Addressing Biosimilars: Federal Legislation for a Pathway

May 28, 2009

Kerry A. Flynn

Shire Human Genetic Therapies, Inc.

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Shire Human Genetic Therapies, Inc.

Specialty pharmaceutical company with a range of products on the market for Attention Deficit and Hyperactivity Disorder (ADHD), gastrointestinal (GI) and therapies for human genetic diseases

Shire Human Genetic Therapies business unit pursues treatments for patients and families facing such rare (“Orphan” or “Ultra-Orphan”) diseases as Fabry disease, Hunter syndrome, Gaucher disease, hereditary angioedema, and metachromatic leukodystrophy

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Hot topics:

Data Exclusivity

Regulatory Pathway

Patent Issues

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Data Exclusivity Periods: Considerations

Biosimilar may be similar enough to a pioneer biologic for regulatory approval purposes, but different enough to avoid the innovator's patents

New therapies will never be developed for some addressable diseases

The current orphan incentives mean that the development of a therapy for some diseases will never yield a return

Lower commercial returns for similar development costs

Prospective commercial returns for orphan biologics are much lower than for other biologic drugs due to the significantly smaller addressable patient populations. Any future pricing pressure will reduce incentives further

Magnifies risk of failure (lower portfolio profits to cover failed products)

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Data Exclusivity: Considerations (Cont’d)

Large orphan markets have already been addressed

Many of the larger orphan markets already have approved and effective therapies (‘low hanging fruit has gone’)

Greater commercial risks in remaining markets

Remaining markets include diseases with high morbidity where there is little ability to understand a drug’s impact on life expectancy (a key driver of commercial return) prior to pivotal trials (ie. after much of the investment has been made)

In order to preserve innovation for orphan drugs in the future (and in an environment of tighter pricing), exclusivity periods need to be longer (than for non-orphans) to compensate innovators for increased development and commercial risks in these challenging markets

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Theoretical market model analysis

Theoretical product development / commercialisation model

Range determined for key variables

Peak sales - $100m-$500m

COGS – 12%-15% (implicitly captures facility investment)

S&M % sales – 10%-20%

Total development costs over 9-year period - $150m - $300m

CMR biotech PoS benchmarks

Other assumptions kept fixed

Discount rate – 11.5%

Tax rate – 30%

Working capital – 20% of y.o.y change in sales

Ranges of key variables were simulated using uniform distribution assumption

Assumes that each value in the range is equally likely

Simulated eNPV after defined periods of exclusivity assuming terminal perpetuity decline rate of 50% post exclusivity expiry

Analysed % of outcomes where eNPVs were positive for different exclusivity assumptions

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60% of hypothesized outcomes never make a return with 7 years of exclusivity

Peak sales range $100m - $500m

Peak sales range ($100m-$500m)

Reflects market size for vast majority of small orphan diseases

Excludes large orphan markets (>$500m)

~60% of outcomes never generate a return assuming a 7 year exclusivity period

~35% of outcomes never generate a return assuming a 12 year exclusivity period

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

6 year 7 year 8 year 9 year 10 year 11 year 12 year

NPV > 0

NPV =< 0

8*Orphan Drug** Regulatory Exclusivity in EU until 2017# Assuming US approval

2000 2005 2010 2015 2020 2025

2013**2019

ELAPRASE*

(500-600)

Patent Term Regulatory Exclusivity

2020

2011REPLAGAL EU*

(300-350)

FIRAZYR EU*

(350-400)#

2018

2009

Peak sales range ($m)

Duration of Patent and Regulatory Exclusivity

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Regulatory Pathways: Considerations

clinical trial evidence and data are fundamental for evaluating and demonstrating the safety and effectiveness of a follow-on biologic, and must be conducted on a product-by-product basis

Avoid constraints on the scientific conclusions FDA can reach in evaluating the similarity or comparability of follow-on biologics

Trade secret and confidential commercial data and information of an innovator must be protected

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Patent : Considerations

Must not limit constitutional or statutory rights of patent holders to protect against infringement

Patent challenge involving the follow-on biologic product must be litigated prior to marketing approval of the follow-on product

No special patent litigation rules that favor follow-on biologics manufacturers

Interplay between Orphan drug legislation (“Same product”), Biosimilar legislation (“similar product”) and Patent legislation (“literal infringement/doctrine of equivalents”)

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Patent considerations

Biotechnology processes define product

Yeast fermentation

Budweiser

Amstel

Heineken

Molson

Are these products equivalent? Similar?

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Hormone Res. Foundation v. Genentech, 904 F. 2d 1558 (Fed. Cir. 1990)

Patent

Accused hGH product differed by two amino acids from claimed product

CAFC held no literal infringement

Regulatory

Would product be similar enough to be approved as a Biosimilar?

Orphan

Is it the “same drug”? rhGH found to be “different drug” than pituitary derived hGH

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Amgen v. Hoechst Marion Roussel (EPO cases)

Patent

Patent claimed 166 aa mature sequence

Accused product had 165

No literal infringement

Infringement under doctrine of equivalents

Regulatory

Products similar?

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Conclusion:

Legislation must:

Provide adequate incentives for development of orphan biologics

Not abrogate the rights of patent holders

Rely on scientific evidence