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International Biopharmaceutical Association Publication

The Current Market for Generic Biologics







Compiled by:

Gurdeep Singh Shah

gurdeeps@rogers.com

Toronto







Abstract

The current market presents potentially lucrative opportunities for companies

that are
well
-
positioned to enter the generic biologics sector. Due to expected intense competition
among generics manufacturers, price erosion will likely occur, thereby negatively
affecting brand name manufacturer revenue. However, generic market expans
ion will be
limited by regulatory and manufacturing hurdles, as well as competition from the
introduction of next
-
generation biotherapeutics.

Due to the uncertainties surrounding biogeneric regulation, expected average wholesale
prices, patient population

penetration rates, and possible brand biologic patent extensions
will have direct impact on the market of generic biologics.

Several factors will drive outsourcing of biotechnology operations to contract
manufacturing organizations (CMOs). First, the supp
ly of certain critical biologics is not
meeting market demand due to the unexpected success of various therapeutics and
second, many generic manufacturers of small
-
molecule drugs are expanding to include
the promising area of biopharmaceuticals. Because ma
nufacturing biologics requires
different processes and quality controls than traditional pharmaceuticals, outsourcing is a
financially prudent strategy. Third, small biotechnology companies do not have the in
-
house capacity to conduct clinical trials and m
arket the product due to a lack of
infrastructure, resources, and expertise needed for successful product manufacture.
Therefore, despite technical and cost related hurdles, the CMO industry is likely to
experience strong growth in the near future due to a

strong biologics and emerging
generic biologics pipeline.

The market segment reached to $30M in 2003 and growth is expected to continue at an
aggressive compound annual rate of 135% to 2010. By 2010, the market will grow to

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approximately $12B worldwide wi
th a majority of these revenues generated in the U.S.
and the EU.

Since biogeneric is a new term combining biologic and generic. Biopharmaceuticals are
synthetic or recombinant versions of natural biologic substances, including proteins such
as enzymes or
antibodies and nucleic acids such as DNA or RNA. Generic products are
non
-
patented chemical and therapeutic equivalents of brand name drugs. However, given
these two definitions, biogenerics are not technically generic biologics because there can
be no tru
e generic form of biologics in the traditional sense. The complex process of
creating biologics and the complex nature of the molecules themselves make
“equivalence” an inappropriate concept in the context of biologics. Hence, industry
participants are str
uggling with what to call these hybrid forms of biologics that will be
created by the generic companies.

There are a number of biopharmaceuticals that will be targets for biogeneric development
identified as potential targets for generic development. Many
of these biopharmaceutical
patents are due to expire in immediate future, over the next 4 years. Many of these
products have sales of over $10 billion, presenting a ripe opportunity for generic
manufacturers. However, because many of these products demonst
rate sales of over $1
billion per year, it is anticipated that there will considerable resistance from the innovator
companies in allowing generic capitalization and consequently approvals.


What is a biological drug (biologic) and what is a “generic” bio
logic?

Biopharmaceutical drugs are large, complex protein molecules derived from living cells,
usually by use of recombinant DNA technology. In contrast, traditional pharmaceutical
products are derived from natural or synthetic chemicals and are generally
smaller,
simpler molecules. However, there is no precise scientific definition of a
biopharmaceutical.

The recombinant DNA technology that forms the basis of biopharmaceuticals first
appeared in the 1970s. It involves the introduction of genes from human D
NA into
another organism, such as mammalian, bacteria (E.coli), yeast, insect or plant cells or
animal cells. Cells from the host are then cloned, resulting in the production of sufficient
quantities of the proteins, which are collected, purified and used
in the treatment of
human diseases.

Traditional pharmaceutical products are regulated by the U.S. Food and Drug
Administration under the Federal Food, Drug and Cosmetic (FD&C) Act of 1938.
Biopharmaceuticals are licensed by FDA under Section 351 of the Pub
lic Health Service
Act (PHSA) of 1944. A few products, such as human growth hormone and insulin, were
historically regulated as pharmaceutical drugs, rather than biopharmaceuticals.

So a

biological drug

differs from a pharmaceutical drug in its gross struc
ture and in the
way it is produced. In short Biologics are therapies based on living cells, as opposed to
traditional pharmaceuticals, which are comprised of chemicals. Because of this, biologics
must be manufactured in highly specialized plants that adher
e to strict manufacturing
processes.

Compared to pharmaceuticals, the complexity of the process required to develop a
biologic is far greater. Additionally, since there are many materials of mammalian
derivation used in the production of these types of dru
gs, a substantial cost is incurred in
the assurance that potential pathogens (viruses and bacteria) are prevented from entering

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the production process. Biologics manufacturing requires a large amount of capacity and
not surprisingly, biologics also tend to

be far more costly than traditional
pharmaceuticals.

A
generic biological

drug

(also named generic biologic, multisource biologic,
subsequent entry protein, biosimilar protein etc.) is similar to a generic pharmaceutical in
that it is an analogous versio
n of an existing drug. The barriers to entry into the
biologicals marketplace are substantially higher from a technical perspective.


Why there is a need for Generic Biological Rather than a New Drug?

There are a variety of health needs to meet that will
sustain the well being of society.
Discovery of new drugs and therapies is always required to further society’s ability to
manage the health of humanity in an ever
-
changing world. The additional need is to
deliver these drugs and therapies at a price that
is economical and to secure supply by
having product provided from more than one source. If a single supplier were to shut
down, the whole market for a given drug would be in confusion, with potentially
catastrophic consequences to healthcare.

The cost of
drug research and development is enormous and only very large companies
and governments can withstand the financial burden required to see a new drug through
to commercialization.

Patent laws are provided to make it economically viable for this type of re
search and
development to take place. A period of market exclusivity allows the first
-
entry company
to recover its investment. After patent expiry, often after more than a decade, the market
is served by new and cheaper versions of the drug from other supp
liers.

The development of a biological drug not only has the complexities of the technology to
produce the drug, but the creation of a totally new drug requires a lengthy process to
determine dosage level, efficacy, safety and long term effects. Additiona
lly, the creation
of market acceptance over existing drugs and therapies, and the potential market size, is
not always well defined. Typical time frames from discovery to commercialization can be
from 10


14 years. Finally, less than 1% of drugs in the pr
e
-
clinical development stage
make it through to the market. The risks are very costly and very high. [1]


Why Generic Biologics Are Not Available Today

As with traditional generic pharmaceuticals before 1984, the obstacle standing between
consumers and sub
stantial savings on biotech drugs is the articulation of a regulatory
process that will enable safe, effective, FDA
-
approved generic versions of biotech drugs
to reach the marketplace following a well
-
defined, scientifically based approval process.
The pat
hway created under biotech generic legislation must enable and compel the FDA
to review generic biotech applications in a manner that assures safety and efficacy that
does not require duplicative and expensive clinical trials, and ensures that the approval

of
generic products is not unnecessarily delayed by litigation or attempts to game the system
by innovators. The standards for generic biotech drugs must be rigorous enough to ensure
safety and effectiveness, and support consumer confidence in generic bio
tech drugs, but
must not be permitted to require generic applicants to recreate clinical studies that simply
reconstruct the scientific knowledge already available.




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Challenges for the 21st Century

Recent advances in technology have opened the doors to m
any other exciting areas in
science. For example, gene therapy now allows us to actually alter the genetic makeup of
a cell. Instead of giving a person interferon
-
which is a protein used to treat certain
cancers and other diseases
-
why not give the person t
he gene and then his own body will
actually start to make the protein, and might never have to replace it again. That's one of
the very intriguing theories of gene therapy.

Xenotransplantation, the transplantation of animal cells, tissues or organs into a
human,
offers new hope for an added source of organs. New vaccines are being developed and
modified as new discoveries teach us about the human immune system. The study of
gene structures is leading to potentially effective treatments for a variety of seri
ous
diseases, including cancer, diabetes, and heart disease.

New biological products such as vaccines and therapeutics have already improved the
health of the public. The blood supply has never been safer. And, as we move through the
21st century, strong s
cience
-
based regulation, coordinated research, and the use of
partnerships will continue to assure that safe and effective new biological products reach
the public. [2]


EMEA opens the door for Generic biologics

Generic copies of biologic medicines could f
inally reach the market in Europe this year,
leaving US companies wondering if FDA will eventually follow suit. The European
Medicines Agency (EMEA) hopes to complete its guidelines for the approval of these
biosimilar drugs early this year, paving the way

for the approval of biogenerics

and a
potential goldmine for the generics companies.

EMEA held a workshop in Paris in December, 2005 where stakeholders from across the
industry shared their views on the introduction of the guidelines. The first guideline
s are
expected to cover erythropoietin, insulin, somatotropin and granulocyte
-
colony
stimulating factor. Guidelines for interferons are also on the drawing board.

Biologic medicines are chemically different from small molecule drugs. Generally
speaking, i
t is fairly uncomplicated to establish two batches of active pharmaceutical
ingredient (API) as chemically identical to one another, with sufficiently similar impurity
profiles. Full clinical trials are therefore not needed: A generics company can use an
a
bbreviated registration procedure, and carry out bioequivalence studies to prove that its
product is therapeutically equivalent to the branded drug.

For biologics, it's a whole different ball game. Even a small change to the biotech process
used to make a

drug can have a huge impact on the efficacy and safety of the resulting
product. This can also make life difficult for the brand
-
name companies

EMEA has
guidelines in place to address comparability when companies introduce changes into their
manufacturing

processes.

There have already been attempts to reach the European market with biogenerics, notably
Sandoz's Omnitrop human growth hormone product, which was knocked back a couple
of years ago.

EMEA has received three applications thus far

none of which
have been approved

and expects another eight this year. At the heart of the problem is the question of what
further tests will be required on biosimilar products. While the originator companies

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claim comprehensive testing should take place, their generic c
ounterparts believe testing
should be minimized. EMEA's new guidelines will establish what tests will be required.

A lot more work will have to be done on immunogenicity. According to Tim Oldham,
chair of the European Generics Association's (EGA's) biotec
hnology and biosimilars
committee, the first half
-
dozen biosimilars
to reach the market could cut as much as €2
billion from the cost of European healthcare budgets. This would allow an additional
500,000 people suffering from kidney failure to receive EPO (rhu
-
Erythropoietin)
treatments.

In Europe, seven of the top
-
10 inj
ectible medicines are biologics, and EGA claims these
cost between €10,000 to €100,000 per person. It says that experience of biosimilars
outside the European Union (EU) shows that the copies are marketed at prices that
undercut branded products by 25 to 4
0 percent.

For many small
-
molecule drugs, once generics appear, the fierce competition ensures
price dropping. This is unlikely to be the case for biosimilars.

Aisling Burnand, chief executive of the UK Bioindustry Association, says that the
ultimate goa
l of the guidelines should be to ensure that biosimilar medicines do not
compromise safety. It is critical that the regulatory standards for the approval of
biosimilar products are firmly based on the protection of public health and patient safety.
Some im
portant issues remain open, including the development of a robust system for
product identification and pharmacovigilance, as well as standardized naming systems
and clear labeling practices to distinguish between branded and generic products. [3}


The Mar
ket for Generic Biologics: Issues, Trends, and Market Potential

Some of the biggest
-
selling biological drugs developed during the first phase of the
biotechnology revolution in the 1980s, including human growth hormone (hGH) and
insulin, lost patent protec
tion in the United States in 2005 and soon after. This opens up a
market currently worth over $30 billion (and growing at over 10% per year) to generic
competition, if

the regulatory hurdles for these generics can be overcome.

The worldwide prescription g
eneric drug market has stood the test of time and has
endured numerous growing pains. Generic drugs continue to represent one of the greatest
values in healthcare and are of great importance in the area of biopharmaceuticals, as
well, because these product
s are among the most expensive treatments currently on the
market. Generic drug manufacturers are poised for strong growth in the future because
the patent protection for a host of major biopharmaceuticals will expire and new
legislative reforms in the gen
eric drug approval process may facilitate bringing products
to market. While there are many issues to address, the outlook for biogeneric promotion
is favorable in the next five years.

This

market can be divided into biopharmaceuticals that have lost pate
nt protection and
biopharmaceuticals that will lose patent protection in the future.

The biopharmaceuticals that have lost patent protection and are likely to be the first
products that will be attempted by generic companies. Some of these products are
re
latively simple in structure (by biotech complexity) such as the insulin and human
growth hormones, while others are extremely difficult to process. It is anticipated that the
insulin and human growth hormones will be the first to be approved.

There are a

number of biopharmaceuticals that will be targets for biogeneric development
identified as potential targets for generic development. Many of these biopharmaceutical

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patents are due to expire in immediate future, over the next 4 years. Many of these
produ
cts sport manufacturer sales of over $10 billion, presenting a ripe opportunity for
generic manufacturers. However, because many of these products demonstrate sales of
over $1 billion per year, it is anticipated that there will considerable resistance from

the
innovator companies in allowing generic capitalization and consequently approvals. [5
]


Biopharmaceutical drugs face patent challenges

Most lucrative brand
-
name drugs eventually lose their patent protection, opening the
market to generic products with

lower prices, but one class of drugs, which includes some
of the most expensive products in the world, are insulated from such generic competition.

These drugs are made using genetic engineering, and at present there are no regulations
allowing for gener
ic versions.

But, with patents on many of the biotechnology industry's best
-
selling drugs set to expire
in the next few years, companies that make generic drugs are pushing to change that,
hoping to invade new turf.

Generic drugs can sell for a fraction
of the price of the equivalent brand
-
name drugs.
Their low prices stem in part from the fact that generic drugs can be approved for sale
without lengthy clinical trials to show they are safe and effective. Drug makers need to
show only that generics are th
e same chemical and act the same in the body as the brand
-
name equivalent.

But this applies only to drugs made using chemistry
--

most of the pills sold by big drug
companies. There is no procedure for quickly approving generic versions of so
-
called
biolo
gics
--

drugs made from living cells like vaccines, blood factors and genetically
engineered proteins
--

because these drugs are regulated under a different law.

Cerezyme, for example, a drug made by Genzyme for a rare disorder called Gaucher's
disease, c
an cost more than $200,000 a year. An anemia drug, erythropoietin, or EPO,
made by Amgen and given to patients undergoing kidney dialysis, sells for millions of
dollars an ounce and is one of Medicare's biggest pharmaceutical expenditures.


Generic manufa
cturers fighting back new regulations

Biotechnology companies plan to fight any new rules. The industry maintains that its
products, mainly proteins made by implanting genes into bacteria or hamster cells, are
hundreds or thousands of times larger and more

complex than chemical drugs. This
makes it virtually impossible for a generic drug maker to show that its product is the
same as another biotechnology drug.

Living things cannot be easily standardized like chemical processes, the industry argues.
What is

more, even slight differences among generic biologic drugs can have a big
impact on their safety and effectiveness. The Food and Drug Administration has
approved two versions of beta interferon, used to treat multiple sclerosis, because slight
changes mea
n that one has fewer side effects than the other. The FDA also has
uncertainties about generic biologics.

There are significant unresolved scientific issues about how to show 'sameness' between
complex biological macromolecules so that FDA can be assured
that any generic biologic
is safe, pure and potent as well as 'equivalent' to an innovator product.

All the biopharmaceuticals are proteins which are not easy to duplicate. In addition to
primary structure (amino acid sequence), biochemists must worry abo
ut secondary,

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tertiary and quaternary structures which may coexist in any combination. Even their
primary structures are not straightforward, since they cover post
-
translational
modifications (PTMs) such as glycosylation, acetylation and several dozen othe
r
biochemical transformations unique to the cell line in which each protein is
manufactured.

Some agency officials refer to an incident in the 1950s when a slight change in the
production process led to a failure to completely inactivate the virus used in
the Salk
polio vaccine. Some people got the disease from the vaccine.


Quirks in regulation


Because of quirks in drug regulation, hormones are regulated as chemical drugs, not
biologics. And in 1997, the FDA approved Ferring Pharmaceuticals' generic vers
ion of
Pergonal, an infertility treatment sold by Serono that consists of two hormones isolated
from the urine of post
-
menopausal women.

Serono sued to block the approval, citing slight differences between its drug and
Ferring's, a unit of Ferring BV Grou
p Holding of the Netherlands. But an appeal court
sided with the FDA, saying that the drugs do not have to be chemically identical, only
identical in terms of their clinical effects.

Some generic drug companies are linking up with biotechnology companies
to acquire
the expertise they need. Teva Pharmaceutical Industries, an Israeli company, has an
agreement with Biotech General. Ivax, another major generic producer, signed an
agreement last year with Indiana Protein Technologies. Barr Laboratories said it
is
working on one biotechnology drug and is looking for others. For competitive reasons, all
the companies declined to say which drugs they are developing.

Even so, some experts said most generic companies would not be pursuing biotechnology
drugs because

the manufacturing will be costly and difficult. If the American market
proves tough to crack, some generic companies are likely to sell their drugs first in Asia,
Europe and Latin America, where biotechnology companies generally have fewer
patents.

In ad
dition to competition from generic drug makers, biotechnology companies are facing
new challenges from others in their industry.


Generic warning
due to competition

Some generic industry officials said that if costly and long
-
drawn
-
out trials are required
,
competition will be limited and the resulting drugs will not be priced significantly below
the originals. Also, they said, if the generic drugs are not considered fully equivalent to
the brand
-
name drug, doctors and pharmacists will not be able to easily

substitute the
generic for the original.

Some experts said that it should be possible to show equivalence between two biologics,
though the tests are likely to be more complicated than for chemical drugs. U.S.
Pharmacopeia, a non
-
profit organization that

sets quality standards for pharmaceuticals,
has set up a committee to explore how the comparisons could be done. [6]






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Biogenerics: a difficult birth

Because of nature of biopharmaceutical drugs it virtually impossible for a generic
company to show that

its product is therapeutically similar to the patent biotechnology
-
based drugs.

Building on the hypothesis that biologicals are growing ahead of the overall
pharmaceutical market, the forecast: "In 2010, nearly 50% of all new approved
pharmaceuticals will

be of biotechnological origin."



Biopharmaceuticals’ share of global prescription sales


Source: IMS Health, BioGeneriX

© 2001 IMS Health Inc.


W
ith a clutch of first
-
generation biologicals approaching patent expiry, the potential for
biogenerics appears great. But in reality biogenerics face an uncertain future. Much of
this uncertainty is down to their unusual regulatory position. As biopharmaceu
ticals are
defined by their production process, any change can impact safety and efficacy and
therefore demands new approval. It is impossible to replicate the biological process
exactly, which makes it difficult to prove essential similarity, or equivalen
ce.

Most importantly of all, no clear regulatory framework yet exists for the market
authorization of biogenerics. Proof of bioequivalence in an abbreviated process is not
accepted by the EMEA or the FDA. The European comparability guideline indicates tha
t
a complete new filing and clinical trials on a case
-
by
-
case basis are required.






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Blockbuster biotechnology products with patent expiry before 2007


Product

Innovator
company

Active substance

Patent
expiration

Global sales,
2002

Humulin

Lilly

Human i
nsulin

2001

$1.0bn

Intron A

Schering
-
Plough

Alpha
-
interferon

2002

$2.5bn

Procrit

Amgen/J&J

Erythropoietin

2004

$4.3bn

Epogen

Amgen

Erythropoietin

2004

$2.3bn

Neupogen

Amgen

Filgrastim (GCSF)

2006

$1.4bn


Source: Generic Pharmaceutical Association, USA

© 2001 IMS Health Incorporated.


What that means in practice is that an already difficult patent position for
biopharmaceuticals is complicated by the fact that "biogenerics don’t really exist". It is
preferred the term ‘biosimilars’ because, as the regul
ations stand, therapeutically similar
products must be different to the original. The development time for biogenerics is at
least twice as long as conventional generics, and the costs 8
-
100 times higher. As a result,
biosimilars will need to be branded an
d marketed very differently to existing generics and
biosimilars will not be substitutable for originals.


Omnitrop case highlights EU uncertainties...

The EMEA has taken a relatively cautious approach to biogenerics. The first such
product, Sandoz’s (Nova
rtis) human growth hormone (hGH)
Omnitrop
, has suffered a
series of knock backs since first receiving a positive opinion from the EMEA’s
Committee for Proprietary Medicinal Products (CPMP) in June 2003. In an unusual step,
the European Commission rejected
the CPMP’s recommendation, citing filing
irregularities. While the precise situation remains unclear


negotiations are not in the
public domain


there appears to be some confusion between the CPMP and the EC over
the appropriate regulatory pathway for
Om
nitrop
.

Unlike the US, the EU has published guidance on appropriate pathways for the clinical
approval of biogenerics. Issued in December 2003, however, the
Omnitrop

case
demonstrates that the development of the regulatory framework is an ongoing project.

Even so, Europe still has an edge over the US.

The EU is clearly ahead of the US. Even though growth hormones and human insulins,
for example, are relatively simple proteins. The FDA believes interchangeable generic
biologics are inevitable, provided the
re is a safe path to generic or follow
-
on biologics.

A two
-
tiered approach is expected. Tier one will outline the requirements for an
abbreviated data package for approval. And tier two will be a more rigorous
characterization of approval requirements for

interchangeability.


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The FDA has particular concerns over the need for large comparative crossover studies
for interchangeability rating and the acceptance of biogenerics by the medical
community. [7]


Biologics are a major driver of increasing prescripti
on drug costs

Seven biotech pharmaceuticals


Procrit, Epogen, Remicade, Enbrel, Aramesp, Nevlasta
and Rituxan generated sales of more than $1 billion. And at least three new blockbusters
are expected to join that list. Three of the top biotech pharmaceuti
cals: Neupogen,
Epogen and Intron cost patients $23,098, $10,348 and $5,850 respectively, each year. As
evidenced by these examples alone, generic competition for biotech pharmaceuticals has
the potential to offer consumers dramatic and substantial savings
, while also lowering
healthcare bill.


Current Science Supports Generic Biologics

The science to create affordable generic biotech drugs exists today. It is being done every
time a brand manufacturer changes a manufacturing process or location and uses
co
mparability to ensure the biotech drug will provide the same

safety and efficacy. Generic companies have highly sophisticated R&D organizations and
manufacturing capabilities, and many, in fact, already develop and market proprietary
products just as brand

companies do. While some drug products, both chemical and
biotech, might be more complex than others, the vast majority can be fully defined or
characterized with currently available scientific methods. These scientific methods also
can help identify and
thus control any process
-
related impurities that are often found with
biotechnology products.

Continued advances in analytical methods will ultimately enable the characterization of
all biotechnology products. Finally, brand biologic companies claim that t
here is magic to
the process of manufacturing biotech drugs. This may have been true when
manufacturing processes were not fully validated and analytical methods were not
advanced enough to characterize the final product.

This is no longer the case. Utiliz
ing surrogate measurements to confirm that the amended
drug will provide the same results is the very process that is used today in traditional
pharmaceutical manufacturing to ensure the safety and efficacy of a generic drug. Such a
process, although emplo
ying different surrogate measurements specific to each individual
biologic product, is applicable to the approval of generic biotech products for several
reasons. This would allow for a more limited clinical program while still ensuring
efficacy. [8]












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References


1. http://www.microbix.com/0204.html

2. http://www.fda.gov/cber/inside/centennial.htm

3.http://www.pharmexec.com/pharmexec/article/articleDetail.jsp?id=301751&sk=&date
=&pageID=2

4.

http://www.medicalnewstoday.com/medicalnews.php?newsid=21194

5.
http://www.marketresearch.com/product/display.asp?productid=1170930&g=1

6.
http://www.mult
-
sclerosis.org/news/Dec2000/BiotechDrugsPatents.html

7. http://open.imshealth.com/IMSinclude/i_articl
e_20040518a.asp

8.
http://barrlabs.com/overview/government/BRL_pp
-
biologics.pdf