Biosimilars; where we are and where we are headed

NexGen Consulting Group, LLC New Era for Biosimilars: What the future holds

Presented by Larry Singer, R.Ph., MBA, JD

President, NexGen Consulting Group, LLC www.nexgen.org

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Introduction Larry J Singer, President, NexGen Consulting Group, LLC

Key topics: Biosimilars at a Glance: Where we started

Global Trends 2020: Where we are going

Innovation and Growth: Drivers of the Next Big Wave

Risk Environment & Changing Regulatory Landscape

Building Stakeholder Value

Q&A

New Era for Biosimilars: What the future holds

New Era for Biosimilars: What the Future Holds - Agenda

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New Era for Biosimilars: What the Future Holds – Presented by:

Larry Singer has been President, NexGen Consulting Group, LLC for the past 15 years. He has over 35 years of experience in biotech, pharma, consumer products and medical devices. His background includes extensive experience in biopharm product and process development, manufacturing, supply chain management, and new product launches. NexGen‘s clients include companies such as Biogen, Salix Pharma, LG Lifesciences (Korea), Kaketsuken (Japan), Red Swan Pharma (Netherlands), Kodak Healthcare, InterMune, and many others. Mr. Singer holds a B.S. in pharmaceutics, an MBA in supply chain management, and a Juris Doctorate in intellectual property management.

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New Era for Biosimilars: What the Future Holds

Biosimilars at a Glance:Where We Started

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Biosimilars at a Glance: Where We Started

2015Major products from the current cliff include:• Remicade• Neulasta• Lantus

2019Major products from the 2019 cliff include:• Avastin• Lucentis• Herceptin

Patent Cliffs: 2015 & 2019 Two Large Cliffs Exist for Expiry of

Major Numbers of Patents: 2015 and 2019

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Biosimilar Patent Expiries at a Glance

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Where We Started: c2008 – 2010 Initial thought: all biologic products were targets for biosimilars.

Basic assumptions:

Global market Common regulatory pathway Current analytical methods would support reverse engineering Easy to achieve

And most importantly: Biosimilars would sell at or near

originator prices

Total originator worldwide market in excess of $25B

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Global Trends 2020:Where We Are Going

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Global Trends 2020: Where we Are Going

The USA, EU, Japan and Korea represent the largest R&D investments in Biosimilar development

The same geographic sectors also represent a large portion of the spend/profit

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Global Trends 2020: Where We Are Going

As with other drugs, the USA will likely represent the largest payor/reimbursement market

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While the Regulatory Pathway is Somewhat Defined:

The EMEA & FDA are essentially requiring functionally identical molecules

BLAs have been rejected for improved side effect profiles relative to the innovator

Current analytical methods are not necessarily enough


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The revenue size of the global Biosimilar market remains undefined, but it is likely far less than originally projected

But why? The target products are in place Markets are defined So is pricing

Is that really the case?


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Is That Really the Case?

The target products are in place Markets are defined So is pricing


Although the list of target products remains the same, there were initial oversights

Creating biosimilars turned out to be more difficult than first estimated

The majority of (originator) development & manufacturing IP remain trade secrets

Trade secrets, unlike patents, can last indefinitely

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Is That Really the Case?

The target products are in place Markets are defined So is pricing


Pricing & reimbursement are not what was originally expectedFor example, Infliximab biosimilar is already in a price war with the originator

There is a scientific bent that from a market perspective, biosimilars are fundamentally different (better?) than small molecule generics

Driven by the difficulty in creating biosimilars relative to small molecules

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However:Biosimilar developers will find that pricing and reimbursement will be unrelated to the degree of difficulty of development

Why? Exactly like small molecule generics,

the only thing upon which biosimilars can compete is price

This is identical to small molecule generics Eventually, biosimilars and their

originators will find themselves locked in price wars


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So Where Does This Leave Us? The Biosimilar market out towards 2020 and beyond will mirror small

molecule generics:

Few, large volume producers

Intense price pressures on both Biosimilar and originator organizations

Consolidation of the small players

MUCH slimmer profit margins on both sides

Global trends 2020: Where We Are Going

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What Else Are We Expected to See? Originators will step up advertising budgets in

the short term

Payor organizations will be unimpressed

So will the medical community

Legislation Mandating Interchange will appear

Several USA states have already proposed mandatory interchange

Global Trends 2020: Where We Are going

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Many biologic products require cold chain distribution (unlike small molecules)

Very expensive and technically complex

Some as low as minus 70

This Creates Additional Price Pressures for Both the Innovator and Biosimilar Manufacturers

Cold Chain: Another Twist in Costing


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This will raise the complexity and cost for organizations entering the Biosimilar field who are unfamiliar with:

- cold chain logistics- storage- development (e.g., master

and working cell banks, etc.)

Cold Chain: Another Twist In Costing


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Innovation and Growth:Drivers of the Next Big Wave

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Innovators

VS.

Biosimilar organizations

• Will reduce manufacturing costs to stay competitive

• Will seek patent extensions through new indications –

This will utimately fail

• Will also seek to reduce manufacturing costs and will be more effective at doing so than innovators

• Will utilize disposables

• Will attempt to "live with fixed stainless steel"

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Allied organizations will see a rise in business

Worldwide capacity for fixed stainless steel will drop – slowly, as innovators consolidate, bring in contract business and shutter facilities

Manufacturing using disposable technology will become the norm

Worldwide contract filling capacity will decrease and costs will rise

Worldwide contract finishing (package and label) capacity will decrease and costs will rise


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Allied organizations:Rise in business

Fixed stainless steel:

Worldwide capacity to drop

Manufacturing using disposable technology:

Will become the norm

Contract filling:

Worldwide capacityto decrease

Costs to rise

Contract finishing(package & label):

Costs to rise

Worldwide capacityto decrease


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New Era for Biosimilars: What the Future Holds


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FDA and EMA regulations are becoming more clear

Molecule similarity remains a major challenge – how similar is sufficient?

What degree of tolerance do the agencies have for a similar but higher incidence known side effects?

Long-term market exposure (patient years) has yet to be established

How will the agencies react to changes, even if they are minor?

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New era for biosimilars: What the future holds

Building stakeholder value

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Building Stakeholder Value

The final Take Away:

USA & EU remain the largest income markets, however:this will only be the case for patent protected molecules

Biosimilar organization relative margins will ultimately drop in a manner similar to those of small molecule generics

Supporting organizations (i.e., manufacturers of disposable technology) will see their market shares, profitability and stakeholder value rise

Overall, generics are generics:- it is a mistake (driven by scientific pride) to assume that biosimilars will not be subject to the same price pressures as small molecule generics

NexGen Consulting Group, LLCNexGen Consulting Group, LLCBoston & San Francisco USA

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Biosimilars; where we are and where we are headed