Tools to Compete and Win
Pioneer biologics will still face stiff competition from any next-generation biologics that show improved performance. Some
200 biologics are already on the market, and another 800 are in the development pipeline to treat conditions from cancer to
MS. This growth and change in market dynamics will force branded producers to defend market share. Superior product will give
pharmaceutical companies the edge to offset competition from an FOB that has no distinct advantage over the first-generation
product. Generics companies have more than one option: Instead of advancing biosimilars, they can out-compete the pioneer
products, increase market share, and avoid start-up costs, building overall profits.
In this hyper-competitive biologics market, is there a way to exploit patent expirations to yield increased market share?
Yes, particularly because of new technologies that can support development of "biobetters"—optimized versions of pioneer drugs
that have improved pharmaceutical properties but carry only minor changes in structure.
Here's how it works. A company starts with a validated drug target, established market, and a proven clinical development
approach, but incorporates a simple change in the development process or design of the drug molecule that could drastically
improve the product offering. By modifying the pioneer product, a biobetter developer can cut the clinical development risk
associated with an entirely new molecule, and still compete with the originator's product. Technologies that enable a biobetters
approach include antibody design methods such as Fc engineering, which provides for superior potency and shelf life; manufacturing
expression hosts for improved glycosylation; and injectable delivery systems.
Given the looming patent cliff, the biobetter opportunity is presenting itself now. Nearly all biologics have patent expirations
coming within the next 10 years, including an entire class of blood cell growth factors and interferons due to expire in 2011
to 2014. A second wave of expirations is set for 2014–2018, including the largest class of biologics by market size, monoclonal
antibodies. During this wave, blockbusters Humira, Herceptin, Synagis, Avastin, and Rituxan will go off-patent. Tools are
now available for drug developers and manufacturers to improve these products and claim a superior position in the biologics
market (see Table 2). Each approach adds some clinical risk, but also dramatically reduces the commercial exposure.
Charting the Landscape
As the competition heats up in FOBs, there are two distinct categories of combatants among the major players. The first is
branded pharmaceutical innovators, committed to adding "generics" capabilities to develop FOBs. The second is generics companies
adding capabilities to develop biosimilars and innovator products.
While in this latter case, attention has focused on US generics companies, the real threat for the long term may be generics
players based in emerging markets such as China and India. Companies like Ranbaxy and Dr. Reddy's can leverage favorable regulatory
conditions in the home market for biosimilars and their low-cost development infrastructure to penetrate the global market,
including the US, Japan, and Europe.
The Big Pharma players include the few companies that have all of the organic capabilities to innovate in FOBs, including
a rich history and expertise in biologics development, launch, and marketing, as well as expansive manufacturing capabilities
and facilities. These companies have achieved success in high-risk, high-reward innovator products to fill unmet medical needs
in a number of diverse markets. The costs are high, but so are the returns. However, an entrance into FOBs enables a completely
different model that is lower risk, and focuses on re-engineering products rather than novel and unproven biology. In fact,
entrance into "biobetter" FOBs greatly facilitates life cycle management of their own legacy products.
Mid-sized to large generics companies that have expertise in generics development, but require additional marketing expertise
to launch differentiated products and shape new markets, will also pursue biobetters. But entrance into FOBs will require
an approach that relies more on technical know-how and niche physician networks than process duplication and broad-based marketing
tactics. Teva, Sandoz, and Mylan are large, well-established generics companies that have either brought biosimilars to market
or intend to do so in the near future. All would be well positioned to develop and market biobetters.
Kent Jancarik, policy director for Pfizer, notes that his company sees the major emerging markets as the principal battleground
in capitalizing on the promise of FOBs. "Ranbaxy and others will rely on local approvals to effectively subsidize their registration
applications in the more regulated US and European markets," he says. "It may take them longer to compete due to the bridging
studies that still pose a hurdle to entry, but a lower cost base and efficiencies on the development and manufacturing side
will help counter that. On the other side of the equation, it will be difficult to compete in high-potential developing markets
because of the local generics players established presence and the supportive industrial policies these companies can count
How to Deliver on the Bottom Line
Given the diversity of players in this space, the capacity to adopt technologies to one-up the competition is going to be
the long term key to success. For example, if a company can re-engineer an antibody for an extended half-life, then it can
persuasively leverage the result to payers and providers, resulting in a superior, more competitive product due to its less-frequent
dosing regimen. The success of Humira (dosed twice monthly) in picking up market share from Enbrel (dosed weekly) in rheumatoid
arthritis, and the growth of Neulasta (dosed once per 14-day cycle) over flat sales of Neupogen (daily dose) demonstrate the
merits of this approach. The value proposition is weighted in improved clinical outcomes.
If you are going to make the investment of $100 million to $200 million to develop an FOB, it makes sense to make the incremental
investment to incorporate technologies for a biobetter FOB that is more likely to capture market share and generate a return
on investment. In unlocking the promise of the new FOB environment, innovation is still required.
Bassil Dahiyat is president and CEO of Xencor Inc., an antibody discovery and development company. Partners include Merck, Pfizer, CSL
Ltd., Boehringer Ingelheim, and Human Genome Sciences.