for CMOs suggests that industry executives should have modest expectations of their prospects. Biosimilars are adding a nice increment to the available pipeline opportunities, especially for injectables CMOs, but they are unlikely to be a bonanza for the industry.    Analysis of the approvals-to-date and the pipeline suggests that developers of biosimilars have substantial in-house manufacturing assets they can employ to produce their products. Those are the same large, vertically integrated companies with deep enough pockets to fund the high cost of developing biosimilars and, even more importantly, the sales and marketing experience and infrastructure to promote acceptance of biosimilars to prescribers and formularies. Those companies have traditionally preferred in-house manufacturing over outsourcing, especially for biologics: their propensity to outsource dose manufacture has always been markedly less for biologics than for small-molecule products.     The European experience has demonstrated that the emerging biopharma companies that are most dependent on CMOs will face an uphill battle trying to gain market share from their larger competitors. Further, it may already be too late for CMOs to meaningfully participate further in the second wave of biosimilars because new entrants may be discouraged by the large number of candidates already in the field. The biggest opportunities, including biosimilar versions of Humira, Avastin, and Herceptin, already have nine or more identified biosimilar candidates.   Strategy for the future   The challenge for CMOs today is to develop a strategy that enables them to participate more meaningfully in the third wave of the biosimilar opportunity that will begin in 2020. That strategy could be built around proprietary cell line and expression technologies, which help them deliver biosimilar APIs more quickly and cheaply than in the past, as well as their strengthened analytical capabilities.    Still, participating as a partner in a biosimilar venture will require CMOs to assume some level of financial risk. In the current industry environment, which has made unprecedented amounts of money available for novel drug development, that may not be a risk that CMOs feel a need to take.   References   1. PharmSource, Catching a Wave: How much will CMOs benefit from biosimilars? (January 2015). 2. IMS Institute for Healthcare Informatics, Assessing Biosimilar Uptake and Competition in European Markets (October 2014).