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Biosimilars the Way Forward: Companies in Focus - Analyst Blog

Arpita Dutt

The first biosimilar version has finally gained approval in the U.S. with the FDA saying yes to Sandoz’s (a Novartis NVS company) Zarxio (filgrastim-sndz), a biosimilar version of Amgen’s AMGN blockbuster drug, Neupogen (filgrastim). Although the approval was expected considering an FDA advisory panel had voted in favor of approving the biosimilar, it is a landmark decision and follows years of debate regarding the regulatory path for biosimilars.

While Amgen’s shares declined 2.96%, Novartis’ shares also recorded a decline (1.51%) despite the approval of Zarxio. There could be several reasons for this.

Firstly, the approval was expected given the positive FDA advisory panel’s recommendation. Secondly, Amgen and Novartis are locked in litigation regarding the Neupogen biosimilar – so at present there is limited visibility as to when Novartis will launch Zarxio. Third, Zarxio has been approved as a biosimilar and not as an interchangeable product.

When a biological product is approved as an “interchangeable,” it means it can be used instead of the reference product without the intervention of the health care provider who had prescribed the reference product. Finally, there is concern that health care providers could be hesitant, at least initially, to switch patients from the reference product to the biologic.

What's a Biosimilar?

A biosimilar is a biologic product whose approval is based on evidence that it is highly similar to an approved biologic, known as the reference product. Moreover, there should be no clinically meaningful differences between the biosimilar and the reference product where safety and effectiveness is concerned.

The Role of Biosimilars

While biosimilars have been available in the EU for quite a while, there was no regulatory pathway for biosimilars in the U.S. However, this changed with the passing of The Biologics Price Competition and Innovation Act of 2009 (BPCI Act) as part of the Affordable Care Act that President Obama signed into law in Mar 2010.

Biosimilars are expected to reduce healthcare costs and provide a large number of patients with access to much needed biologic treatments. According to information provided by pharmacy benefit manager (PBM) Express Scripts ESRX, about $250 billion could be saved in the next decade (2014 – 2024) if biosimilars for 11 products including Neupogen, Avastin, Epogen, Humira, Neulasta, Remicade and Rituxan are approved. According to the PBM, Neupogen biosimilars alone represent potential savings of about $5.7 billion.

However, at present, there is low visibility on the pricing of biosimilars in the U.S. Unlike generics, which are sometimes priced at even a 90% discount to the branded drug, biosimilars are usually sold at a 20%-30% discount to the price of the reference drug. So, it could be a while before biosimilar sales actually pick up and meet industry expectations.

Companies In Focus

Unlike its pharma counterparts, biotech companies have not been exposed to generic competition in the U.S. But with the approval of Zarxio, the floodgates have opened. Here’s a look at some companies apart from Sandoz that are working on bringing biosimilars to the market.

A major player in the biosimilars market is Hospira HSP, which is set to be acquired by Pfizer PFE in the second half of 2015. Hospira has launched several biosimilars including Retacrit (epoetin zeta), Nivestim (filgrastim - Neupogen) and Inflectra (infliximab - Remicade) in Europe and is now looking to get Retacrit and Inflectra approved in the U.S. This Zacks Rank #2 (Buy) stock is also looking to develop a biosimilar of blockbuster eye treatment, Lucentis.

Although Amgen will likely be the first to feel the brunt of biosimilar competition in the U.S. once Sandoz launches its product, the company has been quick to recognize the commercial potential of the biosimilars market. The company has already made significant progress in this field with quite a few late-stage biosimilar candidates in its pipeline.

Amgen is developing biosimilar versions of Avastin, Herceptin, Rituxan, Erbitux, Humira and Remicade and expects to launch five new biosimilars between 2017 and 2019. The biosimilars opportunity represents annual revenues of more than $3 billion for Amgen. The company is collaborating with Actavis ACT for biosimilar versions of Herceptin, Avastin, Rituxan and Erbitux. Actavis is a Zacks Rank #2 stock while Amgen carries a Zacks Rank #3 (Hold).

Another biotech company, Biogen BIIB, is working on bringing biosimilars to market. The Zacks Rank #3 company is working with Samsung Biologics for the development, manufacturing and marketing of biosimilars.

Other companies involved in the development of biosimilars include Teva (TEVA), Mylan MYL, Merck MRK and Merck KGaA MKGAF.

The bottom line is that the introduction of biosimilars will help improve patient access and save billions of dollars in healthcare costs. Although biosimilars are mostly sold at a 20%-30% discount to the price of the reference drug, nevertheless the market is highly lucrative and will remain a talking point in the coming years as several biotech companies lose exclusivity for their hot-selling biologic products.

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