Shaping the biosimilars opportunity - Weinberg Group · PDF file2• SHAPING THE...

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Shaping the biosimilars opportunity: A global perspective on the evolving biosimilars landscape

Transcript of Shaping the biosimilars opportunity - Weinberg Group · PDF file2• SHAPING THE...

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Shaping the biosimilars opportunity:A global perspective on the evolvingbiosimilars landscape

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IMS HEALTH1 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

Shaping the biosimilarsopportunity: A globalperspective on the evolvingbiosimilars landscapeAfter several years in the slow lane, important changes are driving newmomentum in the market for biosimilars, paving the way for their acceleratedgrowth over the next decade and beyond. Although currently small andnarrowly focused on a few disease areas and countries, the biosimilarsopportunity is set to expand as patents expire on leading biologics, USlegislation comes into effect, and payers push for their wider adoption tomanage burgeoning costs.

The signs are there, but questions remain. How will the commercial prospectsplay out? Where is the greatest potential? And what will be the optimal go-to-market model for entrants? Analysis from IMS suggests that companies lookingto take advantage of the evolving landscape will need carefully plannedstrategies, strong commitment and the resilience to overcome someformidable barriers, especially in the short-term, to maximize return oninvestment.

By 2015, sales of biosimilars are expected toreach between US$1.9-2.6 billion, up fromUS$378 million for the year to the first half of2011. Potentially, this market could be thesingle fastest-growing biologics sector in thenext five years – albeit from a small base –spurred by the convergence of major dynamicsthat will see new biosimilars enter the US marketby 2014, bring additional molecules to Europethrough 2015, and open up oncology andautoimmune disease areas to biosimilars for thefirst time ever.

Cost pressures keyThe changing outlook for biosimilars comes at atime when the global pharmaceutical market isfeeling the combined impact of two key events: aperiod of unprecedented patent expirations onmany of the world’s largest pharmaceuticalbrands, and a financial crisis that has requiredhealthcare systems to make significant andsustained cost reductions.

For payers in the advanced markets, limitedeconomic growth and pressures on healthcaremake the patent cliff a true generic dividend,enabling much needed savings to be realized.However, as potential savings from generics start

to decline in these countries over the next 5-10years while the imperative to reduce expenditurecontinues to grow, payers face an urgent need tofind new ways of rationalizing resources. Biologics– among the most expensive pharmacotherapiesavailable and now approaching their own swatheof patent expirations – potentially represent themost lucrative source of savings on drugexpenditure for Western nations after 2015.Biosimilars may be the key that helps them torealize this opportunity.

Biosimilars also bring clear potential for payersin the emerging pharmaceutical or “pharmerging”markets, such as Brazil, India and China. Here, the need to broaden healthcare coverage tolarge populations increasingly must be balancedagainst limited budgets and growing demand forinnovative drugs. Biosimilars offer one way ofwidening access and enabling better value to beobtained from the money spent on healthcare. Insome cases (such as South Korea, India andBrazil) they are seen as a key macroeconomicdriver of growth, attracting foreign capital by creating manufacturing and R&D centers of excellence. ➜

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Growing demand for biologics

The imperative to find cost-effective alternativesto biologics reflects the growing demand for thesespecialty drugs. Since their origins in the 1980s,biologics have prospered into a US$138 billionmarket (2010), fuelled by such key launches asrecombinant insulins, human growth hormone(HGH), alteplase, erythropoietins (EPOs),granulocyte colony stimulating factors (G-CSFs)and then monoclonal antibodies (MAbs), amongothers. Currently accounting for 16% of globalpharmaceutical expenditure and significantly out-pacing total branded sales, biologics will continueto out-perform the global market as moreinnovative products deliver new treatment optionsfor a growing range of indications.

Patent expiries driving new potential

A number of top-selling biologic brands,including Herceptin, Enbrel, Humalog, MabThera,Remicade and Aranesp, are due to lose productpatent protection over the next five years,opening up a wealth of new possibilities forbiosimilars players. Key therapy areas such ascancer, diabetes and rheumatoid arthritis (RA)will spearhead this new wave of biosimilars, withattention focused on the real prizes of anti-TNFMAbs, MAbs for oncology, and insulins (Figure 1).

Diverse competitive landscape

A diversified competitive arena for biosimilars isalready emerging, with generics manufacturers,R&D-based pharma, and biotech companies

poised to compete: Teva is approaching the endof Phase II trials for a biosimilar version ofRoche’s rituximab (MabThera/Rituxan);1 Pfizerrecently signed a deal with Biocon (India) tomanufacture biosimilar insulins;2 AstraZeneca andEli Lilly have both signaled intentions in thisarea;3 Boehringer Ingelheim is creating adedicated division for developing andcommercializing its own biosimilars;4 and a Merck&Co deal with CRO Parexel is expected toyield five late-stage biosimilars by 20125.

Plans to develop biosimilars are also being mootedby leading innovator biotech companies, includingBiogen Idec and Amgen – which has particularlycalled-out emerging markets in South America andAsia.6 Interest in the sector has even extendedbeyond the realms of pharma: digital technologyleader Fujifilm and electronics giant Samsung haveboth now joined the race, securing biosimilardeals with Merck and Quintiles respectively.Samsung is planning to pursue further biotechventures in its effort to achieve target revenues ofUS$1.8 billion from biopharmaceuticals by 20207.The entry of these players may not necessarilyherald similar actions from more companies inother industries, but it does bring a fresh inflow ofcash to fund development programs and atypicalbranding models that have already paid off inother industries (Figure 2). The commitment isclearly there, but how and where will the promisebe fulfilled?

Defining the market

The biosimilars sector has reached very differentstages of evolution around the world. Clarity ofguidelines is variable and regulatory pathwaysdiverse, leading to various definitions ofbiosimilars (or the broader group of follow-onbiologics) across countries and regions. Europehas by far the best-established framework, withwhich the US is now more or less aligned.

Whether the US

opportunity is

realized is the single

most important

differentiator

between success and

failure for biosimilars

in the next decade.

1 http://www.tevapharm.com/en-US/Products/ProductsPipleine/Pages/default.aspx2 Pfizer to sell biosimilar insulins in Biocon deal. Accessed 3 Nov, 2011at http://in.reuters.com/article/2010/10/18/idINIndia-522677201010183 Astra Zeneca eyes move into biosimilars. Accessed 11 Nov, 2011 athttp://www.ft.com/cms/s/0/9740a42e-d064-11dd-ae00-000077b07658.html#axzz1dO1hLirT 4 Boehringer Ingelheim expands its business with biosimilars. Accessed 2Nov, 2011 at http://www.boehringer-ingelheim.co.uk/news/press_re-lease-Boehringer-Ingelheim-expands-its-Business-with-Biosimilars.html 5 Merck & Co in deal with Parexel to develop biosimilars. Accessed 3Nov, 2011 athttp://www.firstwordplus.com/Fws.do?src=corp_site&articleid=411CA68F1931475B92F0A475730DE0CA6 Copying biotech medicine attracts more drugmakers. Accessed 3 Nov,2011 at http://uk.reuters.com/article/2011/01/13/healthcare-biosimi-lars-idUKN1313681520110113?rpc=401&feedType=RSS&feed-Name=governmentFilingsNews. 7 High-tech companies buy into biomanufacturing. Accessed 10 Nov,2011 http://www.genengnews.com/analysis-and-insight/high-tech-companies-buy-into-biomanufacturing/77899375/

Insulins

Anti-TNF

Oncology (MAb)

EPO

Multiple sclerosis

CFS-G

Blood coagulation

Ocular antineovasc.

Antiviral (no-HIV)

Other

Core Therapy Areas for biologics (MAT 12/2010)

15.9

15.8

12.5

7.6

7.3

5.0

3.1

2.0

1.5

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0 10

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20

•Top 5 therapy areas account for about 70% of the total market

FIGURE 1: KEY AREAS SUCH AS CANCER, DIABETES AND RA WILL BE AT THEFOREFRONT OF THE NEW WAVEBig PharmaCos, not only generics companies, are ready to compete

A diversified competitive arenais emerging

• Teva developing its firstbiosimilar version of rituximab(Mabthera/Rituxan)

• Pfizer recently signed a deal withBiocon (India) to manufacturebiosimilar insulins

• Merck signed a deal with CROParexel to provide biosimilars toMerck BioVentures (5 late stagebiosimilars are expected by 2012)

• Biogen Idec ready to enter thebiosimilars arena as well (“thecompany is in the perfectposition...biosimilars market as alow risk” Biogen’s CEO Scangos)

Source: IMS Health

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IMS HEALTH3 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

Outside these markets, definitions of agents andpathways to approval are less precise. It is clearthat follow-on or modified biologics already existin China and India as well as in other countries.Some of these agents would fit the definition ofexisting biosimilars well; many are essentiallycopy versions of patented agents; others fail tomeet either categorization, yet clearly are notoriginal. For instance, Reditux, a copy ofrituximab manufactured by Dr Reddy’s, has beenavailable in India since 2007, but its approvalhas been based on a smaller body of evidencethan is likely to be required in Europe or the US.

To enable consistent analysis across geographies,therapies and manufacturers, IMS has establishedan industry-verified standard market definitionfor the biosimilars sector. This classifiesbiosimilars (also known as follow on biologics in

the US and subsequent entry biologics in Canada) as biologic products approved in a country whichhas an abbreviated approval process for biologicproducts that references an originator biologic inthe regulatory submission. Products marketed incountries without a biosimilar approval pathwayand for which the originator has not granted alicense are not considered true biosimilars.

A tale of three geographies

Geographically, the market for biologics andbiosimilars falls into three distinct clusters: theUS, the other advanced economies (Europe,Japan and Canada) and the pharmerging markets(Figure 3). The US accounts for most of theglobal spending on biologics and will be a keydriver of long-term biosimilars market potential.The advanced economies have the advantage ofan established framework for biosimilars but todate uptake has been slow; Europe is the mostprogressive. Some of the highest growth rates forbiologics are currently seen in the pharmergingmarkets, where biosimilars already exist (albeitthrough a looser regulatory pathway) and wheremuch of the immediate growth will be found. In Japan, biosimilars guidelines have beenrecently established and follow the principles ofthe EU Framework; biosimilar epoietin alfa hastaken over a quarter of the market by volume in aperiod of 12 months, but somatropin has doneless well.

US: The big opportunity

Devoid of a specific regulatory pathway, the UScurrently has no established industry forbiosimilars. At present, there is only one producton the market that could potentially fit thisdescription – Omnitrope (somatropin/HGH) whichwas launched by Sandoz in 2007 under a specialruling. However, all this is set to change in 2014when the country’s new framework forbiosimilars, set out by The Patient Protection andAffordable Care Act of March 2010, comes intoeffect. With leading manufacturers includingPfizer and Merck already positioned to compete,and patients and health insurers stepping up thepressure for access to low-cost, high-value drugs,the US is forecast to be the single biggestopportunity for biosimilars by 2020. Whether thisopportunity is realized is therefore the mostimportant differentiator between success andfailure for biosimilars in the next decade.

UNDERSTANDING THE ISSUESThe future market for biosimilars in the US willbe shaped by a number of factors, not least thereaction of managed care and the play-out ofpricing dynamics. While many of theuncertainties remain to be categorized,experience from analogous situations offersimportant pointers. ➜

FIGURE 2: ATYPICAL BRANDING MODELS HAVE PAID OFF IN OTHER INDUSTRIES

20

16

12

8

4

0

1. USPotential

leading marketfor biosimilars

Biologics,2005-10

CAGR

2. Advanced economiesEstablished framework

for biosimilars, butslow uptake

3. Pharmerging economiesBiosimilars* already established(looser regulatory pathway) andfast-growing biologics market

US JP SEU CAN CEE TUR BRA MEX CHI KOR IND VTN

9% 6% 10% 14% 19% 21% 14% 13% 24% 16% 19% 39%

Biol

ogic

s M

arke

t, L

C$ b

il

60%

50%

40%

30%

20%

10%

0%

Upt

ake,

%

Biologics Market Sales Biosimilars* Uptake, %

FIGURE 3: THREE GEOGRAPHICAL CLUSTERS ARISE, WITH US REPRESENTING ASIGNIFICANT PORTION OF MARKET POTENTIAL (~60%)Pharmerging economies anticipated to be a potential growth driver

Wanted to sell its electronicsin the US in the ’80s

Best Buy and Home Depotinitially refused assuming lowquality

Entered into the US throughsecond-tier, regional retailers(e.g. HHGregg, P.C. Richard)

Transformed its brands, fromLucky Goldstar to Life’s Good

Now LG can be found at all thetop big-box stores

Enter in the developedmarkets

Disparaged by many westernincumbents as more fattening(“Mexican Lemonade”)

Long-term focus in educatingconsumers and aggressivelybranding the product as alifestyle beer

Downplayed “hecho en Mexico”effect

World’s 10th best-selling beerand number 1 imported in the US

Focus on likely earlyadopters (blockbuster-type global launchstrategy not necessarilythe most suitable)

Invest on branding andpatient education

Takeaways forbiosimilarsincumbents

Source: Adapted from Harvard Business Review, December 2010

Source: IMS Health MIDAS, 2005-2010 * Biosimilars in Europe and Japan defined by regulatorypathway, in pharmerging markets looser approval processes applyfor products that resemble biosimilars

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IMS HEALTH4 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

Among the most interesting analogs forbiosimilars in the US are the heavily contracted,narrow provider populations arounderythropoietins and the G-CSFs where theinfluence of managed care is strong and payershave considerable sway over contracting and thedefined treatment paradigm for a disease.

This set-up closely parallels, and is likely tomirror, the institutional contracting environmentin Germany (the most advanced biosimilarsmarket) where a very limited group of doctorsadminister erythropoietins in a small number ofcenters.

1 Price: For originator companies, one of the keychallenges is to anticipate the way in whichbiosimilars will act on price. Heavy pricediscounting in the institutional sector providesa strong incentive for biosimilars to target alist price that is very close to the originator’sand subsequently gain their advantage throughcontracts.

2 Established experience: In classes such asEPOs and G-CSFs, where there is generalacceptance of high similarity betweenbiosimilars and original brands, and establishedexperience of their use in Europe, the technicalbar is likely to be cleared relatively smoothly.Likewise, if there is a hospital network orrelatively limited number of clinic/treatmentcenters, usage decisions will be faster.

By contrast, biosimilars targeting autoimmunediseases are likely to meet reticence inswitching patients unless and until they fail oncurrent treatment. Without a significantfinancial or co-pay advantage, there is likely tobe little interest from managed care in startingnew patients on these medicines – at leastuntil the safety and substitutability of thebiosimilars are demonstrated.

3 Duration of therapy: The nature of drug usewill be also be a key consideration for theadoption of biosimilars in the US: those intendedfor chronic conditions such as RA and psoriasis,for example, may face particular scrutiny bypayers in considering the impact of potentialfinancial exposure to possibly lifelong therapy.Conversely, if the use of biosimilars were toenable significant savings in these areas, payersmay be more favorably inclined towards them –provided of course that safety and efficacy aredemonstrated. Much could depend on therelative influence of the prescribing physiciansand the degree to which patients express apreference for a lower-cost therapy.

4 Familiarity and trust: Doctors are alreadyfamiliar with the concept and cost benefits ofinitiating treatment with generic versions ofnon-biologic agents in such conditions as RA,

but they will need to trust and believe thatbiosimilars are an effective, safe and cheaperoption to follow suit with biologics. Given thatthese biologics remain on the Tier 4 formularylevel with 30% patient co-pay, this is likely tobe a slow build.

5 Uncertainties: For US patients and payers, thekey issues around biosimilars are theuncertainties. In large patient and providerpopulations, the level of co-pay will be crucial:unless they are significantly lower there will belittle incentive for use. The possibility ofmoving biosimilars to a separate formulary tieris an option, but one that is likely to beheavily dependent on a stronger perception ofsafety around MAbs. In the event that a trackrecord of success is established in Europebefore market entry in the US, and some formof medical consensus is reached on switchingpatients to biosimilars, this may change. Thereal key for biosimilar manufacturers withinthis broader provider community is that it willtake longer to convince individual doctors one-by-one, versus contracting.

There is also the potential in the US for greaterbiologic volume arising from the use ofbiosimilars – a phenomenon which has alreadybeen observed in Europe (see Figure 6, page 7).This could put at risk systemic “savings” withhigher utilization, particularly if pricediscounting for biosimilars is only in the regionof 20-30%.

6 Patient role: Increasing co-pays and thegrowing role of patients in treatment decisionswill also be important for biosimilars:manufacturers may choose to differentiate theirproducts through the use of patient assistanceprograms (PAPs) setting their list price at asimilar level to the originator brand andoffering co-pay assistance to the patientthrough social networking, thus bringing theminto play into the decision making process.

SIGNIFICANT POTENTIAL – OVER TIMENotwithstanding the significant potential forbiosimilars in the US, their establishment in thismarket will be a slow process: stringent clinicalrequirements and an involved, potentially drawn-out procedure for resolving patent disputes arelikely to delay the speed of uptake in the nearfuture: behind every product patent there areseveral potential lines of defense for originatorcompanies, including process patents, which mayslow the entry of biosimilar versions when newmarkets open. Given the highly technical issuesinvolved and lack of legal precedent to date,predictions are difficult to make and questionsremain as to whether biosimilar versions of themore complex biologics (MAbs) will reach the USmarket before 2015. ➜

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It will also take time for the FDA and payers tobuild a learning curve on biosimilars and forphysicians to overcome their concerns over safetyand preferentially adopt these products: they willhave to believe in the ability to technically,safely and consistently reproduce thesemolecules. The financial motivation for bothpayers and patients will also be crucial. However,even if technology regulatory barriers do hinderbiosimilars take-off in the US until 2015, thefinancial incentives - for both public and privatestakeholders - will ultimately drive uptake long-term, with the entry of leading US companiesfostering credibility of the sector.

Europe: The first market

The EU presents the most advanced market forbiosimilars, accounting for 80% of globalspending on these molecules. However, despite astrong legislative foundation, to date only a fewmanufacturers have launched biosimilars in theregion. These include a mixture of existinggenerics houses, the generics arms of majorcompanies and new ventures, most notablySandoz/Novartis, Stada, Hospira, Medice andRatiopharma (Teva). Biosimilars are establishedin three therapy areas in Europe: EPOs fortreating anemia caused by renal dialysis, G-CSFsfor lowered white blood cell counts afterchemotherapy, and HGH.

VARIED PENETRATIONThe penetration of biosimilars varies by country,reflecting local pricing and reimbursementpolicies, stakeholder influence, and attitudestowards their adoption and use. Currently,Germany and France account for half the

biosimilars market by value in the region with a34% and 17% share respectively across Europe,although uptake in Spain and the UK has startedto increase.

Across markets, G-CSFs have generally achievedthe highest penetration by value and HGH thelowest (25% and 4% class uptake respectively).The lower penetration of HGH has been largelydriven by the greater element of patient choiceand discrimination over devices and convenience.Original brand Genotropin, for example, isavailable in a form which does not requirerefrigeration, whereas this is a prerequisite for thebiosimilar version. Cautious prescribing has alsoplayed a role, with physicians hesitant to usebiosimilar HGH given the time it takes to show aneffect: with G-CSFs, the impact of treatment ismore readily apparent, enabling physicians tochange course in a faster timeframe if required. Inthe case of EPOs, uptake is more driven by payerthan patient concerns, given the lack of anydiscernible difference in the patient experience asa result of switching to a biosimilar.

Uptake also varies across countries when therapyareas are considered according to type (Figure 4),being significantly lower in differentiated marketswhere the stakeholder landscape is extremelycomplex, the value proposition is high and themarket is driven by price (eg, somatropin) versuscommodity markets where access is mostlycontrolled by payers and the product has limitedintrinsic value (eg, G-CSF and the epoietins).

LIMITED SUCCESS VERSUS SMALL MOLECULE GENERICSTo date, the first wave of biosimilars has metwith limited success if compared to the uptake ofsmall molecule generics. This can be partlyexplained by limited price reductions: averagelist (ex-manufacturer) price cuts in the region of30% are considerably below those for genericswhich are typically around 70%-80%. However,the pattern is one of inconsistent uptake: whilesome countries in Europe with powerful payersand robust generics markets, such as Germany,have seen strong penetration, others such as theUK, which are also highly focused on genericsand have strong payers, have seen lowpenetrations. Other countries with apparentlyhigh sales of biosimilars such as Greece are, infact, most likely simply source countries for theburgeoning German market. ➜

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ake

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Somatropin uptake, SU MAT 6/2011Differentiated market

UK FranceSpain Italy

FIGURE 4: OVERALL WE CAN IDENTIFY TWO UPTAKE PATTERNS FORBIOSIMILARS, DIFFERENTIATED VS. COMMODITYDifferentiated markets will pose several challenges to biosimilars

Source: IMS Health

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IMS HEALTH6 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

FUTURE EVOLUTIONThe learning curve for biosimilars is essentiallystill building in Europe and the high clinicalrequirements of the new MAbs and anti-TNFs willpresent further hurdles ahead. In the meantime,small molecule generics continue to represent themain source of cost savings in the region.However, the clarity of EU regulation and theneed for further cost-containment action in theunfavorable economic climate are likely to easethe uptake of biosimilars going forward, aspayers become more familiar with their use,tendering processes are established and late-adopting markets such as Italy and Spain followthe leading countries.

Pharmerging economies: On a fast track

Most of the pharmerging markets, including China,India, Brazil and Mexico, have developed their ownregulatory pathway to manage the approval ofbiosimilars. While often drawing on the Europeanframework, these generally set a lower barrier interms of clinical trial requirements and regulatorycontrol. This enables local manufacturers to enterthe pharmerging markets on a more level playingfield, but it also potentially provides a lower costentry point for international players. Such a looserstructure has already fuelled the launch ofmodified biologics within the oncology and EPOmarkets in key countries such as China.

Going forward, government initiatives areanticipated to boost the biosimilars market in

south-east Asian countries, principally as a meansof sustaining their domestic industry. Within theconcentrations of biopharmaceuticalmanufacturing globally, bio-clusters are alreadyemerging in this region, some of them matchingthe quality standards of advanced economies.South Korea in particular, with plans to become aleading biosimilars player, is actively expandingits world-class clinical trials and productioninfrastructure, cultivating bio-specializedmanpower, reinforcing global export capability,building R&D, legal and system support strategies.

Although the biologics market is still at an earlystage in the pharmerging economies it isexpanding fast and biosimilars will play a keyrole in its future growth. However, the uniquenature of these countries may see a market thatevolves over time in an entirely different fashion.Whether European and US manufacturers ofbiosimilars will be able to enter more easily orfind themselves locked out by local competitionis currently an open question.

2020 outlook

Within the three main geographic clusters, anumber of differentiating factors will impact thevalue generation opportunity for biosimilars,including ease of access in the short term, speedof uptake, clarity of regulation and, particularly,the role of public and private stakeholders.

Accordingly, most of the immediate value will besourced from the pharmerging markets, spurredby the anticipated flow of new patients. However,in the long-run, the US will be the cornerstone ofthe global biosimilars market, powering a sectorworth between US$11 billion and US$ 25 billionin 2020 (Figure 5) representing a 4% and 10%share respectively of the total biologics market.The overall penetration of biosimilars within theoff-patent biological market is forecast to reachup to 50% by 2020, assuming a price discount inthe range of 20-30% (or 40-50% with tenderdiscounts included).

Underlying this forecast are six core drivers withthe potential to spur or curb future growth of thebiosimilars market: the US uptake, the spread ofbiosimilars in pharmerging markets, thecontinued pattern of evolution in Europe,technology and the second wave of biosimilars,volume effect and the competitive landscape. ➜

30

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02011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Bios

imila

r M

arke

t Si

ze, L

C$ B

il

20151,9 - 2,6 Bil US$

202011 - 25 Bil US$

• Slow uptake in the US due to new legislation enabling innovators to delay the approval process of new biosimilars

• Uptake in Europe acelerates due to more mature framework

• Emerging countries (Asia specifically) ramping up

Share of biologicsmarket - 2020

Lower Bound

Biosimilars market evolution, 2010 - 2020

Base Case Upper Bound

25

20

11

10%

8%

4%

• Key upside drivers represented by the US market

FIGURE 5: US WILL REPRESENT THE CORNERSTONE OF THE BIOSIMILARSMARKET IN THE LONG RUN, WITH AN UPSIDE POTENTIAL OF UP TO 25 BIL US$ IN 2020Biosimilars not a short-term game

Source: IMS Health

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IMS HEALTH7 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

1 US uptake: The core upside driver ofbiosimilars value in 2020 is uptake in the USlong-term (2014-15), unlocking marketpotential and economies of scale. Anylimitations on this, for example due toregulations favoring innovator companies, willdrive down the likelihood of significant growth.

2 Pharmerging markets: Growth is also dependenton the pharmerging countries becoming a keybiosimilars player in terms of both manufacturingand market size. The more moderate spread ofbiosimilars in developing markets and anyshortfall in quality standards that prevents thesecountries from materializing as leading exporterscould impact overall potential.

3 Europe: Late-adopting major EU markets suchas Spain and Italy will need to follow Germanyin terms of biosimilars uptake to maximizeprospects for growth; it is possible thatphysician and payer resistance may impedethis, negatively impacting the 2020 outlook.

4 Technology: If the US is the key driver ofupside potential, the higher complexity offuture biosimilar targets may be the barrierthat hinders future growth. Technical hurdles,particularly devices in the case of anti-TNFs,will be a challenge for manufacturers and onethat may not be overcome by severalcompanies at once. These issues could preventbiosimilars tapping into all therapy areas wherebiologics are off-patent, curtailing the numberof successful launches across therapy areas.

5 Volume effect: There is potential for asignificant volume effect on biologicsconsumption, as observed with G-CSF in the UK

and Sweden (see Case in Practice: G-CSF -Figure 6). This could drive up biosimilarsmarket growth considerably or equallyconstrain it should uptake be insufficient togenerate a spill-over incentive.

6 Competitive landscape: The forecast assumesthat major markets will drive positive financialreturns and biosimilars growth, enabling agood degree of competition. Should financialbarriers and poor uptake in major markets yielda limited number of competitors, growthprospects will be similarly reduced.

Against this background, how will thecompetitive landscape for biosimilars evolvegoing forward?

Stakeholder moves

To date, one of the main challenges forbiosimilars has been the reluctance of payers,prescribers and patients to accept these productsin place of the original brands. Going forward, thereaction of these stakeholders and the chosenstrategies of aspiring players, and particularlyinnovators, will be key to their speed of uptake:

• Payers: As yet, biosimilars have not been a keypriority for payers and there has been little, ifany, top-down pressure urging a move toextensive biosimilar prescribing. Limited pricediscounts, sophisticated products and lack offamiliarity with their use has perhaps made thedecision less clear cut than for small moleculegenerics. Going forward, however, this is likelyto change as biosimilars move into the highercost areas of oncology and autoimmune diseasesand efforts to rationalize healthcare intensify.Emphasis will be placed on the strongestassurances of clinical safety and efficacy.

• Patients: Increasingly vocal in their treatmentdecisions, patients are also becoming morefocused on broader and affordable access totreatment. However, it is likely that they willbe heavily influenced by physician guidance onadministration of biosimilars and they may noteven be aware whether they are being treatedwith a biosimilar or an originator product.

• Physicians: Lack of experience with biosimilarsand the newness of the regulatory pathwayhave led to a natural conservatism inprescribing approach among many physicians.The learning curve has yet to be built andovercoming safety and efficacy concerns will beparamount to their acceptance of biosimilars.Usage will vary by therapy area but it is likelyto be contained to small groups of new patientsinitially, with close monitoring of outcomesbefore considering more widespread use. ➜

80%

90%

100%

110%

120%

130%

t-4 t-3 t-2 t-1 t0 t+1 t+2

Volume effect

% o

f SU

vs.

t-1

(ye

ar p

rior

to

the

intr

oduc

tion

of

bios

imila

rs)*

Years before biosimilars introductionFrance Germany Italy Spain Sweden UK

Volume effect after the introduction of biosimilarsG-CSF, SU

Source: IMS MIDAS, MAT Q4 2010, NHS. *t-1 =100%, t0 = year of biosimilars introduction

FIGURE 6: AS SHOWN BY G-CSF, THE INTRODUCTION OF BIOSIMILARS CANGENERATE A SPILL-OVER EFFECT ON OFF-PATENT BIOLOGIC MOLECULESOpportunity for biosimilars players only or also for innovators?

UK case study

Physicians movedG-CSF back in 1stline cancertreatment due tolower biosimilarscost

G-CSF preventshospitalreadmission dueto infections

Similar evidenceis collected inother countries(e.g. Sweden)

Source: IMS Health

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IMS HEALTH8 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

• Aspiring players: With significant capitalinvested in biosimilars, the entry of brandedplayers bringing R&D capabilities, andbiosimilars addressing multiple areas of thestrategic agenda, would-be entrants are clearlykey to the sector’s success going forward.

• Originators: The lifecycle managementstrategies of the originator companies have animportant role to play in driving volumeexpansion, with the power to limit uptakeopportunities in advanced economies whilstgrowing penetration in pharmerging markets.To date, many originators have chosen todevelop biobetters or functionally enhancedbiologics, such as pegylated, long-actingformulations, and have sought to establishthese newer versions as the standard of care.This has met with some success in certainareas – most notably with Amgen’s launch ofAranesp and Neulasta, second generationversions of Epogen and Neupogen respectively.More sustainably, originators have establishedextremely strong relationships with prescribers,KOLs and patients, based on services, clinicaldevelopment and investment, which biosimilarsmay struggle to replicate. Patent disputes,especially in the US, where the legislationrequires disclosure of patent information bythe biosimilar manufacturer, may also delay orprevent the entry of some biosimilars.

Challenging arena

For new entrants, biosimilars pose very differentchallenges to those presented by small moleculegenerics, with more demanding requirements interms of clinical development, market access,manufacturing and sales and marketingcapabilities:

• High development costs: Developing abiosimilar is not a simple process but one thatrequires significant investment, technicalcapability and clinical trial expertise. Averagecost estimates range from US$100-250 million(various industry sources) if plant developmentis included (or US$20-100 million for non-plantcost). Whilst lower than the costs ofdeveloping a small molecule NCE, they arenevertheless orders of magnitude higher thanthe costs associated with developingtraditional generics, which are typically aroundUS$1-4 million.

• Fledgling regulatory framework: In mostmarkets apart from Europe, the regulatoryframework for biosimilars is generally still verynew compared to the well-established approvalprocess for NCEs and small-molecule generics;in some cases it is non-existent, making globalinvestments risky.

• Manufacturing issues: Barriers to developing abiosimilars manufacturing capability are notprohibitive, but the development of biosimilarsinvolves sophisticated technologies andprocesses, raising the risk of the investment.In the near term, entrants face limited benefitsof scale, relative to incumbents, and in specificareas such as insulins, strict requirements forcompatibility with existing devices will apply.

• Branded mentality: Winning the trust ofstakeholders will call for many of the skills,resources and branded mentality of aconventional innovative pharmaceuticalcompany – potentially involving changes tocommercial models. Initiatives to allay safetyconcerns among physicians and patients will beparticularly important, supported by salesteams with deeper medical and technicalknowledge. This will mean significantinvestment in sales and marketing – initially atleast – using either internal commercialcapabilities or by sourcing these from brandedcompanies. Investment in pricing and marketaccess will also be increasingly important: post-marketing surveillance is already mandatory inEurope and the US is likely to follow. ➜

-10 -5 0 5 10 15 20 25 3010-year IRR

11.5% Median IRR

Industry benchmark(R&D IRR of 12 Top

R&D PharmaCos)

Biosimilars IRR(Number of competitors

in the market)

Most likely intervalfor biosimilars IRR6.4% - 15%

Internal Rate of Return (IRR)�Biosimilar vs. industry benchmark

• Time-to-market (First mover vs. Follower)

• Value chain optimization, especially on R&D and manufacturing

• Degrees of competition (Numbers of competitors into the market)

Critical factors

FIGURE 7: ALTHOUGH RISKY, THE EXPECTED PRODUCTIVITY OF INVESTING INBIOSIMILARS MATCHES OR OUTPACES BENCHMARK RETURNS FROM R&D

Source: IMS analysis. Benchmark from Deloitte & Thomson Reuters Research 2010 (publicly available document)

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IMS HEALTH9 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

The higher break-even requirements andtechnology barriers associated with biosimilarsare likely to make the competitive arena lesscrowded than generics. However, the ability tobuild the right commercial capabilities will be keyto ensuring a successful go-to-market strategy.

Compelling returns, wide appeal

Despite the inherent risk, the expectedproductivity of investing in biosimilars couldmatch or exceed benchmark returns from R&D. Infact, simulating the potential internal rate ofreturn (IRR)8 of a biosimilar investmentcompared to an industry benchmark shows that itcould actually yield a higher IRR than developinga brand new biologic (Figure 7).

Furthermore, biosimilars can fit within thestrategic agenda of various company profiles – asdemonstrated by the eclectic mix of innovatormanufacturers, generics houses and players fromother industries that are already entering thesector. They offer a source of long-term financialreturns, an opportunity to address diminishingpipeline productivity and a basis for building anR&D platform for the future. Importantly, too,they provide access to the fast-growingpharmerging markets where critical new patientsegments are easier to penetrate. The enormouspotential of the pharmerging markets is a keyupside driver and for many companies a principalreason for investing in biosimilars despite thehigh financial barriers short-term.

A further key attraction of biosimilars for R&D-based companies is the opportunity to developbiobetters or biosuperiors – ie, improvements tooriginator biological molecules as opposed tostructural imitations of the originator. Formanufacturers, a major advantage of biobetters istheir lower early-stage R&D costs compared tooriginator drugs.

In reality, regulatory pathways in the EU and UScould encourage the development of biobettersrather than biosimilars. These biobetters woulduse the standard biological approval route, ratherthan the abbreviated pathway used by biosimilars.This would mean that biobetters, as ‘new drugs’,would benefit from market exclusivity.

Tapping the potential

Unlocking the potential of biosimilars will requirea focused strategy along the whole value chain,from optimizing the clinical development programthrough developing the most suitable strategy forcommercialization. Balancing the trade-offbetween in-house versus strategic alliances willbe essential for achieving cost efficiencies andspeeding up time to market, with further tailoringby geography to cope with a heterogeneouslandscape (Figure 8). Entry into pharmergingmarkets, for example, will be strongly governed bypartnerships with local players.

The opportunity afforded by biosimilars can beconsidered from two different standpoints: eitheras a means of protecting current value or as asource of new value generation. For companiesfocused on value protection, evaluating andmitigating risk will be key with a view tooptimizing resource allocation post-LOE; thoselooking to join the biosimilars journey will needto thoroughly assess their strategic fit, thebuilding blocks for successful entry and theoptimal go-to-market model design (Figure 9). ➜

FIGURE 8: SOLVING THE TRADE-OFF BETWEEN IN-HOUSE AND STRATEGICALLIANCES WILL BE KEY FOR FUTURE SUCCESS IN BIOSIMILARSFocusing along the whole value chain will be a must to generate value

FIGURE 9: BIOSIMILARS CAN BE VIEWED FROM TWO DIFFERENT ANGLES – VALUE PROTECTION VS. VALUE GENERATIONOriginators lifecycle strategy can potentially address both perspectives

Leverage of internalassets or outsource ofcapabilities from outersuppliers to speed updevelopment andensure compliancewith regulatoryrequirements

What is the business atrisk and how is it spreadacross regions?

Who are the keystakeholders?

How and where dobiosimilars fit withinour strategic agenda?

What actions should weundertake to minimizerisk? (IP, pricing,volume effect, lifecyclestrategy)

What are the buildingblocks for implementinga successful biosimilar

strategy?

How can we optimizedeployment of resourcespost-LOE?

What is the optimal go-to-market model acrossgeographies and based

on target therapy areas?

CLINICAL SUCCESSAND SPEED TOMARKET

Clinicaldevelopment and

regulatory

Market access

Manufacturingcosts

Sales andmarketing

BUILD TRUST ANDNETWORK

DEVELOPMENT

OPTIMIZE SUPPLYCHAIN AND

MANUFACTURING

BRANDEDMENTALITY TODRIVE ADOPTION

Optimize time tomarket and ensurekey stakeholders(KOLs, payers) areonboard and

supportive to driveadvocacy andacceptance

Scale up production(through in-houseinvestments or

alliances) to achieveeconomies of scale,although in the

short-term is quiteunlikely to happen

Tailor go-to-marketapproach to localdynamics, both interms of sales forcemodel and marketingoffering (e.g. device,patient management

services)

Biosimilars value chain

Risk evaluation

Risk mitigationstrategy

Post-LOE resourceallocation

Strategic fit

Entry strategy

Go-to-marketdesign

BiosimilarsVALUEPROTECTION

VALUEGENERATION

8 IRR is used in capital budgeting to measure and compare the profitabilityof investment options (also known as discounted cash flow rate of return)

Source: IMS Health

Source: IMS Health

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IMS HEALTH10 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011

Summary

To date, limited experience with biosimilarscaptures only a small portion of their anticipatedfuture potential, as powerful economic pressuresincrease their appeal to payers in mature andpharmerging markets. Nevertheless, there aremajor barriers in place which mean that it maybe challenging to be successful. The biosimilarssector is also at very different stages in each ofthe major regions and will likely take a differentcourse. Ultimately, from the heterogeneousgroup of biosimilars entrants and would-beplayers, the number of winners may be small.

Companies looking to take advantage of thebiosimilars opportunity will need to be clear oftheir strategic relevance within the organization,in terms of portfolio fit, financial suitability andsynergies within the value chain, bearing in mindthat this may be an established or pharmergingmarkets play. A full understanding of thefinancial upsides and risks of the investment willbe critical, based on realistic scenarios of thesize of the potential, the therapy areas where itwill be found, and whether collaboration andalliances are required to access the necessaryskills. An effective market access strategy willbe vital for successful entry: the valueproposition is complex and will need to addressthe full range of stakeholders – including payers,physicians and patients whose opinion will becritical. Robust, up-to-date intelligence will alsobe key: competitors will be diverse and theirquantity unknown. Above all, companies willneed commitment: the prospects are good andgrowing but biosimilars will likely be a long-term game.•

FOR FURTHER INFORMATION, SEE OVERLEAF...

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©2011 IMS Health Incorporated or its affiliates. All Rights Reserved.

Working with IMS in biosimilars

FOR FURTHER INFORMATIONPlease contact Sarah Rickwood at [email protected] or Antonio Iervolino at [email protected]

IMS Health7 Harewood Avenue, London NW1 6JB

• How do biosimilars fitwithin a companystrategic agenda?

- Portfolio synergies

- Financial suitability

- Synergies within thevalue chain (R&D,manufacturing, sales& marketing)

• What are the financialupsides and risks ofinvesting in biosimilars?

• In which therapy areas topursue this strategy?

• How to develop asuccessful biosimilar entrystrategy?

• The US is the biggestbiologics market: how toenter it successfully whenthe biosimilar opportunityopens up?

• What other countriesoffer new opportunities forbiosimilar markets, andhow to enter?

• How to maximize uptakein the EU landscape?

• What are the likelycompetitive scenarios(originators/otherbiosimilar competitors)?

• What are key drivers andbarriers to managestakeholders acrossgeographies and how todeal with them (e.g.Branded approach, DTC)?

• Which biosimilartherapeutic markets willbe the most attractive?

• What are the likelybarriers to entry?

- Investment levels (e.g. Marketingcapabilities, device)?

- Stakeholdermanagement?

- Market accessapproach? (e.g.Pricing, developmentof the appropriateclinical package)

- Launch preparation?

• What is the optimal go-to -market model fora successful biosimilarsbusiness?

- Integration andsynergies with existingbusiness

- Partnership and strategicalliances

• What skillsets andresource levels will beneeded, internationallyand locally, to addressnew geographic andtherapeutic markets?

• What Key PerformanceIndicators should be usedto manage and measurethe business?

FIT WITHIN STRATEGIC AGENDA

NEW GEOGRAPHICOPPORTUNITIES

NEW THERAPEUTICOPPORTUNITIES

INVESTMENT ANDINFRASTRUCTURE FOR

SUCCESS

GO OR NO-GO? WHAT IS THE OPTIMAL APPROACH?

We work closely with clients and leading industry groups to keep pace with market changes. Our highly relevant, consistent metrics cover the trends driving global change and innovation— from new distribution channels and emerging markets to generics, biologics and biosimilars — and help clients successfully adapt to new realities. Our key approach tosupporting organizations in addressing the key issues to successfully exploit the biosimilarsopportunity is highlighted below.