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Explainer: How Indian pharma companies are riding the biosimilars wave

A Morgan Stanley report says that as many as nine biologic drugs have either gone off patent or will do so by 2025, with combined revenues of $62 billion in 2018.

August 27, 2019 / 08:31 PM IST
 
 
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Indian pharmaceutical companies have been betting big on biosimilars for quite a while as they hope to cash in on its potentially large market.

Biosimilars are replicas of biologic drugs that are used to treat different types of cancers and autoimmune diseases. Unlike small molecule generic drugs which can be chemically synthesized, biosimilars are large protein molecules, which are harder and more expensive to develop as they are made from living cells and have a far more complex chemical structure that is difficult to replicate.

Also, the need to establish the drug’s safety and its effectiveness at par with its respective biologic drug means that drug makers will have to test the biosimilar drug on humans, which means spending millions of dollars on clinical trials.

The estimated cost of developing biosimilars for the global markets is $75-250 million, while developing traditional non-biologic generics costs about $3-$5 million.

With many biologic drugs becoming off-patent in various countries, Indian drug makers have been investing millions of dollars to get a piece of this market.  A Morgan Stanley report says that as many as nine biologic drugs have either gone off patent or will do so by 2025, with combined revenues of $62 billion in 2018.

But unlike generics, a category of drugs where Indian pharma companies have a clear lead, they are facing heated competition from South Korean, Chinese, US and European companies when it comes to the production of biosimilars.

It was estimated that revenue from the sale of these biosimilars will grow by 24 percent annually for seven years to $13.3 billion in 2025 in the US and Europe alone.

That offers a big opportunity.

Below are the many different models adopted by Indian drug companies to enter the market for biosimilars:

Partnership model

Given the capital-intensive nature to develop biosimilars, long gestation periods between initial investment and commercialization are common. To counter this, some Indian companies like Biocon and Dr Reddy's have adopted a partnership model where they would develop and supply the drug, and its partner companies will make the regulatory filings and commercialise it. Indian companies will get a share in revenue or profits depending on the agreement entered. There will be also milestone payments made by the partners based on the drugs having crossed various stages of clinical development.

This model has its own pros and cons. While the partnership model takes care of the financial, regulatory and commercialization burdens, the general dynamics of the pharma industry might see partners having to realign their businesses from time-to-time, or a sudden merger and acquisition (M&A) could impact such partnerships.

Biocon partnered with Mylan and Novartis, while Dr Reddy's tied-up with Fresenius Kabi.

While the Biocon-Mylan partnership moved at a good speed, having securerd approvals from the US, Europe and other similar highly regulated markets, Dr Reddy's biosimilar journey had been slow. The company had initially partnered with Merck Serono. But the company sold its biologics business to another German company Fresenius Kabi.

Gradual mode

Some companies have decided to go solo, but at a gradual pace. They would launch a biosimilar in India and expand its filings in countries having similar regulatory rigor. With pre-launch and post-marketing clinical data in hand, companies then pursue the highly regulated markets.

The gradual approach is less risky, and it helps companies to unlock the value of their assets before they enter more regulated markets.

Companies like Intas, Cadila Healthcare, Biocon, Dr Reddy's, among others have followed this model.

There is a catch. US, European and Japanese regulators don’t give much weight to the clinical trial data of emerging countries, which could mean taking too much time for clearance from these markets.

Going solo, but global

Companies like Lupin, which have started late, went solo with their development of biosimilars. Instead of taking a gradual approach of launching biosimilars in India, following it up with filings in emerging markets and finally getting into highly regulated countries, Lupin directly sought for global clinical trials that allow it to launch biosimilars in markets such as the US,  Europe, Japan and Australia. Lupin however, relies for on partner companies for its commercialisation.

Another late entrant, Aurobindo, took the inorganic route by buying four biosimilars from Europe-based TL Biopharmaceutical, which are already under various stages of global clinical development, and is directly targeting global launches with these .

This is a costly and risky approach, but it saves time to get to the market.

In-licensing 

Companies like Cipla and Torrent Pharma  followed an in-licensing model to enter the biosimilar market. Here, companies license biosimilars from other companies, and launch them in India and other emerging markets. As of date, Cipla discontinued its biosimilar development programme, while Torrent doesn't have any plans to enter into the development of biosimilars.

This saves a lot of time spent on developing biosimilars. It also allows companies to take biosimilars faster to the market. The limitation with this model however, is that revenues or profits have to be shared, and there is no control over the quality and supply of the product.

Viswanath Pilla
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Aug 27, 2019 08:31 pm

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