Biogenerics – Evolving Risks and Opportunities_M Staples_Mar08

Biogenerics – Evolving Risks and
Opportunities for Biopharmaceutical,
Generic, and
Contract Manufacturers

Mark A. Staples, Ph.D.
Consultant, Cambridge, MA

2008 BioPharma Outsourcing:
Partnerships with CROs & Service Providers
March 25-26, 2008
Boston, MA

1

Introduction

A number of developments are converging to dramatically change
the contribution of generics to the well-characterized biological
product segment of the pharmaceutical industry.

• High potential revenues from biogenerics provides potential for
higher margins to generics manufacturers
• High cost of proprietary biologicals makes prospect of
biogeneric cost savings attractive
• IP expiration of first biological products began five years ago
• Regulatory pathways to biosimilars are becoming clearer
• Biologicals manufacture is becoming more consistent
• Analytical characterization of biologicals continues to improve
• Developing nations are gaining biologicals production capability
• Growing use of outsourcing to CROs and CMOs more likely for
biogenerics due to specialized manufacturing requirements

2008 BioPharma Outsourcing Biogenerics – Evolving Risks and Opportunities 2
Boston Mark A. Staples, Ph.D.
March 25-26, 2008 Consultant, Cambridge MA

1

Biogenerics
Evolving Risks and Opportunities

Background


Definitions: Biologics and WCBPs

• Biological products are quot;... any virus, therapeutic serum, toxin,
antitoxin, vaccine, blood, blood component or derivative,
allergenic product, or analogous product, ... applicable to the
prevention, treatment or cure of diseases or injuries of man ...“
[Section 351(a) of the Public Health Service Act]
• Well-Characterized Biologic Product (WCBP) is a biologic
product which can be described, using analytical techniques,
with regard to identity, purity, potency, and stability [FDA promulgated
concept in 1996]
– Concept allowed FDA to approve “by product” instead of “by
manufacturing process” [via the BLA, rather than PLA + ELA]
– Allows companies to use comparability protocols to support
manufacturing changes without additional clinical testing
– Companies have more flexibility for outsourcing to CMOs
– Implies the same approach could be a biosimilar approval pathway

2

Definitions: Generics and Biogenerics
Generics
• A generic drug is a copy that is the same as a brand-name drug in
dosage, safety, strength, how it is taken, quality, performance and
intended use
• Chemical synthesis is, generally, reproducible, and well-
established
Biogenerics (generic biologics, follow-on biologics, biosimilars)
• EMEA uses “biosimilars” to indicate these biologicals are not
generic in the same way as small molecules.
• FDA definition: a protein product which is intended to be a similar
version or duplicate of an already approved or licensed protein
product.
• Biologic drugs are made in living cells. Their manufacture is
inherently less predictable and reproducible than chemical
synthesis.

Definitions

• Follow-on biologics may be:
– Biogenerics
– Biosimilars
– Second generation proprietary products
• Drugs include (among other things) quot;articles intended for use in
the diagnosis, cure, mitigation, treatment or prevention of
disease in man.quot; [21 U.S.C. 321(g)(1)(B)]
• CMO – Contract Manufacturing Organization. Manufactures
product of a specified grade to clients, usually for clinical trial
supplies or commercial product.
• CRO – Contract Research Organization. Performs a wide range
of development services for special or routine applications
(analytical methods, dosage form development, process
development).

3

Biogenerics

Estimates: Sales
and Costs


Industry Sales

• Recent revenue for the biotechnology industry $50.7 billion
($32.1 billion, sales), 2005 Source: Ernst & Young LLP, 2006
• Biologics projection: 2010 US market potential = $60.0 billion,
WW = $70.0 billion (CAGR 10%, 2005-2010)
• > 500 protein and 150 peptide drugs are in development,
suggesting growth will continue [B Tulsi (Jun04) Drug Discov Devel “Bugs punch the clock
as next protein manufacturers”]

• Biogenerics projection: EU and US biogenerics 2011 market
potential = $16.4 billion (average AGR = 69.8 %) Source: Frost & Sullivan
estimate


4

Biogenerics Costs: positives

• Biogenerics companies can avoid high cost of developing a
proprietary biological
– average out-of-pocket cost of developing a new biological
product totals well over half a million dollars1
– Cost of developing one new medicine: about $800 million2 (over
10–15 years)3
– when costs of failure and other R&D capital costs are included,
average cost approaches ca. $1.24 billion1
• Keys to savings: fewer expensive trials, lower risk of failure
• One way to lower costs: use less expensive production
locations
• Pick your model (see next slide): biogeneric savings just for
US Medicare Part B could approach $14 billion (next ten yr)4
1 Henry G. Grabowski (26Mar07) Statement before the House of Representatives Committee on Oversight and
Government Reform, Hearing on “Follow-on Protein Products”
2 J. A. DiMasi, R. W. Hansen and H. G. Grabowski, Journal of Health Economics 22 (2003): 151-185.
3 J. A. DiMasi, Clinical Pharmacology and Therapeutics 69, no. 5 (2001): 286-296.
4 Engel & Novitt (JAN07) Available from www.pcmanet.org/newsroom/2007/.


Biogenerics Costs: cautions

• Biogeneric costs will be higher, relative to original drug costs,
than conventional generics due to
– greater manufacturing and regulatory costs
– more marketing expenses than generics, because doctors
will have to be convinced of equivalence
• One estimate: FOB development costs could exceed $200
million (very different than few-$30 million for traditional
generics development) [Andy Stone, Biotech Knockoffs, FORBES, Mar. 15, 2007,
available at http://www.forbes.com/business/2007/03/14/biotech-generics-drugs-biz-
cz_as_0315biotech.html.]

• Will take about 4 years for manufacturers to develop and for
FDA to approve a biogenerics (when an approval path exists)
• Pick your model (see previous slide): biogeneric savings to
patients may only be $3.6 billion over ten years


5

Biogenerics

Intellectual
Property


Major Biotech Products Going Off-Patent

• Using one model, 75 currently approved biopharmaceuticals
may be targets (>$20 million sales Sep04-Aug05) for follow-
on production1
• Generic drug manufacturers can proceed with development
with the intent to commercialize product before the innovator
company’s patent has expired2
• Hatch-Waxman Act provides five years of post-approval
exclusivity before FDA can refer to innovator’s data when
considering an application from a generic competitor3
• In Europe, drugs and biologics are protected for 11 years
• Brands seek increased patent protection based on high cost
of new biologics development and more expensive
manufacturing processes
1CEDiliberti, “The best targets for biogenerics”, 19 BIOPHARM INTERNATIONAL 50 (01Apr06)
2Pharmaceutical Industry Profile 2006 (Washington, DC: PhRMA, (Mar06)
3HG Grabowski, Statement before the House of Representatives Committee on Oversight and
Government Reform, Hearing on “Follow-on Protein Products” (26Mar07)


6

BRAND NAME GENERIC NAME MARKETER PATENT EXPIRY
Filgrastim GM-CSF Amgen 2007
Engerix-B Hepatitis B vaccine GSK 2006
Neupogen Filgrastim Amgen and Roche 2006
Protropin Somatrem Genentech 2005
Activase Alteplase Genentech, Boehringer 2005
Ingelheim, Mitsubishi, and
Kyowa Hakko Kogyo

Novolin Human insulin Novo Nordisk 2005
Recormon Epoetin beta Roche 2005
Epogen/ Procrit Epoetin alfa Amgen, Johnson & Johnson, 2004
and Sankyo
Nutropin Somatropin Genentech 2003
Betaseron Interferon beta-1b Chiron 2003
Genotropin Somatropin Genentech/Pharmacia 2003
Humatrope Somatropin Eli Lilly 2003
Avonex Interferon beta-1a Biogen 2003
Intron A Interferon alpha-2b Schering-Plough 2002
Humulin Human insulin Eli Lilly 2001
Cerezyme/Ceredase Alglucerase Genzyme 2001



2006 (E) SALES Patent
PRODUCT $(000) Expiration
Procrit/eprex – Epogen $3,320 2004
Aranesp $2,771 2010
Enbrel $2,645 2009
Epogen $2,489 2012
Neulasta $2,235 2015
Rituxan/Mabthera $2,057 2014
NeoRecormon/Epogen $1,830 2005
Avastin $1,809 2019
Remicade $1,800 2014
Herceptin $1,256 2013
Human insulin/related products $1,250 2004
Novolin $1,250 2005
Neupogen $1,200 2006
Avonex $1,033 2003
Humulin $1,000 2004
All Other $ 10,044.00

7

Biogenerics

Regulatory


Regulatory Paths to Biogenerics

• 505(b)(1): full NDA pathway, not applicable
• 505(b)(2): limited NDA pathway, approval process is
abbreviated
• 505(j): ANDA; used for small molecule generics
• Section 600.3(h): biologicals; market via licensing rather than
approval
• EMEA: biosimilars, one approval path that may result in
generic or biosimilar classification
• Combination products


8

505(b)(2): limited NDA pathway

• Manufacturer must demonstrate safety and efficacy with
clinical or non-clinical data, but may use previously published
research
• Typically used to approve a change in dosage, form, strength,
or route of administration, a change in formulation or form of
active ingredient, or a new combination of previously-
approved drugs
• Products approved under 505(b)(2) may be prescribed as
alternatives to the reference drugs, but, because “sameness”
and “bioequivalence” have not been demonstrated, they are
not viewed as being freely interchangeable and are therefore
not referred to as “generics,” but only as “comparable” or
“follow-on” drugs
• A 1999 FDA draft guidance document specifically identifies
biotech, or “recombinant,” products as falling within the class
of products that could be approved pursuant to section
505(b)(2).


Section 505(b)(2): drug examples

Examples, FDA approvals under section 505(b)(2)
• change in strength of the oral contraceptive ethinyl estradiol
• a change in the dosage form of the analgesic
• naproxen sodium to extended release tablets
• a change in route of administration of the ovulation stimulant
menotropins to subcutaneous injection
• a substitution of the levalbuterol HCL isomer for other
isoforms in an asthma inhalation solution

Gordon Johnston and Roger L. Williams, 505(b)(2) applications: History, science, and
experience, DRUG INFO. J., Apr.-Jun. 2002.


9

Section 505(b)(2): WCBP example

• FDA’s reasons for approving Omnitrope (human growth
hormone) via the 505(b)(2) drug pathway included
– single active ingredient,
– well-known mechanism of action, and
– ability to “extensively and adequately” characterize the protein
• However, still required 4 Phase III clinical trials because
production method differed from approved product
• Other biologics approved:
– Calcitonin
– Glucagon
– Hyaluronidase

BIO White paper, (25Apr07) “The difference with biologics: the scientific, legal, and regulatory challenges
of any follow-on biologics scheme” http://bio.org/healthcare/followonbkg/WhitePaper.pdf


Examples, Current FDA Interpretations

• FDA already treats as functionally interchangeable several
biopharmaceuticals produced as innovator products, not as
follow-ons (i.e., Avonex™)
• FDA considers six approved human growth hormone
products identical and bioequivalent to natural growth
hormone
• Protein drugs follitropin alfa and follitropin beta have slightly
different amino acid sequences, but label claims indicating
the two products are “indistinguishable.”
• Neither HGHs nor the follitropin products have received
FDA’s highest “A” rating of interchangeability
– suggests different products, originating from different cell lines,
can be produced so as to have the very high degree of structural
and therapeutic similarity necessary for interchangeability.
GENERIC PHARMACEUTICAL ASSOCIATION, BIOPHARMACEUTICALS (“FOLLOW-ON” PROTEIN
PRODUCTS): SCIENTIFIC CONSIDERATIONS FOR AN ABBREVIATED APPROVAL PATHWAY 26 (08DEC04)


10

Section 505(j)?

• ANDA; Used for small molecule generics
• FDA has noted that nothing in Hatch-Waxman “precludes
approval of [biotech product] applications …under section
505(j) of the Act,” which addresses true generics, “as long as
the current state of science allows the evaluation necessary
to support approval.”
• For Sandoz’s Omnitrope, FDA could not determine that it was
therapeutically equivalent to Pfizer’s Genotropin, although
both were somatropin [rDNA origin]


Section 600.3(h): Biologicals

• Market via licensing rather than approval, requires
categorization as biologic rather than drug; usually not
WCBPs (vaccines, blood-derived products)
• Originally had an Establishment License Application (ELA),
specific for manufacturing site, and a Product License
Application (PLA), specific for product; in late ’90’s combined
as the Biologics License Application (BLA), which permits
multiple manufacturing sites for one product
• Regulatory pathway less clear for biogeneric that is licensed
rather than approved-proposals for a clear path under
consideration
• Under the PHSA, a manufacturer that ships a biological
product must obtain a US license for both the manufacturing
establishment and the product intended for shipment


11

EU: Biosimilars

• One approval path for biosimilars
– First step: try to achieve non-generic follow-on approval. If
successful,
– Second step: try to meet the standard for true generic approval
– If unsuccessful getting a full generic approval, may be approved
as a biosimilar.
• The stringency of abbreviated applications is determined on a
product-by-product basis


EU: Biosimilars

• Sandoz' Omnitrope, the first approved biosimilar in Europe
(Apr06)
– extended legal arguments in the European court
– presence of host cell protein led to antibody generation among
some clinical trial participants, affecting the safety profile
• Valtropin, BioPartners, was the second product to be
approved by EMEA
• Biosimilar versions of EPO and G-CSF follow


12

Biogenerics

Global Biologic
Manufacturing
Capabilities


Contribution: India, China, Other
Developing Nations
• In general, developing nations are increasing their ability to
produce biologic products and compete as the global
regulatory paths for biogenerics become clearer
• Investment capital more available than previously in
developing countries
• Biotechnology has been targeted as an investment growth
area globally
• Build on existing infrastructure for generics manufacture
• Build on existing CMO relationships to extend to biologics


13

Global Listing, Manufacturers Capable
of Producing Biologics
Original
Manufacturer Country
Apotex, Inc. USA
Biokad Russia
BIOCHIMMASH Russia
BioGeneriX AG Germany
Cangene Corporation Canada
Dr Reddy’s Laboratories, Inc. India
Dragon Pharmaceuticals, Inc. Canada
GeneMedix plc UK
Ivax Corporation USA
LG Life Sciences Korea
Microbix Biosystems, Inc. Canada
Merck KGaA Germany
Pliva d.d. (acquired by Barr) Croatia
Sandoz Pharmaceuticals Switzerland
Savient Pharmaceuticals USA
Shantha Biotechnics India
Sicor, Inc. USA
STADA Arzneimittel AG Germany
Teva Pharmaceutical Industries, Ltd. Israel
Wockhardt India
H Morioka (2004) Businessbriefing: Pharmagenerics, “Considerations about Generic Biologics,” p1-5


Emerging Biologics Companies: Teva

• Israel
• Largest global generic pharmaceutical company after IVAX
acquisition
• Acquired Sicor (includes three plants in Mexico, China, and
Latvia that develop, manufacture, and market biosimilar
materials)
• Absorbed the Israeli biotechnology research team of Serono,
the former team of InterPharm Laboratories


14

Emerging Biologics Companies:
CMC Biopharmaceuticals
• Copenhagen, Denmark-based
• provider of contract biomanufacturing services for early phase
clinical trials
• Jan07, acquired the former ICOS biologics development and
manufacturing operation

http://www.contractpharma.com/articles/2007/11/online-exclusive-cmc-puts-down-us-roots


Emerging Biologics Companies: Barr

Venue = Zagreb, Croatia
• PLIVA became subsidiary of Barr in Oct06 for $2.5 billion
cash
– creates third largest global generic pharmaceutical company,
based on revenue, behind Teva and Novartis
• Broke ground on new biologics facility in Croatia in NOV06
• Three principal strategies:
– develop and market selected generic drugs;
– develop and market proprietary pharmaceuticals
– pursue development and marketing of generic
biopharmaceuticals


15


Generic Biologics Strategy:
• Become leader in development of generic biologics
• Continue to work with State and Federal legislators to define
regulatory pathway for generic biologics
• Overcome significant barriers to entry:
– Scientific
– Regulatory
– Intellectual Property



Biologics Capabilities:
• Well-positioned to become leader in the US and EU markets
• Several products in development:
– G-CSF (Granulocyte Colony Stimulating Factor) for US and
Europe
– Adenovirus with US Dept of Defense
– Additional undisclosed products, various stages of development
• Development facilities and staff scientists in place


16

Emerging Biologics Markets: India

• Biologics manufacturing capability in place:
– Wockhardt*
– Dr Reddy's Labs*
– Biocon*
– Bharat Biotech
– Panacea Biotec
– Intas Pharmaceuticals
– Shantha Biotechnics
– Shreya Life Sciences

* Plan to enter the regulated market in Europe with an
established regulatory path for biogenerics

Source: BIOSPECTRUM | DECEMBER 05 www.biospectrumindia.com


Emerging Biologics Markets: India

• Generic biotechnology drugs in production, under multiple
brands:
– Hepatitis B vaccine
– Streptokinase
– Insulin, G-CSF
– Erythropoietin
– Human Growth Hormone
– Interferon alpha 2b

Source: BIOSPECTRUM | DECEMBER 05 www.biospectrumindia.com


17

Emerging Biologics Companies:
Wockhardt
• India
• Pharmaceutical and biotechnology
– entered European market through acquisitions (UK-based Wallis
Laboratory and CP Pharmaceuticals, Esparma of Germany)
• Growth strategy hinges on biopharmaceuticals (31DEC05):
– Already has biogenerics production capability
– >55 registrations for biopharmaceuticals pending
– 26 approvals,18 countries (Russia, South America, North Africa,
Central Asia, South East Asia)

BIOSPECTRUM | DECEMBER 05 www.biospectrumindia.com


Chinese CMOs Poised for Biologics

• Implementation of Good Manufacturing Practice (GMP)
enabled growth of the Chinese CMO industry
• Chinese CMO industry 2004 revenues were $7.5 billion
[Pharmaceutical Manufacturing JUL/AUG06]
• Ten Chinese finished drug manufacturers have received FDA
GMP certification
• FDA GMP certification applies to 259 products associated
with 130 Chinese manufacturers
• GMP-certified manufacturers may serve as CMOs for foreign
companies as long as all product is exported (eff. JAN06)
– Pfizer signed Shanghai Pharmaceutical Group as CMO and
was expected to sign Harbin Pharmaceutical Group
– Global big pharmas acknowledge the lower costs and greater
efficiency that may be realized using Chinese CMOs


18

Major Chinese Biogeneric Manufacturers

• Over 400 biopharmaceutical manufacturers established in
China, including 114 genetically engineered drug
manufacturers and 28 vaccine manufacturers

• China National Biotec Corp. (CBNC)
• Beijing Tiantan Biological Products
• Chengdu Rongsheng Pharmaceuticals
• Shanghai Institute of Biological Products
• Changchun Institute of Biological Products
• Shenyang Sunshine Pharma
• Anhui Anke Biotechnology
• Beijing Tri-Prime Genetic Engineering
• Changchun ChangSheng Gene
• Guangxi Beisheng Pharmaceuticals
• Others
Source: quot;Chinese Biogenerics,quot; Genetic Engineering News, Sept. 1, 2006.

China: History of Biologics Manufacture

• Chinese biopharmaceutical manufacturers already produce
– recombinant human interferons
• The first Chinese-developed biotech drug, recombinant human
interferon-a1b (Shenzhen Kexing Biotech), entered the Chinese
market in 1989
– interleukins, G-CSF
– GM-CSF
– EPO
– Insulin
– growth hormone
– Others
• Largest vaccine manufacturing country in the world (41
vaccines to prevent 26 viral diseases)
• Worlds largest producers of EPO and insulin are in China
– China was the third country to successfully product insulin at
large scale
Asia Offers Opportunities in Pharmaceuticals GenEngNewsAug 1 2005 (Vol. 25, No. 14)


19

China: Positive Factors for Biologics
Manufacture
• Commerce: Chinese biotech was targeted for development
by the government in the 1980s
– Biopharmaceutical production value growth has accelerated:
$30 million (1986), $200 million (1996), $860 million (2000), $4.2
billion (2005)
– China’s biopharmaceutical sales revenue has grown at a rate of
20–30% in the past five years
• Trade: Entry into the World Trade Organization in 2001
improved access to global markets
• Regulatory: Developed the State Drug Administration (SDA)
regulatory system
• Implementation of Good Clinical Practice (GCP) standards, Sep03.
Allows use of Chinese clinical data for regulatory submissions in
other countries
• Implemented Good Laboratory Practices (GLP)
• Implemented Good Manufacturing Practice (GMP)


China: Positive Factors for Biologics
Manufacture
• Intellectual Property (IP)
– Chinese government has expanded Intellectual Property (IP)
protection
• quot;Regulations for Implementation of the Drug Administration Law,quot;
SEP02, define a new drug as one that has never been marketed or
sold in China
• China's patent law was amended on DEC02 to harmonize with other
WTO countries
• Resource entry barriers may restrict biologics manufacturing
to companies with adequate funding and staff to support the
capital- and skill-intensive requirements
– Biosimilar manufacturers may avoid the extent of competitive
pricing characteristic of the small molecule generics segment
• Human Capital
– Return of Chinese nationals with biopharmaceutical expertise
and experience


20

Obstacles to Growth of China in
Biologics Manufacture
• Low levels of biologics product commercialization
– Inexperience with commercial manufacturing processes may
increase development time and production costs, and hinder
large-scale production
• Domestic pricing limitations
– Smaller sales revenues should be expected in the Chinese
market
• Scale inefficiencies due to fragmentation
– Multiple manufacturers produce the same products
unnecessarily, duplicating investment
• Inadequate protection of IP
– Relative absence of IP fails to adequately protect technology
investment, often due to operation at small scale with small profit
margins
• Lack of experienced managers
– More Chinese professionals are returning to China after
establishing their careers abroad, but shortfall will probably
persist for managerial and technical leadership

Biogenerics

Risks


21

Risk: Economic

• Evolving reimbursement policies and impact on profit margin
• Lower pricing structure may be required to sell in developing
countries, cutting profit potential
• Leverage: Need to assume debt (or use cash) to construct
facilities that will not generate revenues for over five years
• No regulatory path for biggest market, the US, creates
significant capital risk


Risk: Intellectual Property

• Evolving patent legislation could limit ability of brand and
generic companies to settle patent litigation under the Hatch-
Waxman Act
• Branded companies decision to launch an authorized
biogeneric version may reduce market share of other
potential manufacturers
• Use of legislative tactics involving patent law by brand
companies can delay biogeneric product launch
• “At risk” launches may fail and result in the need to pay
substantial damages to the innovator firm


22

Risk: International

Changes in a wide range of country-specific
• Reimbursement policies
• Regulatory requirements
• Local product preferences and product requirements
• Trade protection measure, import/export licensing
requirements
• Non-US staffing; labor regulations
• Environmental, health and safety laws
• Political considerations
• Economic considerations
• IP policies


Risk: Competitive

• Competition from other biogenerics manufacturers will lower
revenue and profitability
• Innovator firms may have safer, more effective, more user-
friendly and/or less expensive patentable new versions of the
first generation product
– Example: Amgen's darbepoetin alfa vs. EPO
• Original product may not be approvable in some markets due
to inferiority of safety and/or efficacy relative to new products


23

Risk: Regulatory

• Lack of an internationally harmonized definition for
bioequivalence
• Failure of FDA to declare a clear path to biogeneric approval
for US market
• Example: hurdles faced by Sandoz‘s Omnitrope (first
biosimilar approved in Europe, Apr06)
– extended legal disputes in the European courts
– Sandoz had to sue FDA to get Omnitrope approval in US


Risk: Capacity

• Under-estimation; consequences
– CMO market is relatively undeveloped, especially in mammalian
cell technologies, and represents a significant opportunity
• Large capital requirements ($400 million per plant) and
extended set-up times (4 years) to begin operations at a new
biologics manufacturing facility is an entry barrier to the
biologics CMO market
• Over-estimation; consequences
– Underutilization of plant-liable for overhead and depreciation
– Opportunity cost of investment foregone on other potential
projects

BioPharm Int “Outsourcing: Biologics Manufacturing: The CMO Advantage”
J Lakshmikanthan(01Feb07)


24

Risk: Technical

• Underestimation, technical sophistication to manufacture
biotech products
– facility replication is still not routine for biologics: technology
transfer to a CMO involves significant risk
– Impurity profile, specific to a cell line and processing, can be as
important to bioequivalence as making identical active ingredient
– Physical phenomena (aggregation, folding differences) can
significantly affect PK, PD and adverse events
• Continuous introduction of new products is critical, as old
products are superseded by improved versions
– Process is long and expensive and has high development risk
– New products are needed as revenues fall for old generics with
declining profitability
– Long development and approval timelines create additional risk
of changes in the competitive environment by the time of launch

Technical Risk: Microheterogeneity

• Unlike small molecule drugs, even well-characterized
biological molecules may be represented by a family of
subpopulations that vary with respect to glycosylation, N- or
C-terminal trimming, and modifications of native amino acid
residues
• The basis of the microheterogenity may be the process, and
any process change may affect the microheterogeneity
profile; innovators can keep their experience and know-how
secret indefinitely
• Dangers: immunogenicity, neutralizing antibodies,
unforeseen adverse reactions to trace components


25

Technical Risk: Immunogenicity

• Generally assess immunogenicity after a manufacturing
change without extensive clinical trials, although any biologic
can cause problems
• Bioassays, animal studies, and limited human testing typically
suffice to spot risks for immunogenicity-but no guarantees
• Omnitrope example: host cell protein, a common trace
contaminant in biologics, produced antibodies among some
clinical trial participants that contributed to adverse events
• Immunogenicity problems are usually resolvable pre-
approval, especially if regulators can access results of
reference product analyses, but cause additional expense
and delay, and are unpredictable

Melissa R. Leuenberger-Fisher, The Road to Follow on Biologics: Are We There Yet? 23 BIOTECHNOLOGY L. REP. 389 (2004).


Risk: Case Study, J&J EPREX (EPO)

Example: unforeseen (and lethal) consequence of a
manufacturing change intended to improve product safety

• Not a biosimilar, but illustrates the risks of extrapolating risk
experience with small molecule generics to biotech products
• Provides additional rationale for not considering a follow-on
product to be interchangeable with an innovative product

• Change in the formulation: polysorbate 80 replaced HSA as
stabilizer due to new regulations of European Health
Authorities
• Experience: product had been marketed for a decade with no
evidence of immunogenicity problems


26

Risk: Case Study, J&J EPREX (EPO)

• Indirect impact of formulation change: polysorbate released
leachables from uncoated stoppers, increasing
immunogenicity of product
• Consequence: serious rare adverse reaction, aplastic anemia
• Cause: anti-EPREX antibodies were triggered by EPREX
produced using polysorbate-based formulation. Antibodies
inactivated EPREX and the natural protein required for red
blood cell production
• Resolution: An extensive and expensive investigation by J&J
was required to determine the cause of this adverse reaction
and correct it


Lessons in Risk, EPREX Case Study

State-of-the-art scientific tools and methods have significantly
advanced over the last decade, when EPO problems
occurred, but maybe adjustment of risk assessment is as
important:
• Re-evaluate risk from manufacturing changes: consider the
adverse reaction was created by a single change to a well-
established process made by a manufacturer with extensive
specific process and product experience
• Re-evaluate risk from a new manufacturer and process - as
will be the case with follow-on biologics.
• Post-market monitoring of biologic safety to re-evaluate risk
on basis of field experience is critical


27

Biogenerics

Strategies


Innovator Strategy: Product lifecycle
management
Marketing the initial NCE is just the beginning
• Create a product franchise with a continuous stream of
improvements:
– Process (one target: consistency)
– Product (active ingredient)
– Dosage form (one target: quality)
– Administration route
– Packaging, distribution
– Label claim
• Defend improvements
– Process patents
– Product patents
– Know-how
– Trademarks


28

Innovator Strategy:
Process Improvements
• Lower manufacturing cost
– higher yield
– faster
– simpler
– less expensive ingredients
• Lower risk
– more reliable raw material supplies,
– better control over suppliers,
– investigate substitutes
• Better process reproducibility
• Higher product quality-tighten specifications as competitive
tool
• Improvements in safety, efficacy, stability, impurity profile, all
of which can provide competitive advantage


Innovator Strategy:
Product Improvements
• Active ingredient variants
– Improve safety, efficacy, stability, impurity profile
– Different sequence, structure (disulfide bonds, change labile
residues, restrict sequence to binding peptide)
– Alter post-translational modifications (oligosaccharide profile)
– Covalent modification (PEGylation)
– Change physical structure (degree of crystallinity)
• Dosage form and formulation variants
– Improve delivery characteristics
– Controlled (or different) release formulations
– Change dosage form to achieve better bioavailability,
convenience, release properties, localization
• Innovative packaging can reduce distribution costs and
improve market share
• Ongoing clinical trials should support broader label claims


29

Innovator Strategy: Organizational

• Create a franchise product portfolio
– Optimize positioning of product variants to maximize defendable
market, minimize impact of cannabilizing existing product sales
• Acquire/build a biogenerics division
– Reduce attractiveness of off-patent brands to generic
competitors by creating an authorized biogeneric
– Manufacture biogenerics internally to realize efficiencies of
know-how and existing systems
• CMOs to leverage internal resources
– Maximize flexibility by outsourcing selected manufacturing
operations
– Offset technology transfer risk to CMOs with increased
knowledge, experience, and skills among short-list CMOs


Strategy: Generic Manufacturers

• A generic manufacturer can lower capital costs by partnering
with a biogeneric CMO who already has plant capacity
available, to share risks to launch a biogeneric product
• Another alternative: acquire/build a biosimilars division within
an existing generics or innovator company
– Expand operations through acquisitions with proven sales
and operations capabilities
• Establish strategic partnerships, potentially with innovator
company
• Need sufficient technical capability for biologics manufacture
• Must manufacture to Western GMP standards


30

Strategy: Generic Manufacturers

• Need to be well financed to ride out years before profitability
• Avoid effort dilution; initially focus on 1 - 2 products
• Must understand each market segment
• Sales hurdle for product: maybe $20 million/yr for innovator
product? Must decide appropriate requirement for target ROI
• Savings to users may be less than true generics (25-44%),
10-25%, because entry costs will be higher [H. G. Grabowski, Statement
before the House of Representatives Committee on Oversight and Government Reform, Hearing on
“Follow-on Protein Products” (Mar. 26, 2007)]
• Staged launch via geographic roll-out: supply developing
markets initially to take advantage of fewer biogeneric
restrictions, followed by Europe and eventually US
– Loss-leader approach because easiest markets for entry will
likely offer the lowest acceptable prices
• Develop second-generation products to maintain premium
margin


Strategy: CMOs

• Greater complexity than small-molecule manufacturing
– requires more planning, investment, and skilled personnel
• Greater investment implies greater risk, hence access to
sufficient cash (via debt capacity and/or cash flow) will
provide a competitive advantage
• Investment coupled with risk may exceed resources of most
biotech innovator and biogeneric companies, making CMO
partnering beneficial to share project risk and lock in
minimum commitments [CIBC World Markets Biotechnology Coverage Universe, 2005]
– Two-thirds of biopharmaceuticals in development are sponsored
by companies with <$1 billion revenues
• Given a portfolio of client products, unused capacity risk will
be minimized because risk of failure can be spread over
many projects
– A CMO needs to produce about four products in a plant before
realizing a profit [J Lakshmikanthan (February 1, 2007) Int BioPharm “Outsourcing:
Biologics Manufacturing: The CMO Advantage ]


31

Strategy: CMOs

• CMOs can gain a competitive advantage by achieving a
leadership role in biologics manufacturing technology
– CMOs main business is manufacturing. CMOs work with more
projects than an innovator or generic company. Therefore, they
have the incentive and the ability to design innovative processes
• Most microbial manufacturing capacity is already at CMOs
– Existing microbial expression system capacity adequate
– Growing adoption of mammalian expression systems suggests
additional capacity may not be needed
• Opportunity: new biologics CMOs should build capacity in
mammalian expression systems
– CMO capacity in mammalian expression still relatively
undeveloped
– Most mammalian expression capacity is at innovator firms
[Citigroup report. Lonza Group AG. London: Citigroup: 2005 Sept.]


Conclusions

• Biogenerics will inevitably become a significant part of the
global pharmaceutical market
• Biogenerics will be significantly more challenging to develop,
manufacture, and approve than traditional generics, lowering
profit margin
• Revenues from biogenerics per product should exceed
traditional generics due to the high value added per dose
• Biogenerics represent different strategic opportunities for
innovator firms, generic manufacturers, and CMOs
• It will be more productive for all industry participants and for
society if the advent of biogenerics is approached as an
opportunity rather than a threat


32

BioGenerics – Evolving Risks and
Opportunities for Biopharmaceutical,
Generic, and
Contract Manufacturers

THANKS!
FOR YOUR ATTENTION
Questions and Answers…


33

Biogenerics – Evolving Risks and Opportunities_M Staples_Mar08

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