hormone therapy, though many people with HER2‐positive breast cancer can still benefit from hormone therapy. Along with the other HER2 follow‐on Roche products, only 43% of the franchise in Europe is currently vulnerable to biosimilar competition.
Greater competition. Biologic drug classes such as growth factors, insulins, and anti‐TNFs have several comparable products available and are therefore highly competitive areas. It took many years for these competitive environments to develop and for many indications particularly within oncology, the market remains relatively uncompetitive. However, this lack of competition is not an intrinsic property of the biologic market; it is a consequence of their relative novelty. A larger pipeline of biologics has meant that many players are developing treatments for the same indication, sometimes with the same mechanism of action. Previously validated disease/treatment pathways also reduce clinical trial risk, facilitating “fast follower” strategies. The result is that the window of opportunity for a first‐to‐market biologic will be shorter, with less market differentiation. The more competitive future biologic market will impact the return on investment for manufacturers. This can already be seen in many of the recent biologic launches such as immuno‐oncologic, respiratory biologics, and PCSK‐9 inhibitors.
Maintaining leadership. In times of high innovation output, established players are frequently challenged by new competitors entering their field. These companies can often be more dynamic and agile, making and acting on decisions quickly. Bristol‐Myers Squibb (BMS) is an example of a company that broke into a leadership position through partnering early and investing heavily. BMS moved up from rank 11 in oncology to rank 3 between 2011 and 2016 (DRG, Company & Drugs, April 2016), establishing itself as a long‐term leader in immuno‐oncology and a partner of choice for biotechs. Similarly, Alexion was founded as a small biotech in 1992, but has now become a top 30 biologic player, thanks to its focus on rare diseases. Large established players need to stay on the cutting edge of biologics R&D or risk losing leadership within their space. Business development will remain an important source of this innovation, but the challenge will be to keep it cost‐effective given the greater future competition in the market.10
2.4.2 Niche Biologic Innovators
Small biotechnology companies are the lifeblood of the biologic drug industry. The positive market environment for biologic products has placed these companies in a position of strength with respect to access to capital. This has given some the ability to push through development while retaining autonomy. However, the gains from deals have never been greater. Licensing leading products while keeping earlier pipeline and the scientific talent is a popular compromise. Our understanding of the science behind biological technologies is improving, and investor confidence has increased. However, the fact remains that many novel technologies pursued by biotechs will be high‐risk areas of research.11
2.4.3 Players Looking to Enter the Biologic Space
These are companies that predominantly invested in small molecule research and did not previously consider biologics as key to their strategies. Large pharmaceutical companies such as AstraZeneca and GlaxoSmithKline have not historically embraced the biologic wave. Many midsized innovative companies also fall under this category since they have specific disease area focus, often in therapy areas with little biologic use. Biologic therapies are becoming relevant in a greater number of disease areas. These companies will be looking to extend disease area leadership by following opportunities for investment in biologic products and biotech capabilities. For example, AstraZeneca, one of the leading companies in the respiratory space with its small molecule, Symbicort® franchise, is now poised to enter the respiratory biologics space with benralizumab.
The challenge for these incoming biologic players will be to secure deals for the most promising pipeline candidates. They will be competing with other big pharma for increasingly sought after and expensive assets, with disadvantages in areas such as experience, biologics manufacturing infrastructure, and capital in the case of midsized companies. However, these midsized companies do have a greater capability for focus, particularly in niche therapeutic areas and technologies.12
2.4.4 Biosimilar Players
Biosimilar players are presented with an opportunity to take sales from 15 of the top 20 biologics in most developed countries by 2020, a market value greater than US$80 billion (DRG, Company & Drugs, April 2016). Investment barriers have meant that these players will face fewer competitors relative to the small molecule generic market. However, the competition that is present has formidable resources to draw from. Leading players have been gaining experience taking biosimilars through regulatory approval. Their legal teams/partners have been setting precedents while clearing patents to prevent at‐risk launch. This experience will be invaluable when preparing launches for the many biosimilar targets that will be presently moving forward. Some players such as Novartis/Sandoz, Merck & Co, and Amgen will be playing in both the originator/innovator and the biosimilar space. These hybrid players can leverage their expertise in biologic development and manufacturing to generate synergies. They also have the financial capacity to invest heavily in this space. However, they will face a certain degree of conflict of interest.
Biosimilar players can also bring bio‐betters to market. Today's off‐patent originator molecules were engineered over 15 years ago. Since then, scientific advancements have enabled biosimilar developers to improve the molecule significantly. Novel screening methods have assisted in the detection and replacement of immunogenic parts of the protein; iterative binding assays have improved specificity and binding strength; better understanding of structure/solution stability and stress tests have improved the temperature stability and shelf life. However, these improvements with respect to biosimilars are limited by the regulatory requirement to keep the molecule like the originator, this is to enable simple switching and to avoid dosage confusion.
The challenge is that there is currently no dedicated FDA or EMA regulatory guidance for bio‐betters. Approval through a novel medicine's pathway would require the developer to invest in clinical trials at a scale like creating a new biologic product. If the improvements on the molecule are not transformative, and payers do not see a profound therapeutic value, the return will not be high enough to justify investment. In the longer term, the development of an abbreviated bio‐better regulatory pathway remains a possibility. As the biosimilar market becomes more competitive, players looking for product differentiation may explore this bio‐better route.13
2.5 Outlook: Landscape of the Biologic Market
Biologics markets are concentrated and crowded. Currently, the top 10 biologic therapies account for 36% of all biologic drug spending. The three largest biologic therapy areas (autoimmune, diabetes, and oncology) are worth US$110 billion, over half of all biologic drug revenue. They are represented in 9 of the top 10 biologics and are increasingly relevant due to their contribution to 70% of biologic market growth since 2010.14
Over half of the biologic pipeline is in therapy areas with few or no biologic treatments on the market. Their large presence in the pipeline is a sign of biologics broadening their therapeutic focus, bringing new therapeutic areas for growth.15
2.5.1 Biologics in Nontraditional Biologic Disease Areas
2015 was the year that two high‐profile classes of biologics had their first launches, the anti‐PCSK9 mAbs for hypercholesterolemia (Repatha® and Praluent®) and an antiIL‐5 mAb for severe asthma (Nucala®). These launches were particularly important because the indications they were approved for have seen either no biologics (hypercholesterolemia) or a single biologic (asthma‐Xolair®).
