strategies are increasingly incorporating biologics into the pipeline with large pharma driving the trend. This competition, particularly between companies with deep pockets, is driving up deal values.
There has been prolonged availability of capital at low interest rates, promoting deal making across all sectors.
The Valeant, Turing, and Mylan pricing scandals attracted heavy criticism in late 2015 and 2016. The resulting attention from policy makers in the United States has concerned investors, reducing expectations of future pharmaceutical market potential and growth. This has contributed toward the fall of the NASDAQ biotech index by 21% since September 2015. President Trump's pronouncements after his election have served to increase the uncertainty of an already nervous and volatile sector. The number of biologic product deals signed has also risen. Between 2008 and 2012, these numbers were relatively stable at ~250 deals per annum. However, in 2015, the number of deals announced reached 400. A relevant question to be posed is: Where are these biologic assets being sourced from?
Historically, most biologic product deals have been executed early in the drug development cycle. This trend is becoming more pronounced. Between the 2006–2010 and 2011–2015 periods, deals for biologic drugs in development to Phase II increased by over 60%. If we look at deal growth in absolute terms, the bulk of biologic deal increase is coming from very early stage, discovery/preclinical (392 more deals, 71% of deal growth) (DRG Deal Database, 2017).
There are not many high‐potential late‐stage biologics left to acquire. Demand for pipeline biologic therapies has increased but it will take several years before reactive supply will progress to the late stage.
High valuation of biologic products is pushing players who are unwilling to invest heavily to look earlier in the development of promising candidates.
Players in the industry now have many years of experience developing biologics. They have taken them from scientific concept through to market blockbusters. As a result of this experience, more players have comfort in conducting early stage deals.
The greater risk of early deal making has been balanced with the increased usage of contracted milestones within deals.20
2.7 The Arrival of Major Biosimilars
2.7.1 Biosimilar Immediacy
When small molecule drugs lose patent protection, generics enter the market, resulting in lower drug cost burden for payers. These savings are channeled into the funding of new innovative drugs and expanding access to older ones. The same innovation cycle for biologics is reaching maturity. Many biologic blockbuster products now have biosimilars lined up to take market share. Those biologic makers facing loss of exclusivity on a current marketed product can be partially comforted by the prospect of funding availability for future launches.
A jump in biosimilar availability and usage:The first biosimilar mAb, infliximab, has launched for all originator indications and has taken majority share in several European markets. There are now three competing infliximab biosimilar brands in Europe: Remsima® marketed by MundiPharma, Inflectra® by Pfizer/Hospira, and Flixabi® by Biogen.The list of biosimilar molecules that have gained FDA approval now includes filgrastim, infliximab, adalimumab, and etanercept, with many more entrants expected before the end of the decade.A rich pipeline with over 240 biosimilars in development (including only those that are announced publically) will mean that launches will be coming with increasing frequency and there will greater competition within each molecule.
Stakeholders will have biosimilars high in their priorities. They will gain a lot of experience in the space of a few years:Regulators will be clarifying guidance for biosimilar manufacturers. Many regulatory bodies are aligning guidelines to those of the EMA.Country medicines agencies will be assessing the clinical evidence over time. Important decisions on stance for switching patients to biosimilars will be adopted as a result.Payers will be grappling with barriers to biosimilar uptake in order to find savings and increase leverage.Physician and patient groups will express their views. These will form the backbone of public opinion on biosimilars and have the potential to influence regulatory agency guidance.The biopharma industry, innovative and biosimilar players, will develop new strategies for competition. The level of discounting that a biosimilar business model can sustainably provide and absorb will be more fully understood.
The decisions and opinions developed during this transition period will set precedence moving forward. As a result, keeping up to date with this rapidly changing space will be important for strategic decision‐making in the short and long term.
Many of the top 20 biologics are already exposed to biosimilar competition. An estimated 6/20 have lost exclusivity in the United States and 7/20 in Europe. By 2020, these figures will increase to 15/20 and 14/20, respectively (DRG Company & Drugs, 2016).21
2.7.2 Regulatory Hurdles for Biosimilar Launch
The regulatory evolution of biosimilars is still relatively immature. The EMA published the world's first biosimilar guidelines in 2005, with the FDA publishing its guidelines in 2012. The convergence between these and other regulatory guidelines has been slow, preventing single cost‐effective biosimilar development. Biosimilar legislation is only in its infancy. The Hatch‐Waxman Act in the United States in 1984 did not lead to an immediate mature small molecule drug generic market, and neither will this be the case for biosimilars. As regulatory agencies and biosimilar manufacturers gain experience in bringing biosimilars to market, regulatory difficulties and pathways will have a smaller impact on biosimilar uptake.
Players have gained experience developing and taking biosimilars through regulatory procedures. This combined with a greater understanding of the biosimilar business model has meant that biosimilars are now being developed earlier and with greater competition than was the case previously. Moving forward, the lag time between biologic loss of patent protection and biosimilar launch will decrease.22
2.7.3 Interchangeability and Substitution
Another factor that may affect uptake of biosimilars is that a biosimilar generally cannot be automatically substituted for the reference product (i.e. brand‐name or innovator biologic) at the pharmacy level unless it is determined to be interchangeable with the reference product. An interchangeable product “can be expected to produce the same clinical result as the reference product in any given patient and, for a biological product that is administered more than once, that the risk of alternating or switching between use of the biosimilar product and the reference product is not greater than the risk of maintaining the patient on the reference product. Interchangeable products may be substituted for the reference product by a pharmacist without the intervention of the prescribing health care provider.” In January 2017, FDA released draft guidance on interchangeability, and final guidance on 10 May 2019. FDA has not yet approved an interchangeable biologic product.23
2.8 Biosimilars in Emerging Markets
The emerging markets typically have relatively low access to biologic medicines when compared with developed markets. Patients in these markets stand to gain the greatest increase in access as a result of biosimilar competition. This has caused emerging market health authorities to put significant effort into encouraging use of non‐original biologics (NOBs). NOBs are copy‐biologics that have not gone through a biosimilar pathway with strict regulatory scrutiny such as the EMA, FDA, or WHO biosimilar guidelines. They have been preferred in the emerging markets due to their early access and lower price relative to true biosimilars. NOB uptake has been significant, the market was worth US$2.1 billion in 2015 relative
