Although relatively few biosimilar products have entered major markets, including no approvals yet in the US, this new class of biopharmaceuticals is already having a major impact on many (bio)pharmaceutical contract manufacturing organizations (CMOs). As noted below, US and European biopharmaceutical CMOs are already reporting a 15% increase in business due to biosimilar projects at various development stages. And while 30% of current commercially manufactured biologics are done by CMOs, we expect at least this level of commercial manufacture of biosimilar products by CMOs.
There are currently approximately 40 recombinant proteins/antibodies with blockbuster (≥$1 billion/year) markets and another approximately 20 with sales between $0.5-$1 billion.1 These are the primary targets for biosimilar development. Even just 10% market share with a biosimilar of a reference product with $1 billion/year sales, ie, a market of $100 million/ year, is rather attractive, considering the average cost for development of most biosimilars likely will not reach this level. Companies of all types, including small and virtual biopharmas in all global regions, view biosimilars as an attractive niche. For established companies, this includes rounding out product portfolios by adding biosimilars in product classes where they already have a significant presence. For emerging-market companies, biosimilars are attractive as a relatively easier way to enter the US and other major biopharmaceutical markets.
Biosimilars Status and the R&D Pipeline
Biosimilars are still a new phenomenon, particularly in the US. The great majority of currently marketed biopharmaceuticals, including over 180 recombinant products marketed in the US and European Union (EU), will become susceptible to biosimilars, ie, their patents will expire in the coming years. But biosimilar development targeted to the US remains stalled, with the US Food and Drug Administration (FDA) years overdue in issuing needed guidance and final regulations. Despite the biosimilar approvals-enabling law enacted in the US in 2009, no biosimilars have yet received FDA approval, with the first applications just starting to be filed as of this publication.
The EU has been the leader in approving biosimilars, with 20 approved products (although the actual number is smaller as some of the products are actually duplicates marketed by different subsidiaries), and other major markets have at least enacted laws enabling biosimilar approvals. However, despite these follow-on products being sold at a discount (relative to their reference products), biosimilar uptake, sales, and market share capture has been slow. Current total worldwide sales of biosimilars are only on the order of ≥$500 million, not even the size of the current market for most single biosimilar target reference products. Most of these sales are in Europe.
Despite leading in approvals, uptake of biosimilars has been slow in Europe, with each individual country needing to approve reimbursement and other aspects; and unlike in the US, Europe lacks private sector insurers who are fully expected to force patients to switch to cheaper biosimilars as soon as they become available.
The number of current US/EU reference products vs. their US launchable dates (ie, when US patents and other exclusivities expire) is shown in Figure 1.1 Through the next 5 years, we can expect a large number (hundreds) of biosimilars to enter the US and other major markets. Those already launchable (dates ≤2014) generally have small markets or other factors that have restricted biosimilars development to date.
Figure 1. US and EU Recombinant Biosimilar Launchable Dates: Number of US and EU Reference Biologics Targeted by Biosimilar Competition.The portion of the current market for biopharmaceuticals susceptible to biosimilars competition is over $100 billion. And it is reasonable to expect several hundred biosimilars to enter the US and other major markets in the next 5 to 10 years. There could be 8 to 12 biosimilar versions of many major reference products. Will there be too many biosimilar products, too much competition? Maybe—especially for companies that need high, innovator-like profit margins; those that are less focused on manufacturing efficiency; and those lacking competitive marketing efforts.
Note, this article does not include data on the perhaps several hundred lower-end biogenerics, unproven knock-offs (by highly regulated country standards), not having gone through rigorous biosimilarity testing-based approvals. These products are generally located in lesser- and non-regulated international commerce. Few, if any, are being developed or manufactured by CMOs. However, in the coming years, manufacturing and testing for many current biogenerics will likely be upgraded, often with assistance from CMOs, and these new versions may potentially enter major markets as biosimilars. Also, biobetters (ie, improved variations of current reference products involving some innovation receiving full approvals) and other me-too products targeting the same indications will be competing with reference products and biosimilars.
The Development Pipeline
Nearly 700 biosimilars (N = 687) are currently in the development pipeline, with nearly 500 companies involved. As is normal, most products in the pipeline are in earlier phases of development, and nearly half have yet to enter trials. Many products in development remain on hold (ie, are waiting to enter trials), until FDA issues needed guidelines concerning biosimilars. As can be expected, reference products with the largest markets are attracting the most development efforts. Table 1 presents recent annual revenue and the number of biosimilars in development for some current products and product classes.
Table 1. Biosimilars in the Pipeline Targeting Reference Products and Classes
Geographically, most companies developing genuine biosimilars (destined for major, not unregulated international, markets) are planning for manufacture to occur in major market countries, mostly in the US and Europe. The use of CMOs for product development and manufacture is rather common in the US and Europe. Offshoring (ie, hiring CMOs in developing countries) to develop and manufacture biosimilars is likely to remain rare. A small number of biosimilars can be expected in the coming years to originate from developers in India and other non-major, less regulated markets. These countries and their CMOs generally lack needed infrastructure, expertise, capital, and other requirements to develop cGMP commercial manufacturing capabilities. For example, there is still no precedent for an Indian or other emerging country-originating biopharmaceutical product approved in the US, the primary target market for biopharmaceuticals, including biosimilars.
In terms of size (company revenue), biosimilar developers tend to either be very large, established (including Big Pharma) companies, or small, newer biotech-type companies—most lacking any current products. Both these classes of companies are more prone to outsource biosimilars development to experienced CMOs. For major players, such as Big Pharma companies, biosimilars are not core products, making them prime candidates for outsourcing. Of course, in terms of eventual marketing, if not developed by, the great majority of biosimilars will be licensed to and marketed by large established companies. Many small companies simply have no other options and their business plans involve outsourcing biosimilars development and manufacture to CMOs. More mid-sized companies (including public, mainstream innovative biopharmaceutical developers) are generally not involved in biosimilars development.
Biosimilars Bioprocessing and CMOs
Biosimilars will generally be recombinant proteins/antibodies, and these will soon rapidly outnumber the ≤200 innovative/reference recombinant products currently in the US/EU markets. This will have major impacts on the biopharmaceutical CMO sector, including capacity utilization. CMOs are already experiencing noticeable growth in business from biosimilars development and manufacturing projects. As confirmed by BioPlan’s extensive surveys, biopharmaceutical development and use of CMOs in general are up, with the industry having recovered from prior years’ financial disruptions.
US and European biopharmaceutical CMOs are already reporting a 15% increase in business due to biosimilar projects. Currently, with innovative/reference products, about 30% of these are commercially manufactured by CMOs. It is reasonable to expect at least this level of commercial manufacture of biosimilar products by CMOs. As noted above, this includes established companies outsourcing this “non-core” biosimilars R&D and manufacture, favoring concentrating in-house resources on development of higher profit innovative products, while many small companies have no options other than to outsource.
Most every biopharmaceutical CMO has recently been adding capacity, much of it single-use systems but also significant additions of fixed stainless steel systems. As biosimilars exit the development pipeline, an increasing portion of CMO capacity will be used for biosimilars commercial manufacturing. By 2020, we might expect several hundred marketed biosimilars, more than the current number of reference products, including an increased frequency of commercial manufacturing of these products by CMOs. Currently, relatively few CMOs perform GMP commercial product manufacture, with most concentrating on R&D and scale-up. This will change with biosimilars, with many more CMOs becoming product manufacturers.
Cost-effective manufacture is a requirement with biosimilars, which have to compete against established reference products and other biosimilar versions. As with generic drugs, this includes the follow-on products being sold at a substantial discount. So far, biosimilar discounts in Europe have been generally around 30% compared to their reference product. However, with so many competing products in development and with many developers viewing their first biosimilars as their pathways into the lucrative US/EU biopharmaceuticals markets, price competition could become fierce. Some CMOs have announced expectations of discounts approaching 50%. And while this is still minor in comparison to small molecule drug discounts of up to 90%, it is still dramatic considering the high cost of manufacturing a biologic. Such competition in biologics also tends to favor the use of CMOs, with their expertise allowing more rapid development and scale-up and their operations inherently flexible, lean, and efficient—valuable traits in the very competitive CMO sector.
Most biosimilars will be manufactured in single-use bioprocessing systems, including within flexible, multi-product facilities, with these well-suited for CMO use. Most biosimilars, with their inherently smaller markets, (even those targeting blockbuster antibodies), can be cost-effectively manufactured in single-use systems. For some large volume products (eg, monoclonal antibodies), this will require multiple parallel trains of 1000- to 2000-L bioreactors and/or continuous manufacture, such as the use of perfusion. However, some biosimilars, particularly those manufactured microbially (which tend to be more difficult in single-use systems), will be manufactured in stainless steel. In many cases, this will involve CMOs adapting current in-house equipment or construction biosimilar-dedicated stainless steel bioprocessing capacity.
Biosimilar development and manufacture are complex undertakings, much the same as innovative biopharmaceutical development but without the expensive and time-consuming underlying research and large Phase III clinical trials already done with the reference product. The inherent complexity of biopharmaceuticals makes biosimilar development and manufacturing challenging—certainly not a trivial undertaking. It can be difficult to closely replicate biopharmaceuticals sufficiently to the point that they have both substantially identical analytical and clinical profiles as decades-old reference products. In this context, CMOs can be ideal partners for biosimilars development and manufacture. CMOs have much more diverse experience with bioprocess design and execution, having worked on a larger number products while developers typically concentrate on just a few. Also, most CMOs have developed proprietary in-house expression systems and other technologies suited for use with diverse products, with biosimilars to be “plugged into” these established manufacturing platforms.
Another impact of biosimilars is that innovative biopharmaceuticals are increasingly becoming more complex. This includes the development of more complex, much harder to replicate products generally involving more complex bioprocessing, such as antibody-drug conjugates. While this complexity may create hurdles for eventual biosimilar competition, we can also expect increased adoption of more complex and proprietary bioprocessing technologies. CMOs with needed resources may be ideally positioned to develop these for multiple clients.
Besides traditional fee-based work for clients, we may also expect some CMOs to become biosimilar developers and manufacturers themselves— selling/licensing their own APIs and finished products for resale by marketing companies. With CMOs having the needed resources and experience, often already developing multiple biosimilars for clients, it may make business sense for them to develop these themselves for licensees. So some CMOs may, themselves, become biosimilar developers and manufacturers. This will have as yet unpredictable impacts on the CMO sector.
Biosimilars are rapidly expanding the number of biopharmaceutical developer and marketing companies and with their natural fit, are resulting in CMOs increasingly working on these products. Biosimilars will enable many CMOs to graduate to become approved product developers and GMP manufacturers, substantially increasing the diversity and competition among CMOs, including competition for more profitable commercial product manufacture.
Reference
- 11th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production. BioPlan Associates, Inc. April 2014. www.bioplanassociates.com.
Ronald A. Rader is Senior Research Director, BioPlan Associates, Inc. He is the author of BIOPHARMA: Biopharmaceutical Products in the U.S. and European Markets, and a biosimilars/bio-better pipeline-tracking database.
Eric S. Langer is president and managing partner at BioPlan Associates, Inc., a biotechnology and life sciences marketing research and publishing firm established in Rockville, MD in 1989. He is editor of numerous studies, including “Biopharmaceutical Technology in China,” “Advances in Large-scale Biopharmaceutical Manufacturing,” and many other industry reports; [email protected]; 301-921-5979.www.bioplanassociates.com