United States: Identifying The Likely Beneficiaries Of An Emerging Biosimilars Market

Financial analysts have predicted that over the next five years, biosimilars will be a $10 billion market, so it is understandable why considerable attention and investment is being made in this space. However, while there is consensus that there is a strong future in the biosimilars marketplace, there are countless unanswered questions about how these products will see the light of day in the United States. A brief overview of significant outstanding questions includes:

  • What will the FDA Guidance Documents on Interchangeability look like and will the standard be achievable across products in a financially reasonable way?
  • Is the IP battle between Amgen and Sandoz establishing a plug-and-play framework for future products or rather setting a standard for the time that can be bought by the innovator by using legal maneuverings? 
  • How are actions in individual states going to impact the ability of smaller players to enter the market?
  • How will biosimilars be priced and will this pricing difference be enough to encourage uptake or create access?

Given this excitement but uncertainty in the area of biosimilars, there are significant opportunities to be had.  At Tiber Creek Partners and Dentons, we believe that beyond the obvious participants such as Amgen, Hospira, Pfenex, Celltrion, and Janssen, other ancillary companies are likely to be significant beneficiaries of this current turmoil.

Beneficiary Number One: Bio-betters

There is a financial inflection point at which time it will make more sense for a company to pursue a bio-better approach and seek approval for a product through the traditional innovator pathway than try to leverage the biosimilar pathway.  By exploring bio-better products, a company can build upon what is known about a core molecule but enhance its properties in such a way to surpass the outcomes of the original innovator molecule.  This may be by improving PK, route of administration, reducing side effects, or enhancing function by way of an antibody drug conjugate (ADC).  Innovators of biologics are likely to also be moving in this direction of bio-betters in response to price competition given that they are best able to leverage what is known about the core molecule, its clinical experience, any manufacturing challenges, and opportunities to decorate the molecule such that they can demonstrate superior health outcomes.  This has the benefit for the innovator company of maintaining a portfolio of high price point products with superior activity compared to impending biosimilar market entrants.

Beneficiary Number Two: Deep Pockets and Really Deep Pockets

The ongoing legal maneuvering between Amgen and Sandoz, and between Janssen and Celltrion, is impacting the decision-making of other potential participants in the market.  Given that longer and protracted timelines for a biosimilar entrant to the market impacts the return-on-investment of that product, investors are surely keeping a close eye on the broader financial implications of each tactic that may be used to streamline, or, alternatively, delay entrance into the biosimilars market.  Certainly investors have some level of risk built into their investments, but there is also a point of diminishing returns or an inflection point where investing in a bio-better or another product altogether will make more financial sense.  At the end of the day, investors need to see a return-on-investment in a given timeframe, and an extended timeframe is only going to be tenable for those with a long financial runway- such as Roche, Pfizer, and Amgen, which puts them in an interesting position of theoretically being the market leaders for both innovator and biosimilar products.  Given the uncertainty in the current biosimilars market- whether regulatory, legal, or financial- it will be interesting to observe which investors have biosimilar staying power and which chose to find another home for their investments.

Given that both material procedural and substantive issues remain unresolved with respect to biosimilars, opportunistic investors will likely sit on the sideline until there is greater clarity as to the processes, substantive rules, and reimbursement environment, further limiting the participants in the market.  he next few years will certainly set the tone for whether smaller, less-well financed companies can pull together the resources and the will power to undertake a long, protracted route to market.  Therefore, these early products and procedural maneuverings are incredibly important as they are likely to set the tone for how the industry – both innovator and biosimilar – proceed in the future and how much investment it will take to stay in the game.

Beneficiary Number Three: Contract Research Organizations

The current legal maneuverings between Amgen and Sandoz and Janssen and Celltrion are currently very much process based.  However, to date in the US, there have not been questions raised about the characterization of the reference product and the biosimilar and whether they are truly "similar".  Given that Health Canada determined there are enough differences in mechanism of action between Janssen's Remicade and Celltrion's Inflectra to exclude two indications from Celltrion's current Canadian label, that seems to open the door to biosimilar challenges based on the structural similarity of the innovator and the biosimilar product.  It is easy to imagine that the sponsor of a reference product would be ready to exploit language such as that used by Health Canada ("Inflectra is comparable to Remicade in situations where the mechanism of action is exclusively binding to TNFα. Where the mechanism of action is not clearly defined or where there is a role for ADCC in the mechanism of action, it cannot be conclusively determined that the molecules are comparable.") to suggest that the products are not, in fact, similar.  This scientific based debate has not yet occurred in the US (and is another opportunity to delay entrants into the market) so it is unclear at this point what additional legal, political, or scientific resolutions may be available to companies who find themselves in dispute over the structure and function of a molecule. 

Those research groups with the scientific sophistication to identify any molecular structural issues, mechanistic differences, or other molecular complexity are not just going to be a direct asset to companies, but are also going to be important to the regulatory authorities who are using this characterization as a primary method of determining biosimilarity.  Additionally, the regulators are in an on-going learning process to understand the depth and breadth of biologic characterization.  Those entities with this type of scientific sophistication are setting the standard for all products that FDA reviews, creating an opportunity to use regulatory hurdles as another significant barrier to market entry.

Beneficiary Number Four: Companies with a Sophisticated Approach to Reimbursement

Clinical discussion around interchangeability of biosimilar and reference products will continue while emerging US-based clinical data are generated and undergo peer review. Whereas payers will focus on achieving price discounts through the use of biosimilars, biosimilars have yet to achieve widespread clinical recognition and acceptance in the US. While European-based studies may demonstrate safety and efficacy of the new agents, outside US data have never been the exclusive determinant of US adoption. Clinicians tend to be wary of agents added to formularies by PBMs and committees in general, and based on price differentials, specifically. Many chronic diseases are managed by well-established, specialty-developed clinical guidelines, and wholesale modification of such treatment guidelines by payer lobbying will be challenging. 

Medicare for parts B and D drugs as well as state Medicaid agencies have taken a largely wait-and-see strategy whereas stirrings are already underway for commercial payers. This is evident from recent meetings on biosimilars by the Academy of Managed Care Pharmacy (AMCP) whose pharmaceutical dossiers are used by many "gate keepers" to make and justify formulary adoption and changes. Consequently, companies that develop documentation on the comparative effectiveness of biosimilars will be able to submit evidence to such groups as they begin to undertake assessments of these new agents which will eventually be used by payers for coverage decisions. Likewise, companies that use this evidence to inform specialty societies and clinical utilization will be able to enhance their product uptake opportunity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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