Biosimilars: Opportunity Amongst Uncertainty

This is intended to be a concise, high level overview of the current biosimilar environment in the U.S. with links to articles and other blogs that offer more detailed discussions with opinions and strategies that relate to the regulatory, legal and commercial environment surrounding biosimilars.

The review includes the following sections: summary, definitions, background, regulatory status, and industry trends & news, including recent transactions from the sector.

Executive Summary

While biosimilars and interchangeables present a huge commercial opportunity, the regulatory uncertainty and technical complexity surrounding the development of these follow-ons and the marketing skill that will be required to win over doctors and patients are already separating the potential winners from the losers with those willing to make the necessary high-cost, long-term investment best positioned to crack this highly lucrative market, which ultimately may pit innovator against innovator, rather than innovator against the traditional concept of a generic.


Biologic – refers to biopharmaceutical medical product created by a biologic process, rather than being chemically synthesized. Examples of biologics include  medicinal product such as a vaccine, blood or blood component, allergenic, somatic cell, gene therapy, tissue, recombinant therapeutic protein, or living cells.

Biosimilar – or follow-on biologic, refers to a product similar to a biologic product already approved for sale. Biosimilars comprise an active drug substance made by a living organism or derived from a living organism by means of recombinant DNA or controlled gene expression methods. From the Biologics Act, a biosimilar is a biological product that “is highly similar to the reference product notwithstanding minor differences in clinically inactive components” and for which “there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity and potency of the product.” Regulatory authorities have provided guidelines in an attempt to better define the above terms and criteria.

Interchangeable – refers to a product interchangeable with a biologic product already approved for sale. The criteria used to classify a follow-on as “interchangeable” are stricter than those for biosimilars. Therefore, an interchangeable can be expected to produce the same clinical result as the reference product in any given patient


* The worldwide market for biologics—therapeutic proteins and other biologically engineered drug products—now tops $175 billion a year1.

* These pioneering medications are expensive to develop and manufacture, but generally generate far higher revenues than traditional small-molecule drug products.

* Blockbuster biologics include such widely prescribed medications as Humira®, Rituxan®, Avastin®, Herceptin®, Remicade®, Lantus® and Enbrel® – all of which occupy a spot among the top selling drugs of all time with peak year sales all exceeding $5 billion2.

* Biosimilars, or follow-on biologics, refer to products similar to, or in some cases interchangeable with, biologic products already approved for sale. These biopharmaceutical medical products comprise an active drug substance made by a living organism or derived from a living organism by means of recombinant DNA or controlled gene expression methods.

* The molecular structure of biologics, compared to that of pharmaceuticals, is complex, and the data required to demonstrate biosimilarity, is also more complex than the bioequivalency requirements for pharmaceuticals3.

* However, biosimilars present a significant opportunity to reduce healthcare costs (e.g., top 5 Medicare expenditures are biologicals4), while also offering innovators, and their competitors, greater access to a biologics market that is likely to lead the pharmaceutical industry for the foreseeable future.

Regulatory Status – The Biologics Act

* The FDA gained the authority to approve biosimilars (including interchangeables that are substitutable with their reference product) as part of the Patient Protection and Affordable Care (PPAC) Act, or ACA, signed by President Obama on March 23, 2010.

* The Biologics Act, a subtitle of ACA, brings the U.S. in line with other jurisdictions that already have enacted similar measures. The European Union pioneered biosimilar legislation in 2005. India and China have also recently enacted laws governing the development of biosimilars.

* Although the Biologics Act granted the FDA authority to approve follow-on biologics theoretically through an “abbreviated pathway”, the agency has yet to approve a biosimilar, at least in part due to the complexity of biologics.

* Prior to the implementation of the ACA, only a few subsequent versions of biologics were authorized in the U.S. through the simplified procedures allowed for small molecule generics, namely Menotropins (January 1997) and Enoxaparin (July 2010), and a further eight biologics through the 505(b)(2) pathway.

* Non-patent exclusivity – The passing of ACA guarantees the reference biological a 12-year marketing exclusivity period from the time of FDA approval. During this time, the follow-on product cannot be launched – regardless of patent protection or a lack thereof. This includes a provision similar to the Hatch-Waxman Act that precludes the filing of an application for a follow-on biologic product until four years after the launch of the innovator’s product5.

Regulatory Status – FDA Guidance

* Last February, the FDA released initial drafts of guidance aimed at the implementation of the Biologics Act and reflect the agency’s current positions on certain aspects of its provisions6. However, great uncertainty remains.

* Much of the uncertainty revolves around the requirements for demonstrating biosimilarity, starting with extensive structural and functional characterization of the proposed and referenced product.  This characterization is the “foundation” of a biosimilar development program and informs the type and extent of additional studies that the FDA will require. The entire process may require applicants to account for variability associated with manufacturing, while also performing toxicity studies in animals and clinical trials in humans.

* The drafts leave several issues unresolved: The FDA did not address what standards would be necessary to demonstrate a follow-on biologic’s interchangeability with a reference product. The agency did not provide specific requirements, such as the scope, size, and number of clinical tests, or the quantity of production lots to be tested. Nor did the FDA address biosimilar naming conventions, with innovators arguing that biosimilars should have names that are different from those of the reference biologics. Finally, the guidelines do not address the exclusivity periods or patent dispute resolution procedures.

* In August 2012, the FDA conceded that its progress in completing and finalizing rules has been slower than it had hoped, and that it has still not provided the industry with many details. In particular, the FDA noted that it has not yet dealt with interchangeability.

* Although the FDA has not yet approved a biosimilar or decided whether a biosimilar is interchangeable with a brand-name biologic, this has not stopped more than a dozen state legislatures from considering bills that would allow substitution7. The states are being challenged by big biotechs such as Genentech and Amgen who aim to keep rivals from having easy entre to their lucrative markets.

Industry Trends

* Based on the guidelines provided by the FDA, together with the costly manufacturing processes, it is estimated the development costs for biosimilars could be between $75–250 million per molecule8.

* Biological brands with a total global market value of over $40 billion in annual sales are expected to lose patent protection by 2016.

* According to the PharmaExecBlog, the peak penetration of biosimilars over four years has been between 10 and 35% (although in Europe somatotropin and filgrastim have provided contrasting examples). The price erosion of the originator brand following biosimilar introduction has been modest — in the range of 20 to 40% in Europe. There is a tendency to price close to the originator and then to compete for share using institutional rebates and contracting rather than competing directly on price9.

* The Alliance for Safe Biologic Medicines, a group that includes Amgen, Genentech and the BIO trade group, wants clear lines drawn for substitution, such as giving physicians authority to specify “do not substitute” and that such an option should override any policy from payers or state law that would have substitution be the standard or default practice10.

* An October 2012 survey from BioTrends Research, showed oncologists in the U.S. and around the world indicated that 42-45% on U.S. docs would take a “wait and see” attitude toward prescribing biosimilar mAbs when they first become available. This contrasts with 25% docs in France and 33% docs in Germany for example11.

Industry News & Transactions

[2/20/13] FierceBiotech “Star-crossed Merck reorganizes troubled biosimilars effort around Samsung pact” Just two months after Merck dropped out of a snake-bit biosimilar development program for Enbrel, the pharma giant – which has experienced a number of setbacks in the field – has stepped back up with a new, high-profile partnership, teaming up with a new venture formed by the South Korean conglomerate Samsung and Biogen Idec. 

[2/20/13] Forbes “There’s Nothing Contradictory About Amgen’s Biosimilars Move” Making biologics is hard; Amgen is very good at it. That’s a reason to argue for making it very tough to get a biosimilar approved. It’s also an argument that if you’re really good at making biosimilars, it’s a good market to be in, because lack of competition will mean prices don’t drop as much and there will be fewer players to split the pie. Amgen would like there to be as few biosimilar manufacturers as possible. It also would like to be one of them.

[2/14/13] Pharma TimesBiocon buys Actavis out of biosimilar JV, teams up with Mylan” Mylan has stepped in to replace Actavis and partner with India’s Biocon on a set of three biosimilar versions for a trio of insulin blockbusters that currently garner $11.5 billion in annual sales.

[1/31/13] FierceBiotechGenentech flashes PhIII progress for prized Rituxan successor” In a way, Genentech is competing against itself and holding all the good cards in the development of GA101. Rituxan, the multibillion-dollar drug from Genentech and Biogen Idec ($BIIB), is the standard of care for CLL cases that express CD20. However, the blockbuster loses patent exclusivity in Europe in late 2013, and those developing biosimilar versions of the drug aim to grab market share from Biogen and Roche/Genentech.

[12/16/12] Press ReleaseCatalent and UMN Pharma announce collaboration for Biosimilar Development and Production in Japan” Catalent announced that it has signed a deal to provide biosimilar cell lines to Japan’s UMN Pharma, a development and manufacturing agreement designed to jump-start the CMO’s presence on the Asian market. Neither company disclosed the terms of the agreement, but the deal tasks Catalent with using its GPEx technology to produce high-yielding cell lines, and UMN, in turn, will recruit pharma outfits that want to partner on biosimilar development in Asia.

[10/31/12] Press ReleaseNovartis to start construction of new biotechnology facility in Singapore with an investment of over USD 500 million” Novartis announced the construction of a new state-of-the-art biotechnology production site in Singapore with an investment valued at over USD 500 million. The new facility will focus on drug substance manufacturing based on cell culture technology.

[10/19/12] ReutersActavis CEO: originators to have edge in “biosimilars”” “Biosimilars will have to be advertised and explained. That would be something relatively new to the generics industry,” Actavis CEO Albrecht told Reuters. “We will have to learn again to generate prescriptions.”

[10/17/12] The Korean TimesSamsung halts clinical tests for biosimilar” The South Korea-based conglomerate has halted development of a biosimilar version of the blockbuster biologic Rituxan/MabThera, with the path to develop the knockoff version of the protein drug appearing thornier than some people thought, The Korea Times reported. An unnamed company source told the Korean newspaper that recent regulatory guidelines from U.S. regulators could be partly to blame for the delay.

[10/4/12] FierceBiotechBiosimilars team at Teva/Lonza slams the brakes on Rituxan knockoff” Three years after Teva and Switzerland’s Lonza joined forces to create a new joint venture to develop a few blockbuster biosimilars, Teva announced that it has suspended its Phase III study of a biosimilar of Roche’s Rituxan. Both companies through unnamed sources indicated the decisions were made due to an uncertain regulatory environment.


1: Transparency Market Research – “Biologics Market – G7 Industry Size, Market Share, Trends, Analysis, And Forecasts 2012 – 2018

2: Forbes – “The Best Selling Drugs of All Time; Humira Joins The Elite

3: Biosimilars – “Scientific factors for assessing biosimilarity

and drug interchangeability of follow-on biologics

4: SKGF – “The New Biosimilars Act – Overview of the Legislation and IP Implications

5: Pharmaceutical Compliance Monitor – “Biosimilars vs. Generics – Major Differences in the Regulatory Model

6: FDA News Release – “FDA issues draft guidance on biosimilar product development

7: PharmalotOne Down, 13 To Go: A Biosimilar Bill Falls Flat

8: Pharmaceuticals – “Biosimilars: Company Strategies to Capture Value from the Biologics Market

9: PharmaExecBlog – “Biologics: The Next Patent Cliff

10: The New York Times – “Biotech Firms, Billions at Risk, Lobby States to Limit Generics

11: BioTrends Research Group – “Biosimilar Versions of Monoclonal Antibodies for Cancer are Forecast to Garner Sales of $4.9 Billion…


About Bourne Partners

As a healthcare-focused merchant bank, Bourne Partners provides financial advisory, direct investment, alternative assets and management consulting services to our client-partners. We play an active role in helping businesses grow by creating long-term, profitable relationships that extend beyond single transactions. It is our focus on relationships and long-term results that has yielded us an impeccable track record of client satisfaction . Our direct and indirect investments in sector-leading companies – often through our relationships with top-tier Private Equity funds – allow us to learn about the best-of-the-best from the inside and apply that knowledge to the companies we serve. At Bourne Partners, we operate within a specific set of core boundaries: integrity, accountability, teamwork, loyalty and commitment are the driving forces behind everything we do.
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9 Responses to Biosimilars: Opportunity Amongst Uncertainty

  1. A recent recall of Omontys due to adverse reactions highlights the complexity surrounding biologics. Although Omontys is not a biosimilar, the unexpected postmarketing reports of serious hypersensitivity reactions linked to the erythropoiesis-stimulating agent (ESA) served as a reminder of the variability of biologics, their sensitivity to minute manufacturing changes and the difficulty of catching a rare safety signal in the full-blown biologic development process – let alone an abbreviated biosimilar path. See BioWorld’s “Omontys Recall Rings Alarm Over Biosimilars” article from February 27th here:

  2. Biogen continues to establish itself as an innovation leader in the biologic space. Most recently the company reported positive results from a late-stage (Ph III) study for its MS drug, Plegridy, or peginterferon beta-1a. Plegridy is an injectable drug designed to reduce the dosing schedule of standard interferon drugs such as its own Avonex, which are typically dosed at least once a week. In Ph III results, the company said its experimental drug reduced the annual relapse rate of patients with multiple sclerosis by 36 percent when dosed once every two weeks. More from Reuters here:

  3. [3/22] Pharmalot “Biotechs Get First State Victory Over Biosimilars” For the first time since a nationwide lobbying effort began several months ago, a bill that details new requirements for biosimilar substitution has become state law. Virginia Governor Bob McDonnell signed legislation today that would allow interchangeable biosimilars to be substituted for a biologic, but only if more restrictive conditions are met by prescribing physicians and pharmacies. Here are some key points to consider:
    * The key feature of the Virginia bills says that a biosimilar must have been deemed by the FDA to be interchangeable with the prescribed medicine for the specified indicated use.
    * The states are getting ahead of themselves. The FDA has not yet approved a biosimilar or decided whether a biosimilar is interchangeable with a brand-name biologic. In order for a biosimilar to be considered “interchangeable”, it must meet stricter criteria than merely being a biosimilar – this qualifying criteria is still being worked out by the FDA.
    * Biotech’s want physicians to call the shots, not payers. In other words, the biotechs want clear lines drawn for substitution, such as giving physicians authority to specify “do not substitute” and that such an option should override any policy from payers or state law that would have substitution be the standard or default practice.

  4. [3/26] Retuers “Analysis: Roche stays a step ahead of copycat drugmakers” Delays in developing copies of Roche’s top-selling biotech drug are justifying the Swiss company’s decision to stay out of biotech generics (biosimilars). While rival drugmakers such as Novartis and Amgen have opted to develop biosimilars, eyeing a market that could be worth more than $15 billion by 2020, Roche has ruled out generics, preferring to defend its original products. The strategy is working so far. Uncertainties over the regulatory framework for biosimilars in the United States, plus high manufacturing costs and the need to run clinical trials to win approval, have caused delays.

  5. [3/29] Drug Store News “FDA proposes regulations for meetings between agency, biosimilar makers” Agency releases draft guidance, calls for comment. The draft guidance proposes five different types of meetings: Biosimilar Initial Advisory meetings, which discuss the feasibility of a proposed product; Biologic Product Development Type 1 meetings, to discuss issues like clinical holds, special protocols and safety issues; BPD Type 2 meetings, to discuss specific issues such as proposed study designs or study endpoints; BPD Type 3 meetings, which are in-depth data review and advice meetings; and BPD Type 4 meetings, to discuss the format and content of a product application.

  6. [4/1] Reuters “Lonza CEO says reviewing biosimilar venture with Teva” Swiss specialty chemicals and life sciences group Lonza is reviewing whether it is still worth investing in its joint venture with Teva in “biosimilar” drugs, its Chief Executive said. “It’s not clear if this business model, which we acted on in 2009, still works today,” Richard Ridinger told reporters. Four years ago, he added, it looked like you could develop a knockoff biosimilar for a mere $105 million. But costs have evidently soared, or at least the reality of mounting a full, late-stage trial required by regulators has set in.

  7. [4/1] Outsourcing Pharma “PPD Gears Up Bio-Related Services in US, Brazil for Onslaught of Niche Biologics” CRO PPD (Pharmaceutical Product Development) is bolstering its bioassay and bioanalytical services in both the US and Brazil, respectively, in preparation for more niche biologic and biosimilar developments. PPD, who recently received certification from Brazil’s ANVISA, will offer bioavailability and bioequivalency services to customers hoping to bring biologics and biological follow-ons to the Brazilian market.

  8. [4/18] Bloomberg “Celltrion Drops Late-Stage Trial of Roche Rituxan Drug Copy” Celltrion Inc. dropped a late-stage trial of a biosimilar version of Roche Holding AG (ROG)’s best-selling Rituxan drug, potentially benefiting competitors such as Boehringer Ingelheim GmbH and Novartis (NOVN) AG. Celltrion had planned to take its drug, CT-P10, into phase- III trials later this year. It’s not clear what prompted the change, Goonewardene said, and if the South Korea-based company will resume the trial later.

  9. [5/7] Pharmalot “Another Biosimilar Legislative Defeat For Amgen & Genentech” Another state legislature has defeated a controversial push by some of the largest biotechs to establish new requirements for biosimilar substitution. The latest vote took place late last week in Florida, where the legislature approved a bill that follows current substitution practices for prescription medicines, rather than a measure that would have created new barriers to substitution.

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