Biogenerics – Evolving Risks and
            Opportunities for Biopharmaceutical,
                        Generic, and
   ...
Biogenerics
            Evolving Risks and Opportunities




                               Background



2008 BioPharma O...
Definitions: Generics and Biogenerics
            Generics
            • A generic drug is a copy that is the same as a br...
Biogenerics
            Evolving Risks and Opportunities




                         Estimates: Sales
                   ...
Biogenerics Costs: positives

              • Biogenerics companies can avoid high cost of developing a
                pr...
Biogenerics
            Evolving Risks and Opportunities




                                  Intellectual
              ...
Major Biotech Products Going Off-Patent
              BRAND NAME                GENERIC NAME                    MARKETER  ...
Biogenerics
            Evolving Risks and Opportunities




                             Regulatory



2008 BioPharma Out...
505(b)(2): limited NDA pathway

              • Manufacturer must demonstrate safety and efficacy with
                cli...
Section 505(b)(2): WCBP example

              • FDA’s reasons for approving Omnitrope (human growth
                hormo...
Section 505(j)?

              • ANDA; Used for small molecule generics
              • FDA has noted that nothing in Hatc...
EU: Biosimilars

              • One approval path for biosimilars
                     – First step: try to achieve non-g...
Biogenerics
            Evolving Risks and Opportunities



                             Global Biologic
                 ...
Global Listing, Manufacturers Capable
             of Producing Biologics
                                                ...
Emerging Biologics Companies:
             CMC Biopharmaceuticals
              • Copenhagen, Denmark-based
              ...
Emerging Biologics Companies: Barr


              Generic Biologics Strategy:
              • Become leader in developmen...
Emerging Biologics Markets: India

              • Biologics manufacturing capability in place:
                     –    ...
Emerging Biologics Companies:
             Wockhardt
              • India
              • Pharmaceutical and biotechnolog...
Major Chinese Biogeneric Manufacturers

              • Over 400 biopharmaceutical manufacturers established in
          ...
China: Positive Factors for Biologics
             Manufacture
              • Commerce: Chinese biotech was targeted for ...
Obstacles to Growth of China in
             Biologics Manufacture
              • Low levels of biologics product commerc...
Risk: Economic

              • Evolving reimbursement policies and impact on profit margin
              • Lower pricing ...
Risk: International

              Changes in a wide range of country-specific
              • Reimbursement policies
    ...
Risk: Regulatory

              • Lack of an internationally harmonized definition for
                bioequivalence
    ...
Risk: Technical

              • Underestimation, technical sophistication to manufacture
                biotech products...
Technical Risk: Immunogenicity

              • Generally assess immunogenicity after a manufacturing
                chan...
Risk: Case Study, J&J EPREX (EPO)

              • Indirect impact of formulation change: polysorbate released
           ...
Biogenerics
            Evolving Risks and Opportunities




                                     Strategies



2008 BioPh...
Innovator Strategy:
             Process Improvements
              • Lower manufacturing cost
                     –     ...
Innovator Strategy: Organizational

              • Create a franchise product portfolio
                     – Optimize p...
Strategy: Generic Manufacturers

              • Need to be well financed to ride out years before profitability
         ...
Strategy: CMOs

              • CMOs can gain a competitive advantage by achieving a
                leadership role in bi...
BioGenerics – Evolving Risks and
      Opportunities for Biopharmaceutical,
                  Generic, and
            Con...
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Biogenerics – Evolving Risks and Opportunities_M Staples_Mar08

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Biogenerics – Evolving Risks and Opportunities for Biopharmaceutical, Generic, and Contract Manufacturers
Presented at 2008 BioPharma Outsourcing, Boston

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Biogenerics – Evolving Risks and Opportunities_M Staples_Mar08

  1. 1. Biogenerics – Evolving Risks and Opportunities for Biopharmaceutical, Generic, and Contract Manufacturers Mark A. Staples, Ph.D. Consultant, Cambridge, MA 2008 BioPharma Outsourcing: Partnerships with CROs & Service Providers March 25-26, 2008 Boston, MA 1 Introduction A number of developments are converging to dramatically change the contribution of generics to the well-characterized biological product segment of the pharmaceutical industry. • High potential revenues from biogenerics provides potential for higher margins to generics manufacturers • High cost of proprietary biologicals makes prospect of biogeneric cost savings attractive • IP expiration of first biological products began five years ago • Regulatory pathways to biosimilars are becoming clearer • Biologicals manufacture is becoming more consistent • Analytical characterization of biologicals continues to improve • Developing nations are gaining biologicals production capability • Growing use of outsourcing to CROs and CMOs more likely for biogenerics due to specialized manufacturing requirements 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 2 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 1
  2. 2. Biogenerics Evolving Risks and Opportunities Background 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 3 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Definitions: Biologics and WCBPs • Biological products are quot;... any virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, ... applicable to the prevention, treatment or cure of diseases or injuries of man ...“ [Section 351(a) of the Public Health Service Act] • Well-Characterized Biologic Product (WCBP) is a biologic product which can be described, using analytical techniques, with regard to identity, purity, potency, and stability [FDA promulgated concept in 1996] – Concept allowed FDA to approve “by product” instead of “by manufacturing process” [via the BLA, rather than PLA + ELA] – Allows companies to use comparability protocols to support manufacturing changes without additional clinical testing – Companies have more flexibility for outsourcing to CMOs – Implies the same approach could be a biosimilar approval pathway 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 4 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 2
  3. 3. Definitions: Generics and Biogenerics Generics • A generic drug is a copy that is the same as a brand-name drug in dosage, safety, strength, how it is taken, quality, performance and intended use • Chemical synthesis is, generally, reproducible, and well- established Biogenerics (generic biologics, follow-on biologics, biosimilars) • EMEA uses “biosimilars” to indicate these biologicals are not generic in the same way as small molecules. • FDA definition: a protein product which is intended to be a similar version or duplicate of an already approved or licensed protein product. • Biologic drugs are made in living cells. Their manufacture is inherently less predictable and reproducible than chemical synthesis. 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 5 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Definitions • Follow-on biologics may be: – Biogenerics – Biosimilars – Second generation proprietary products • Drugs include (among other things) quot;articles intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in man.quot; [21 U.S.C. 321(g)(1)(B)] • CMO – Contract Manufacturing Organization. Manufactures product of a specified grade to clients, usually for clinical trial supplies or commercial product. • CRO – Contract Research Organization. Performs a wide range of development services for special or routine applications (analytical methods, dosage form development, process development). 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 6 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 3
  4. 4. Biogenerics Evolving Risks and Opportunities Estimates: Sales and Costs 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 7 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Industry Sales • Recent revenue for the biotechnology industry $50.7 billion ($32.1 billion, sales), 2005 Source: Ernst & Young LLP, 2006 • Biologics projection: 2010 US market potential = $60.0 billion, WW = $70.0 billion (CAGR 10%, 2005-2010) • > 500 protein and 150 peptide drugs are in development, suggesting growth will continue [B Tulsi (Jun04) Drug Discov Devel “Bugs punch the clock as next protein manufacturers”] • Biogenerics projection: EU and US biogenerics 2011 market potential = $16.4 billion (average AGR = 69.8 %) Source: Frost & Sullivan estimate 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 8 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 4
  5. 5. Biogenerics Costs: positives • Biogenerics companies can avoid high cost of developing a proprietary biological – average out-of-pocket cost of developing a new biological product totals well over half a million dollars1 – Cost of developing one new medicine: about $800 million2 (over 10–15 years)3 – when costs of failure and other R&D capital costs are included, average cost approaches ca. $1.24 billion1 • Keys to savings: fewer expensive trials, lower risk of failure • One way to lower costs: use less expensive production locations • Pick your model (see next slide): biogeneric savings just for US Medicare Part B could approach $14 billion (next ten yr)4 1 Henry G. Grabowski (26Mar07) Statement before the House of Representatives Committee on Oversight and Government Reform, Hearing on “Follow-on Protein Products” 2 J. A. DiMasi, R. W. Hansen and H. G. Grabowski, Journal of Health Economics 22 (2003): 151-185. 3 J. A. DiMasi, Clinical Pharmacology and Therapeutics 69, no. 5 (2001): 286-296. 4 Engel & Novitt (JAN07) Available from www.pcmanet.org/newsroom/2007/. 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 9 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Biogenerics Costs: cautions • Biogeneric costs will be higher, relative to original drug costs, than conventional generics due to – greater manufacturing and regulatory costs – more marketing expenses than generics, because doctors will have to be convinced of equivalence • One estimate: FOB development costs could exceed $200 million (very different than few-$30 million for traditional generics development) [Andy Stone, Biotech Knockoffs, FORBES, Mar. 15, 2007, available at http://www.forbes.com/business/2007/03/14/biotech-generics-drugs-biz- cz_as_0315biotech.html.] • Will take about 4 years for manufacturers to develop and for FDA to approve a biogenerics (when an approval path exists) • Pick your model (see previous slide): biogeneric savings to patients may only be $3.6 billion over ten years 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 10 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 5
  6. 6. Biogenerics Evolving Risks and Opportunities Intellectual Property 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 11 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Major Biotech Products Going Off-Patent • Using one model, 75 currently approved biopharmaceuticals may be targets (>$20 million sales Sep04-Aug05) for follow- on production1 • Generic drug manufacturers can proceed with development with the intent to commercialize product before the innovator company’s patent has expired2 • Hatch-Waxman Act provides five years of post-approval exclusivity before FDA can refer to innovator’s data when considering an application from a generic competitor3 • In Europe, drugs and biologics are protected for 11 years • Brands seek increased patent protection based on high cost of new biologics development and more expensive manufacturing processes 1CEDiliberti, “The best targets for biogenerics”, 19 BIOPHARM INTERNATIONAL 50 (01Apr06) 2Pharmaceutical Industry Profile 2006 (Washington, DC: PhRMA, (Mar06) 3HG Grabowski, Statement before the House of Representatives Committee on Oversight and Government Reform, Hearing on “Follow-on Protein Products” (26Mar07) 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 12 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 6
  7. 7. Major Biotech Products Going Off-Patent BRAND NAME GENERIC NAME MARKETER PATENT EXPIRY Filgrastim GM-CSF Amgen 2007 Engerix-B Hepatitis B vaccine GSK 2006 Neupogen Filgrastim Amgen and Roche 2006 Protropin Somatrem Genentech 2005 Activase Alteplase Genentech, Boehringer 2005 Ingelheim, Mitsubishi, and Kyowa Hakko Kogyo Novolin Human insulin Novo Nordisk 2005 Recormon Epoetin beta Roche 2005 Epogen/ Procrit Epoetin alfa Amgen, Johnson & Johnson, 2004 and Sankyo Nutropin Somatropin Genentech 2003 Betaseron Interferon beta-1b Chiron 2003 Genotropin Somatropin Genentech/Pharmacia 2003 Humatrope Somatropin Eli Lilly 2003 Avonex Interferon beta-1a Biogen 2003 Intron A Interferon alpha-2b Schering-Plough 2002 Humulin Human insulin Eli Lilly 2001 Cerezyme/Ceredase Alglucerase Genzyme 2001 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 13 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Major Biotech Products Going Off-Patent 2006 (E) SALES Patent PRODUCT $(000) Expiration Procrit/eprex – Epogen $3,320 2004 Aranesp $2,771 2010 Enbrel $2,645 2009 Epogen $2,489 2012 Neulasta $2,235 2015 Rituxan/Mabthera $2,057 2014 NeoRecormon/Epogen $1,830 2005 Avastin $1,809 2019 Remicade $1,800 2014 Herceptin $1,256 2013 Human insulin/related products $1,250 2004 Novolin $1,250 2005 Neupogen $1,200 2006 Avonex $1,033 2003 Humulin $1,000 2004 All Other $ 10,044.00 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 14 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 7
  8. 8. Biogenerics Evolving Risks and Opportunities Regulatory 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 15 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Regulatory Paths to Biogenerics • 505(b)(1): full NDA pathway, not applicable • 505(b)(2): limited NDA pathway, approval process is abbreviated • 505(j): ANDA; used for small molecule generics • Section 600.3(h): biologicals; market via licensing rather than approval • EMEA: biosimilars, one approval path that may result in generic or biosimilar classification • Combination products 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 16 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 8
  9. 9. 505(b)(2): limited NDA pathway • Manufacturer must demonstrate safety and efficacy with clinical or non-clinical data, but may use previously published research • Typically used to approve a change in dosage, form, strength, or route of administration, a change in formulation or form of active ingredient, or a new combination of previously- approved drugs • Products approved under 505(b)(2) may be prescribed as alternatives to the reference drugs, but, because “sameness” and “bioequivalence” have not been demonstrated, they are not viewed as being freely interchangeable and are therefore not referred to as “generics,” but only as “comparable” or “follow-on” drugs • A 1999 FDA draft guidance document specifically identifies biotech, or “recombinant,” products as falling within the class of products that could be approved pursuant to section 505(b)(2). 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 17 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Section 505(b)(2): drug examples Examples, FDA approvals under section 505(b)(2) • change in strength of the oral contraceptive ethinyl estradiol • a change in the dosage form of the analgesic • naproxen sodium to extended release tablets • a change in route of administration of the ovulation stimulant menotropins to subcutaneous injection • a substitution of the levalbuterol HCL isomer for other isoforms in an asthma inhalation solution Gordon Johnston and Roger L. Williams, 505(b)(2) applications: History, science, and experience, DRUG INFO. J., Apr.-Jun. 2002. 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 18 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 9
  10. 10. Section 505(b)(2): WCBP example • FDA’s reasons for approving Omnitrope (human growth hormone) via the 505(b)(2) drug pathway included – single active ingredient, – well-known mechanism of action, and – ability to “extensively and adequately” characterize the protein • However, still required 4 Phase III clinical trials because production method differed from approved product • Other biologics approved: – Calcitonin – Glucagon – Hyaluronidase BIO White paper, (25Apr07) “The difference with biologics: the scientific, legal, and regulatory challenges of any follow-on biologics scheme” http://bio.org/healthcare/followonbkg/WhitePaper.pdf 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 19 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Examples, Current FDA Interpretations • FDA already treats as functionally interchangeable several biopharmaceuticals produced as innovator products, not as follow-ons (i.e., Avonex™) • FDA considers six approved human growth hormone products identical and bioequivalent to natural growth hormone • Protein drugs follitropin alfa and follitropin beta have slightly different amino acid sequences, but label claims indicating the two products are “indistinguishable.” • Neither HGHs nor the follitropin products have received FDA’s highest “A” rating of interchangeability – suggests different products, originating from different cell lines, can be produced so as to have the very high degree of structural and therapeutic similarity necessary for interchangeability. GENERIC PHARMACEUTICAL ASSOCIATION, BIOPHARMACEUTICALS (“FOLLOW-ON” PROTEIN PRODUCTS): SCIENTIFIC CONSIDERATIONS FOR AN ABBREVIATED APPROVAL PATHWAY 26 (08DEC04) 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 20 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 10
  11. 11. Section 505(j)? • ANDA; Used for small molecule generics • FDA has noted that nothing in Hatch-Waxman “precludes approval of [biotech product] applications …under section 505(j) of the Act,” which addresses true generics, “as long as the current state of science allows the evaluation necessary to support approval.” • For Sandoz’s Omnitrope, FDA could not determine that it was therapeutically equivalent to Pfizer’s Genotropin, although both were somatropin [rDNA origin] 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 21 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Section 600.3(h): Biologicals • Market via licensing rather than approval, requires categorization as biologic rather than drug; usually not WCBPs (vaccines, blood-derived products) • Originally had an Establishment License Application (ELA), specific for manufacturing site, and a Product License Application (PLA), specific for product; in late ’90’s combined as the Biologics License Application (BLA), which permits multiple manufacturing sites for one product • Regulatory pathway less clear for biogeneric that is licensed rather than approved-proposals for a clear path under consideration • Under the PHSA, a manufacturer that ships a biological product must obtain a US license for both the manufacturing establishment and the product intended for shipment 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 22 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 11
  12. 12. EU: Biosimilars • One approval path for biosimilars – First step: try to achieve non-generic follow-on approval. If successful, – Second step: try to meet the standard for true generic approval – If unsuccessful getting a full generic approval, may be approved as a biosimilar. • The stringency of abbreviated applications is determined on a product-by-product basis 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 23 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA EU: Biosimilars • Sandoz' Omnitrope, the first approved biosimilar in Europe (Apr06) – extended legal arguments in the European court – presence of host cell protein led to antibody generation among some clinical trial participants, affecting the safety profile • Valtropin, BioPartners, was the second product to be approved by EMEA • Biosimilar versions of EPO and G-CSF follow 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 24 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 12
  13. 13. Biogenerics Evolving Risks and Opportunities Global Biologic Manufacturing Capabilities 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 25 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Contribution: India, China, Other Developing Nations • In general, developing nations are increasing their ability to produce biologic products and compete as the global regulatory paths for biogenerics become clearer • Investment capital more available than previously in developing countries • Biotechnology has been targeted as an investment growth area globally • Build on existing infrastructure for generics manufacture • Build on existing CMO relationships to extend to biologics 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 26 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 13
  14. 14. Global Listing, Manufacturers Capable of Producing Biologics Original Manufacturer Country Apotex, Inc. USA Biokad Russia BIOCHIMMASH Russia BioGeneriX AG Germany Cangene Corporation Canada Dr Reddy’s Laboratories, Inc. India Dragon Pharmaceuticals, Inc. Canada GeneMedix plc UK Ivax Corporation USA LG Life Sciences Korea Microbix Biosystems, Inc. Canada Merck KGaA Germany Pliva d.d. (acquired by Barr) Croatia Sandoz Pharmaceuticals Switzerland Savient Pharmaceuticals USA Shantha Biotechnics India Sicor, Inc. USA STADA Arzneimittel AG Germany Teva Pharmaceutical Industries, Ltd. Israel Wockhardt India H Morioka (2004) Businessbriefing: Pharmagenerics, “Considerations about Generic Biologics,” p1-5 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 27 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Emerging Biologics Companies: Teva • Israel • Largest global generic pharmaceutical company after IVAX acquisition • Acquired Sicor (includes three plants in Mexico, China, and Latvia that develop, manufacture, and market biosimilar materials) • Absorbed the Israeli biotechnology research team of Serono, the former team of InterPharm Laboratories 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 28 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 14
  15. 15. Emerging Biologics Companies: CMC Biopharmaceuticals • Copenhagen, Denmark-based • provider of contract biomanufacturing services for early phase clinical trials • Jan07, acquired the former ICOS biologics development and manufacturing operation http://www.contractpharma.com/articles/2007/11/online-exclusive-cmc-puts-down-us-roots 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 29 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Emerging Biologics Companies: Barr Venue = Zagreb, Croatia • PLIVA became subsidiary of Barr in Oct06 for $2.5 billion cash – creates third largest global generic pharmaceutical company, based on revenue, behind Teva and Novartis • Broke ground on new biologics facility in Croatia in NOV06 • Three principal strategies: – develop and market selected generic drugs; – develop and market proprietary pharmaceuticals – pursue development and marketing of generic biopharmaceuticals 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 30 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 15
  16. 16. Emerging Biologics Companies: Barr Generic Biologics Strategy: • Become leader in development of generic biologics • Continue to work with State and Federal legislators to define regulatory pathway for generic biologics • Overcome significant barriers to entry: – Scientific – Regulatory – Intellectual Property 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 31 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Emerging Biologics Companies: Barr Biologics Capabilities: • Well-positioned to become leader in the US and EU markets • Several products in development: – G-CSF (Granulocyte Colony Stimulating Factor) for US and Europe – Adenovirus with US Dept of Defense – Additional undisclosed products, various stages of development • Development facilities and staff scientists in place 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 32 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 16
  17. 17. Emerging Biologics Markets: India • Biologics manufacturing capability in place: – Wockhardt* – Dr Reddy's Labs* – Biocon* – Bharat Biotech – Panacea Biotec – Intas Pharmaceuticals – Shantha Biotechnics – Shreya Life Sciences * Plan to enter the regulated market in Europe with an established regulatory path for biogenerics Source: BIOSPECTRUM | DECEMBER 05 www.biospectrumindia.com 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 33 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Emerging Biologics Markets: India • Generic biotechnology drugs in production, under multiple brands: – Hepatitis B vaccine – Streptokinase – Insulin, G-CSF – Erythropoietin – Human Growth Hormone – Interferon alpha 2b Source: BIOSPECTRUM | DECEMBER 05 www.biospectrumindia.com 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 34 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 17
  18. 18. Emerging Biologics Companies: Wockhardt • India • Pharmaceutical and biotechnology – entered European market through acquisitions (UK-based Wallis Laboratory and CP Pharmaceuticals, Esparma of Germany) • Growth strategy hinges on biopharmaceuticals (31DEC05): – Already has biogenerics production capability – >55 registrations for biopharmaceuticals pending – 26 approvals,18 countries (Russia, South America, North Africa, Central Asia, South East Asia) BIOSPECTRUM | DECEMBER 05 www.biospectrumindia.com 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 35 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Chinese CMOs Poised for Biologics • Implementation of Good Manufacturing Practice (GMP) enabled growth of the Chinese CMO industry • Chinese CMO industry 2004 revenues were $7.5 billion [Pharmaceutical Manufacturing JUL/AUG06] • Ten Chinese finished drug manufacturers have received FDA GMP certification • FDA GMP certification applies to 259 products associated with 130 Chinese manufacturers • GMP-certified manufacturers may serve as CMOs for foreign companies as long as all product is exported (eff. JAN06) – Pfizer signed Shanghai Pharmaceutical Group as CMO and was expected to sign Harbin Pharmaceutical Group – Global big pharmas acknowledge the lower costs and greater efficiency that may be realized using Chinese CMOs 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 36 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 18
  19. 19. Major Chinese Biogeneric Manufacturers • Over 400 biopharmaceutical manufacturers established in China, including 114 genetically engineered drug manufacturers and 28 vaccine manufacturers • China National Biotec Corp. (CBNC) • Beijing Tiantan Biological Products • Chengdu Rongsheng Pharmaceuticals • Shanghai Institute of Biological Products • Changchun Institute of Biological Products • Shenyang Sunshine Pharma • Anhui Anke Biotechnology • Beijing Tri-Prime Genetic Engineering • Changchun ChangSheng Gene • Guangxi Beisheng Pharmaceuticals • Others Source: quot;Chinese Biogenerics,quot; Genetic Engineering News, Sept. 1, 2006. 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 37 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA China: History of Biologics Manufacture • Chinese biopharmaceutical manufacturers already produce – recombinant human interferons • The first Chinese-developed biotech drug, recombinant human interferon-a1b (Shenzhen Kexing Biotech), entered the Chinese market in 1989 – interleukins, G-CSF – GM-CSF – EPO – Insulin – growth hormone – Others • Largest vaccine manufacturing country in the world (41 vaccines to prevent 26 viral diseases) • Worlds largest producers of EPO and insulin are in China – China was the third country to successfully product insulin at large scale Asia Offers Opportunities in Pharmaceuticals GenEngNewsAug 1 2005 (Vol. 25, No. 14) 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 38 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 19
  20. 20. China: Positive Factors for Biologics Manufacture • Commerce: Chinese biotech was targeted for development by the government in the 1980s – Biopharmaceutical production value growth has accelerated: $30 million (1986), $200 million (1996), $860 million (2000), $4.2 billion (2005) – China’s biopharmaceutical sales revenue has grown at a rate of 20–30% in the past five years • Trade: Entry into the World Trade Organization in 2001 improved access to global markets • Regulatory: Developed the State Drug Administration (SDA) regulatory system • Implementation of Good Clinical Practice (GCP) standards, Sep03. Allows use of Chinese clinical data for regulatory submissions in other countries • Implemented Good Laboratory Practices (GLP) • Implemented Good Manufacturing Practice (GMP) 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 39 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA China: Positive Factors for Biologics Manufacture • Intellectual Property (IP) – Chinese government has expanded Intellectual Property (IP) protection • quot;Regulations for Implementation of the Drug Administration Law,quot; SEP02, define a new drug as one that has never been marketed or sold in China • China's patent law was amended on DEC02 to harmonize with other WTO countries • Resource entry barriers may restrict biologics manufacturing to companies with adequate funding and staff to support the capital- and skill-intensive requirements – Biosimilar manufacturers may avoid the extent of competitive pricing characteristic of the small molecule generics segment • Human Capital – Return of Chinese nationals with biopharmaceutical expertise and experience 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 40 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 20
  21. 21. Obstacles to Growth of China in Biologics Manufacture • Low levels of biologics product commercialization – Inexperience with commercial manufacturing processes may increase development time and production costs, and hinder large-scale production • Domestic pricing limitations – Smaller sales revenues should be expected in the Chinese market • Scale inefficiencies due to fragmentation – Multiple manufacturers produce the same products unnecessarily, duplicating investment • Inadequate protection of IP – Relative absence of IP fails to adequately protect technology investment, often due to operation at small scale with small profit margins • Lack of experienced managers – More Chinese professionals are returning to China after establishing their careers abroad, but shortfall will probably persist for managerial and technical leadership 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 41 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Biogenerics Evolving Risks and Opportunities Risks 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 42 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 21
  22. 22. Risk: Economic • Evolving reimbursement policies and impact on profit margin • Lower pricing structure may be required to sell in developing countries, cutting profit potential • Leverage: Need to assume debt (or use cash) to construct facilities that will not generate revenues for over five years • No regulatory path for biggest market, the US, creates significant capital risk 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 43 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Risk: Intellectual Property • Evolving patent legislation could limit ability of brand and generic companies to settle patent litigation under the Hatch- Waxman Act • Branded companies decision to launch an authorized biogeneric version may reduce market share of other potential manufacturers • Use of legislative tactics involving patent law by brand companies can delay biogeneric product launch • “At risk” launches may fail and result in the need to pay substantial damages to the innovator firm 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 44 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 22
  23. 23. Risk: International Changes in a wide range of country-specific • Reimbursement policies • Regulatory requirements • Local product preferences and product requirements • Trade protection measure, import/export licensing requirements • Non-US staffing; labor regulations • Environmental, health and safety laws • Political considerations • Economic considerations • IP policies 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 45 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Risk: Competitive • Competition from other biogenerics manufacturers will lower revenue and profitability • Innovator firms may have safer, more effective, more user- friendly and/or less expensive patentable new versions of the first generation product – Example: Amgen's darbepoetin alfa vs. EPO • Original product may not be approvable in some markets due to inferiority of safety and/or efficacy relative to new products 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 46 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 23
  24. 24. Risk: Regulatory • Lack of an internationally harmonized definition for bioequivalence • Failure of FDA to declare a clear path to biogeneric approval for US market • Example: hurdles faced by Sandoz‘s Omnitrope (first biosimilar approved in Europe, Apr06) – extended legal disputes in the European courts – Sandoz had to sue FDA to get Omnitrope approval in US 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 47 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Risk: Capacity • Under-estimation; consequences – CMO market is relatively undeveloped, especially in mammalian cell technologies, and represents a significant opportunity • Large capital requirements ($400 million per plant) and extended set-up times (4 years) to begin operations at a new biologics manufacturing facility is an entry barrier to the biologics CMO market • Over-estimation; consequences – Underutilization of plant-liable for overhead and depreciation – Opportunity cost of investment foregone on other potential projects BioPharm Int “Outsourcing: Biologics Manufacturing: The CMO Advantage” J Lakshmikanthan(01Feb07) 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 48 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 24
  25. 25. Risk: Technical • Underestimation, technical sophistication to manufacture biotech products – facility replication is still not routine for biologics: technology transfer to a CMO involves significant risk – Impurity profile, specific to a cell line and processing, can be as important to bioequivalence as making identical active ingredient – Physical phenomena (aggregation, folding differences) can significantly affect PK, PD and adverse events • Continuous introduction of new products is critical, as old products are superseded by improved versions – Process is long and expensive and has high development risk – New products are needed as revenues fall for old generics with declining profitability – Long development and approval timelines create additional risk of changes in the competitive environment by the time of launch 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 49 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Technical Risk: Microheterogeneity • Unlike small molecule drugs, even well-characterized biological molecules may be represented by a family of subpopulations that vary with respect to glycosylation, N- or C-terminal trimming, and modifications of native amino acid residues • The basis of the microheterogenity may be the process, and any process change may affect the microheterogeneity profile; innovators can keep their experience and know-how secret indefinitely • Dangers: immunogenicity, neutralizing antibodies, unforeseen adverse reactions to trace components 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 50 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 25
  26. 26. Technical Risk: Immunogenicity • Generally assess immunogenicity after a manufacturing change without extensive clinical trials, although any biologic can cause problems • Bioassays, animal studies, and limited human testing typically suffice to spot risks for immunogenicity-but no guarantees • Omnitrope example: host cell protein, a common trace contaminant in biologics, produced antibodies among some clinical trial participants that contributed to adverse events • Immunogenicity problems are usually resolvable pre- approval, especially if regulators can access results of reference product analyses, but cause additional expense and delay, and are unpredictable Melissa R. Leuenberger-Fisher, The Road to Follow on Biologics: Are We There Yet? 23 BIOTECHNOLOGY L. REP. 389 (2004). 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 51 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Risk: Case Study, J&J EPREX (EPO) Example: unforeseen (and lethal) consequence of a manufacturing change intended to improve product safety • Not a biosimilar, but illustrates the risks of extrapolating risk experience with small molecule generics to biotech products • Provides additional rationale for not considering a follow-on product to be interchangeable with an innovative product • Change in the formulation: polysorbate 80 replaced HSA as stabilizer due to new regulations of European Health Authorities • Experience: product had been marketed for a decade with no evidence of immunogenicity problems 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 52 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 26
  27. 27. Risk: Case Study, J&J EPREX (EPO) • Indirect impact of formulation change: polysorbate released leachables from uncoated stoppers, increasing immunogenicity of product • Consequence: serious rare adverse reaction, aplastic anemia • Cause: anti-EPREX antibodies were triggered by EPREX produced using polysorbate-based formulation. Antibodies inactivated EPREX and the natural protein required for red blood cell production • Resolution: An extensive and expensive investigation by J&J was required to determine the cause of this adverse reaction and correct it 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 53 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Lessons in Risk, EPREX Case Study State-of-the-art scientific tools and methods have significantly advanced over the last decade, when EPO problems occurred, but maybe adjustment of risk assessment is as important: • Re-evaluate risk from manufacturing changes: consider the adverse reaction was created by a single change to a well- established process made by a manufacturer with extensive specific process and product experience • Re-evaluate risk from a new manufacturer and process - as will be the case with follow-on biologics. • Post-market monitoring of biologic safety to re-evaluate risk on basis of field experience is critical 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 54 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 27
  28. 28. Biogenerics Evolving Risks and Opportunities Strategies 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 55 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Innovator Strategy: Product lifecycle management Marketing the initial NCE is just the beginning • Create a product franchise with a continuous stream of improvements: – Process (one target: consistency) – Product (active ingredient) – Dosage form (one target: quality) – Administration route – Packaging, distribution – Label claim • Defend improvements – Process patents – Product patents – Know-how – Trademarks 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 56 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 28
  29. 29. Innovator Strategy: Process Improvements • Lower manufacturing cost – higher yield – faster – simpler – less expensive ingredients • Lower risk – more reliable raw material supplies, – better control over suppliers, – investigate substitutes • Better process reproducibility • Higher product quality-tighten specifications as competitive tool • Improvements in safety, efficacy, stability, impurity profile, all of which can provide competitive advantage 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 57 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Innovator Strategy: Product Improvements • Active ingredient variants – Improve safety, efficacy, stability, impurity profile – Different sequence, structure (disulfide bonds, change labile residues, restrict sequence to binding peptide) – Alter post-translational modifications (oligosaccharide profile) – Covalent modification (PEGylation) – Change physical structure (degree of crystallinity) • Dosage form and formulation variants – Improve delivery characteristics – Controlled (or different) release formulations – Change dosage form to achieve better bioavailability, convenience, release properties, localization • Innovative packaging can reduce distribution costs and improve market share • Ongoing clinical trials should support broader label claims 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 58 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 29
  30. 30. Innovator Strategy: Organizational • Create a franchise product portfolio – Optimize positioning of product variants to maximize defendable market, minimize impact of cannabilizing existing product sales • Acquire/build a biogenerics division – Reduce attractiveness of off-patent brands to generic competitors by creating an authorized biogeneric – Manufacture biogenerics internally to realize efficiencies of know-how and existing systems • CMOs to leverage internal resources – Maximize flexibility by outsourcing selected manufacturing operations – Offset technology transfer risk to CMOs with increased knowledge, experience, and skills among short-list CMOs 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 59 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Strategy: Generic Manufacturers • A generic manufacturer can lower capital costs by partnering with a biogeneric CMO who already has plant capacity available, to share risks to launch a biogeneric product • Another alternative: acquire/build a biosimilars division within an existing generics or innovator company – Expand operations through acquisitions with proven sales and operations capabilities • Establish strategic partnerships, potentially with innovator company • Need sufficient technical capability for biologics manufacture • Must manufacture to Western GMP standards 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 60 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 30
  31. 31. Strategy: Generic Manufacturers • Need to be well financed to ride out years before profitability • Avoid effort dilution; initially focus on 1 - 2 products • Must understand each market segment • Sales hurdle for product: maybe $20 million/yr for innovator product? Must decide appropriate requirement for target ROI • Savings to users may be less than true generics (25-44%), 10-25%, because entry costs will be higher [H. G. Grabowski, Statement before the House of Representatives Committee on Oversight and Government Reform, Hearing on “Follow-on Protein Products” (Mar. 26, 2007)] • Staged launch via geographic roll-out: supply developing markets initially to take advantage of fewer biogeneric restrictions, followed by Europe and eventually US – Loss-leader approach because easiest markets for entry will likely offer the lowest acceptable prices • Develop second-generation products to maintain premium margin 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 61 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Strategy: CMOs • Greater complexity than small-molecule manufacturing – requires more planning, investment, and skilled personnel • Greater investment implies greater risk, hence access to sufficient cash (via debt capacity and/or cash flow) will provide a competitive advantage • Investment coupled with risk may exceed resources of most biotech innovator and biogeneric companies, making CMO partnering beneficial to share project risk and lock in minimum commitments [CIBC World Markets Biotechnology Coverage Universe, 2005] – Two-thirds of biopharmaceuticals in development are sponsored by companies with <$1 billion revenues • Given a portfolio of client products, unused capacity risk will be minimized because risk of failure can be spread over many projects – A CMO needs to produce about four products in a plant before realizing a profit [J Lakshmikanthan (February 1, 2007) Int BioPharm “Outsourcing: Biologics Manufacturing: The CMO Advantage ] 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 62 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 31
  32. 32. Strategy: CMOs • CMOs can gain a competitive advantage by achieving a leadership role in biologics manufacturing technology – CMOs main business is manufacturing. CMOs work with more projects than an innovator or generic company. Therefore, they have the incentive and the ability to design innovative processes • Most microbial manufacturing capacity is already at CMOs – Existing microbial expression system capacity adequate – Growing adoption of mammalian expression systems suggests additional capacity may not be needed • Opportunity: new biologics CMOs should build capacity in mammalian expression systems – CMO capacity in mammalian expression still relatively undeveloped – Most mammalian expression capacity is at innovator firms [Citigroup report. Lonza Group AG. London: Citigroup: 2005 Sept.] 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 63 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA Conclusions • Biogenerics will inevitably become a significant part of the global pharmaceutical market • Biogenerics will be significantly more challenging to develop, manufacture, and approve than traditional generics, lowering profit margin • Revenues from biogenerics per product should exceed traditional generics due to the high value added per dose • Biogenerics represent different strategic opportunities for innovator firms, generic manufacturers, and CMOs • It will be more productive for all industry participants and for society if the advent of biogenerics is approached as an opportunity rather than a threat 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 64 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 32
  33. 33. BioGenerics – Evolving Risks and Opportunities for Biopharmaceutical, Generic, and Contract Manufacturers THANKS! FOR YOUR ATTENTION Questions and Answers… 2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 65 Boston Mark A. Staples, Ph.D. March 25-26, 2008 Consultant, Cambridge MA 33

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