Deal-Making in the Biosimilars Market

Driven by significant opportunity and a perceived lower risk strategy for taking a slice of the booming biologics market, companies have been investing heavily in biosimilars to capitalize on a market that’s forecast to be worth US$3.5 billion by 2015. To exploit this opportunity, companies have embarked on a hearty meal of deal-making. Since the biosimilar market’s formal inception in Europe in 2005, deal flow has been solid. Generics companies made early forays, seeking to leverage relationships with payers and drive long-term growth. Over time, more companies — including several originator pharmaceutical and biotechnology companies — have invested in the market.

To date, biosimilar deals have focused on building synergies and derisking investments. Companies have joined forces to maximize the potential of combined resources or use licensed assets or capabilities to fill internal gaps. Rarely have companies hit the acquisition trail. When they have, biosimilars have been part of the deal rather than the key driver of the purchase. Collaborative agreements have given companies the ability to walk away from deals with manageable losses should things not play out as expected. Acquisitions, on the other hand, are riskier and more expensive.

Because of limited information and companies keeping their cards very close to their chests, total deal value in this market is difficult (almost impossible) to calculate. However, one thing is certain: In a market that was worth only $243 million at the end of 2010, investment has, thus far, significantly exceeded return.

A Broad Range of Strategies

The extensive barriers to entry may seem to make the biosimilar market unattractive to potential investors: high up-front investment costs, the likely need to compete on price rather than product differentiation, and uncertainty over issues such as substitution. However, since the world’s first biosimilar approval in April 2006, deal flow has continued. Multiple agreements have been announced at all stages of the value chain. And although financial terms of many deals have never been published, it is assumed that the total value of those announced so far is in the region of $10 billion.

Technologies: From a technology perspective, one deal stands out from the rest. In December 2011, Baxter International and Momenta Pharmaceuticals announced a collaboration to develop and commercialize interchangeable biosimilars. Their deal focuses on development and commercialization of biosimilars, but technology is at its heart.

Momenta Pharmaceuticals specializes in the detailed structural analysis of complex drugs. In a statement to the market, president and CEO Craig Wheeler commented that the main focus of this deal was to “create interchangeable biologic products by taking advantage of Momenta’s innovative physicochemical and biologic characterization capabilities, coupled with a quality-by-design approach to process development.”

A key market-shaping issue of the biosimilars market is interchangeability between reference products and the biosimilars. By developing fully interchangeable biosimilars, Baxter and Momenta would have a significant advantage over the competition. Such products could be perceived as “more biosimilar” than their reference products, speeding their market uptake.

Manufacturing Agreements: A significant number of manufacturing deals have also been struck in the biosimilars market. In January 2009, Teva Pharmaceuticals joined forces with Lonza to create Teva-Lonza Biopharmaceuticals, thereby allowing Teva to gain access to Lonza’s biologics manufacturing capabilities. A key part of this deal was the manufacturing and supply of Teva’s biosimilar rituximab, TL-011. But three years after that announcement, Teva suspended the development of TL-011 “to consider the best path to a regulatory approval in Europe and the US.”

Soon after the Teva–Lonza announcement, US-based Merck & Co. made its first external investment in the biosimilars market. In December 2008, it had kicked off its biosimilar strategy by investing $1.5 billion to establish Merck BioVentures (MBV). Then in February 2009, it acquired the biosimilar manufacturing facilities of Insmed for $130 million. That deal also included a number of pipeline products, including a biosimilar G-CSF (INS-19) and a PEGylated biosimilar G-CSF (INS-20).

Other manufacturing deals have been struck, including Roche’s agreement with Indian-based biotech, Emcure. Roche has given Emcure rights to manufacture Rituxan (rituximab) and Herceptin (trastuzumab) for India. Innovation as a way of competing with biosimilars has been and remains the name of the game at Roche. This deal does indicate, however, that the company is willing to adopt a flexible strategy in certain markets.

Clinical Development: Driven by regulatory requirements for clinical testing of biosimilars, clinical development services also have been in high demand. Companies such as Merck, Samsung, and Amgen have all set up strategic biosimilar development collaborations with contract research organizations (CROs) to gain expertise in biosimilar clinical development and support regulatory activities.

In January 2011, MBV partnered with Parexel International to access its clinical development and regulatory services. As part of their agreement, an MBV unit was established within Parexel to support all ongoing clinical and regulatory activities for the company. Both Samsung’s $266 million joint venture with Quintiles in April 2011 and Amgen’s deal with PRA International in May 2012 were struck for similar reasons.

Licensing Agreements: Outside of deals focused on technology platforms, manufacturing capacity, and clinical development services, big money has also been spent on biosimilar product licensing. Over the past four years, several high-profile deals have been struck, many of which have focused on complex biosimilars, including monoclonal antibodies (MAbs) and fusion proteins.

Indian-based biotech Biocon has out-licensed rights to its biosimilar pipeline twice in the past few years. In June 2009, Biocon outlicensed rights to its MAb portfolio, which includes trastuzumab (Roche’s Herceptin) and bevacizumab (Roche’s Avastin) to Mylan. And in October 2010, Biocon struck a deal with Pfizer, giving it access to Biocon’s biosimilar insulin portfolio — a deal that has subsequently been cancelled.

To complement its activity in the clinical trials and manufacturing spaces, MBV has also licensed the rights to certain pipeline biosimilar assets. In June 2011, the company invested a potential $720 million to gain global rights (except for Turkey and Korea) to HD-203, a biosimilar version of etanercept (Amgen’s Enbrel) from Korea’s Hanwha Chemical. Only a few months later, Amgen put those plans to the sword by announcing a “stealth patent” that could keep Enbrel biosimilars off the US market for another 15 years. Whereas Merck can continue etanercept development outside the United States, the new patent will prevent entry into the US market, which accounts for just under half of global Enbrel sales.

Not to be overshadowed by Merck, Amgen has also struck several deals to gain access to pipeline biosimilars. Kicking off in December 2011, the company joined forces with Watson Pharmaceuticals to collaborate on development and commercialization of biosimilar oncology MAbs, with Watson paying $400 million for the privilege. Then in July 2012, Amgen and Watson licensed global rights to Synthon’s biosimilar trastuzumab (Roche’s Herceptin). That biosimilar completed phase 1 testing in March 2012, and phase 3 trials are planned for early 2013.

A High Price for a Lean Cut?

This is only a small selection of deals seen in the biosimilars market over the past few years, and it shows that deal flow has been solid. As companies jostle for position and strive to establish themselves in a potentially lucrative seg
ment of the biologics market, much investment has been made.

However, the rate at which generic, biotechnology, and pharmaceutical companies invest in biosimilars (and aim to incorporate biosimilars into their core businesses) is likely to slow down in the next couple of years. Rates of return are not as meaty as companies have expected.

Although more investment is likely to be announced in the near term, there will also be strategy changes, with companies pulling out of the space when investments don’t bring the expected rates of return. The biosimilars market is attractive, but there is only so much of the pie to go around.

BioProcessss International European Conference and Exhibition 17–18 April 2013, Swissôtel (Düsseldorf, Germany)

Five Conferences in Two Days

Production Strategies for Biosimilars, Antibody-Drug Conjugates, and Fusion Proteins (New for 2013)

Cell Culture and Upstream Development

Downstream Processing: Capture, Recovery, and Purification

Process, Product, and Particle Characterization

Flexible Manufacturing Strategies and Technology Transfer (New for 2013)

Seven Preconference Workshops (16 April 2013)

The Pain and Gain of QbD for Biopharmaceuticals (led by Daryl Fernandes, founder and CEO of Ludger UK)

Practical Technology Transfer for Biopharmaceuticals (led by Richard Dennett, director of CMC technical/regulatory, technology transfer, and CGMP at Voisin Consulting Life Sciences)

CMC Expectations Surrounding Comparability Studies for Biologics and Antibody–Drug Conjugates (led by Gavin Edwards and Ralf Hess of PAREXEL Consulting)

Ensuring Viral and TSE Safety of Raw Materials and How to Prepare Yourself in the Event of a Contamination (led by Hannelore Wilkommen of RBS Consulting)

Biosimilar Development and Production: From Development to Market–Biosimilar Monoclonal Antibodies in the EU and US (led by Carsten Brockmeyer, biosimilar expert and managing director of Brockmeyer Biopharma)

The Challenge of Protein Aggregation and Subvisible Particles in Biopharmaceuticals (led by Tudor Arvinte of the University of Geneva and Therapeomic Inc., and Wim Jiskoot of Leiden University)

Cost Management for Biomanufacturing: The Influence of Development, Design, and Engineering (led by Bill Thompson, consultant with Rotherwood Associates)

For More Information: www.bpi-eu.com

About the Author

Author Details
Dr. Duncan A. Emerton is director of Datamonitor Healthcare Consulting, a division of Informa Business Information, 119 Farringdon Road, London EC1R 3DA United Kingdom; 44-20-7551-9156, fax 44-87-0132-4874; www.datamonitorconsulting.com.Meet him and a host of leading biosimilar developers at the 2013 BioProcess International Europe Conference. This article has been adapted from its original publication in the November 2012 edition of Scrip Newsletter, with permission from our colleagues in that Informa business.