A few days ago, Biopharmalinks (Emergpharma, www.emergpharmalinks.com) finished the first part of its ambitious research on biosimilars in Europe 2020-2026. This study reviews what has happened in Europe since the launch of the first biosimilars in the period 2006-2019 (referred to in the study of the "first wave"). The aim is to use the data, along with some related to the adoption of generics during the Lehmann Brothers crisis, as a benchmark to develop a multivariate model to help to identify best potential future biosimilar candidates from among the biological products that have lost or will lose the patent in the coming years. These potential leads are defined as "the second wave".
Currently, there are 18 biologic molecules with biosimilars approved in European markets. 57 different products, corresponding to 15 of these molecules have been launched to date. In total, sales of these molecules (original and biosimilars) accounted for total sales of $70 billion globally in 2019, 16 billion in the European markets. With the latest data available (2019), the average penetration of biosimilars, although with significant differences by molecule and country, was 23% in Europe, growing between 5 and 8% annually thanks mainly to the rapid adoption of the recently approved anti-TNF, the true market growth driver at the moment.
"We can estimate an average of 25% reduction on prices compared with those before the patent expiry."
Price erosion also differs depending on the country and molecule studied, but we can estimate an average of 25% reduction on prices compared with those before the patent expiry. This reduction has been produced in two ways: the prices of biosimilars, slightly lower or considerably lower than that of innovators depending on the cases, and reduction in prices of the original products induced by new competition. The single-winner tender models established in many countries have made this process easier and faster, and parallel trading companies have also contributed to these rebates being transmitted to other countries, mainly Germany.
From the sales of the 15 molecules mentioned, the so-called "first wave" of biosimilars, 78% of all belongs to the therapeutic categories of oncology and autoimmune diseases, as shown in the following graphic.
The Second Wave
There are over 50 molecules of biological drugs that have already lost patent or will lose it in the next 5 or 6 years and that do not yet have biosimilars launched on the European markets, although in some cases they have been approved. According to the analysis of Biopharmalinks, global sales of these products accounted for up to $79 billion in 2019 and will reach its peak in the coming years to achieve 101 million sales before their patents expire, which means almost 50% more than the so-called "first wave". Unlike the latter, there does not appear to be any product in the second wave with potential to reach the nearly 20 billion annual sales of adalimumab in 2018, but in which we could call "third wave" (molecules whose patent will expire at the end of this decade) there are at least two candidates to date capable to beat these figures (Keytruda and Opdivo).
Within this "second wave" of biologics with biosimilar potential in the coming years, at least 30 will reach the blockbuster level, ranging from $1 to $12 billion in annual sales. As we see in the graph below, the biological products that make up the second wave belong to many more therapeutic areas than the first, and the autoimmune & oncology categories already represent only 34% of the total. Categories that did not exist in the first wave, such as transplantation, cardiovascular, osteoporosis, antiviral, or dermatology are present in the second wave, and others such as diabetes and ophthalmic grow in relative importance.
There are already several biosimilars of these products in clinical development and many more are waiting to shift when legal conditions allow it. Selecting the best options is going to be a real challenge for companies willing to play in this segment, but a key success factor. By using the first wave as benchmarking, it seems clear that certain choices taken in the past have probably considered only patent expiration and theoretical market size, without considering other factors, such as the level of competition driving to potential market saturation. It is not difficult to foresee in the short future some price wars resembling those on we have seen in the generic arena in the past years. In a market increasingly dominated by hospital centralized tenders, some of them under the model of a single winner, competition between more than 30 players (e.g. in the case of adalimumab) can pose a serious problem for companies in the medium term to bring a minimum ROI. As discussed in other articles, bringing a biosimilar to market is not cheap, so risks are much higher than in the case of generics.
Some criteria for selecting which biosimilars to develop/search.
In such a changing scenario, many factors should be considered when searching/developing a certain biosimilar other than legal status (when the patent expires) and the existence of large current sales in the original product. In addition, it is a process that will last several years, so establishing decision points is advisable. Our recommendation is to set at least three: one when the product is in Phase I of clinical development, another just before completing Phase III, and a third just before commercialization. In each of them, critical variables should be reviewed before making the decision after having performed a risk-benefit analysis considering different scenarios and back-ups.
Some of the criteria we propose in addition to the two most obvious are listed and shortly explained below:
Technical complexity (understood as possible entry barriers for competition)
Ability to optimize the production process against the original and other competitors (the platform used, technology). If finally, competition is higher than expected, technical variations that would lead to lower production costs will be a key factor.
API provisioning options APIs (degree of accessibility, pricing, potential sourcing problems, the existence of alternative suppliers, etc.). In a very pricing-pressure scenario, it is not wise to keep the negotiation power in the hands of limited API providers
Patient risk of dead/injury in clinical development (which may involve the cancellation of the trials in the late stage, just when all the investments have been done)
Level of stability in the treatment paradigm (future scenario, therapeutic alternatives, trends, etc.)
The ratio of conversion expected by the doctor (based on the pressure of the payers and the degree of fidelity to the original brands)
Level of complexity of the delivery device (if any, e.g. insulin pens)
Level of expected competition (based on the current development of new biosimilars in the molecule, not forgetting the full category affecting molecule use)
Portfolio synergy (other products currently in the same therapeutic category, other similar developments in the pipeline)
The company's commercial strategy.
Market access (e.g. is the molecule important enough to be included in centralized tenders when biosimilars available? How would it affect the prices?)
The Future of Biosimilars in Europe.
The future of biosimilars in Europe is growing significantly and is expected to do so even more in the coming years due to the need for governments to free up resources to apply to the many new needs that will reach the market in the coming years. The COVID 19 crisis, although in the short term, may have represented a temporary interruption of some of the projects, will quite possibly accentuate even more the need to generate more savings. It is expected, and more after the success of the biosimilars strategy put in place by Nordic countries, that the incentives to promote the use of biosimilars will increase significantly, as well as measures to accelerate and intensify prices reduction, as it happened with generics in the financial crisis that began in 2008.
"The key is whether the European authorities will dare to take the step to accept the substitution of original products with biosimilars at all levels"
Many of the barriers of entry, mainly those related to the perception of these products as potentially dangerous and less effective have been definitively parked and, although large differences remain with respect to generics, particularly the need for the prescription to include the name of the product and that the doctor, therefore, maintains a certain autonomy, the urgency of the situation will very possibly lead to a more pragmatic approach to the subject. The key is whether the European authorities will dare to take the step to accept the substitution of original products with biosimilars at all levels (which in practice would imply an equivalent situation to this with generics) and furthermore, on the other hand, the degree to use of tenders for the supply of expired patented biologics and the rules that will guide these tenders.
As discussed in other articles the approval of the first anti-TNFs has represented a significant acceleration in the adoption of these drugs, which intensifies as more options reach the market. There was some fear on part of all stakeholders at the arrival of these products in sensitive therapeutic areas, mainly oncology, but the results have ended up convincing that they are safe and as effective as the originals. This fact suggests that the patent expiry of biological products in other therapeutic areas will also allow the development of biosimilars whenever there is a commercial interest. A key success factor, as we have indicated, will be the strategic work of companies in evaluating the best candidates, once the criteria most appropriate to each situation have been defined.
It remains yet to be seen about what will happen within the rare disease segment, where the number of patients and therefore units sold is small; so the final price and the expected conversion rate are even more decisive than in other types of products. It should not be forgotten that in this type of specialist it is much more difficult to exert pressure by payers, besides that they usually keep greater fidelity to the original products, as has been seen in the non-biological products.
Biopharmalinks is an independent consultancy specialized in strategic analysis of biosimilars. We have a database that incorporates profiles, including sales levels by country, of more than 70 molecules of biological drugs with an expired patent or with expiration scheduled for the coming years. We also have a file of more than 260 companies that develop, manufacture, or market biosimilars worldwide. If you wish to receive more information about our services or reports, please contact us.