Strategies for Biogeneric Success

What are biogenerics?

Biogenerics are generic forms of biopharmaceuticals -molecules developed using biological processes, usually through modern biotechnology activity. Generic chemical pharmaceuticals can be defined as those molecules which, when compared with the originator product:

• have essentially similar activity
• are chemically identical to their branded counterparts
• are bioequivalent
• achieve market authorization through an abbreviated procedure following patent expiry.

Biogenerics are rather more difficult to define. Taking recombinant human growth hormone (rh GH) as an example, there are a number of different versions on the market already, but these have not been tested for bioequivalence and all went through the full procedure for market authorization. The only potential exception is Omnitrop. This is Sandoz'  version of rh GH, which was expected to be on the market in 2004. However, this may not be achieved given the delay and eventual rejection of marketing approval, initially expected in Q4 2003. Omnitrop appears to have gone through a somewhat abbreviated market authorization procedure and, may be the first biogeneric rh GH if the problems between Sandoz, the CPMP and the European Commission about the appropriate regulatory framework can be resolved.

To take a further example, PEGIntron would not comply with this definition of a biogeneric, since it did not go through an abbreviated procedure to achieve market authorization. Importantly it also displays different clinical characteristics from the original recombinant human interferon alpha (rh IFN alpha) and therefore is not bioequivalent.

Recombinant human erythropoietin (rh EPO) is an example of a biogeneric product within this definition. Two companies, Pliva and GeneMedix, have submitted proposals to the EMEA for marketing approval of their molecules, via an abbreviated route. The EMEA has indicated that it is satisfied with their approaches. So perhaps these may be among the next biogenerics to enter the European and US markets.

How big is the biogenerics market?

Europe and the US represent the largest markets, with the highest

prices and therefore the potential for greater profits. These are consequently becoming the focus of biogeneric manufacturers'  plans. Figure 1 illustrates the size of the market potentially available to the biogeneric manufacturers.

Who are the players?

When biogenerics were first under discussion there were probably around 15-20 companies involved in the market. However, there are now probably less than 10, and possibly only around five, serious contenders with the ability to bring biogeneric products to market. In the past few years, the environment for biogeneric companies has changed significantly and consolidation has started. For example, Sicor originally acquired Biotechna UAB, Lithuania; then in late 2003, Teva acquired Sicor. In 2002, Novartis purchased Slovenian generics company Lek, the third largest player in European generics. The number of marketed biogenerics is likely to be limited to four to five initially; but there would be potential for much more development as the market progressed.

There seems some consensus that the main biogenerics companies in Europe will be Novartis, Pliva, Teva, BioPartners and possibly BioGeneriX. In the US, the main contenders are likely to be Cangene and Transkaryotic Therapies. Companies which are beginning to identify themselves as protein manufacturers such as GeneMedix may not be successful on their own; they may be too small and will need to partner to remain in the competition. There is also the question as to whether any of the Indian companies, such as Wockhardt and Ranbaxy, will be successful in penetrating Western markets with biogenerics.

So, when will biogenerics reach the markets�c

The first companies will take time to gain entry to the market; but once this has happened, the biogenerics market will evolve more rapidly. The biogenerics market will be different from the generics market. There will be fewer players due to consolidation brought about by complex manufacturing processes, difficulties in gaining approval and the high cost of successfully marketing products. It will be three to four years before the limited numbers of main players have their first products on the market. Most consider that these main players will have the market to themselves for the first few years.

likely to be several years before generic competition has a significant effect on the market, possibly longer than most potential players acknowledge in their public statements. The public authorities might be expected to promote biogenerics, encouraging price competition to ease the burden of payment for biotechnology-derived treatments. This, however, is unlikely to be the strategy that the early biogeneric entrants will wish to adopt, having had to invest significantly to:

• bring their products to market
• gain market acceptance for their products.

The investment required is substantially more than was envisaged just ten to fifteen years ago, when companies began to consider their involvement in this area. In addition events in 2003, mainly the controversy involving the safety of rh EPO, may have raised the risk aversion of both EU regulators and clinicians.

The general view is that the US will represent a harder market for biogenerics to access. The big pharma lobby is very strong, with patents lasting longer. The situation is becoming increasingly legalistic and the biotechnology innovators are likely to challenge every change in legislation, essentially employing effective delaying tactics. Changing current regulations will need political intervention, and there is some evidence that this is starting to occur.

How to be a success in the biogenerics market

Success or failure in the Western biogenerics market will depend on avoiding or circumventing the barriers and employing the best business strategies.

In order to succeed, companies should ask themselves three questions, which each encompass both barriers and strategies (see figure 2):

• Can you make the product?
• Can you get the product to market?
• Can you make money?

Can you make the product?

Production of biopharmaceuticals remains a relatively complex science. Many argue that subtle differences in the make up of these products, caused for example by slightly different manufacturing processes, and organisms used, place a question mark on their safety. Thus, there is a very real requirement to ensure that the conditions and manufacturing base are correct. Many companies are already carrying out manufacturing processes for biopharmaceuticals worldwide, although not all will be carrying out the processes to GMP standards. Some companies are working in relative secrecy. Once patents have expired and interest can be declared there may therefore be more players on the scene, although not necessarily producing to the required standards for the Western world.

Whilst improvements in science and technology have made it possible for companies to gain entry to the biogenerics market, the need to show compliance to GMP will limit the number of companies approaching Western markets in future. If companies in less regulated markets cannot demonstrate compliance with GMP, they will not be able to take the first steps to enter the more regulated Western markets.

Successful strategies for overcoming some of these manufacturing barriers include:

• Acquiring biopharmaceutical expertise.
• Collaborating to gain access to production technology.
• Gaining production expertise outside the EU
• Moving production facilities inside the EU.

Can you get the product to market?

After solving any production issues -the next barrier is in accessing the market. The key problem areas here are:

• regulatory barriers
• innovator strategies.

Regulatory barriers

In the past, EU regulatory authorities have been more flexible than those in the US have, with EU regulators taking a more liberal position on biogeneric approval process since 2001. In addition, unlike the US situation, the regulatory framework is the same whether the product is a biological or a chemical.

Like the FDA, the EMEA has been considering how to implement an abbreviated procedure for biogenerics. A consultation document was issued in July 2002, followed by a Directive in June 2003 (Directive 2003/63/EC), which for the first time makes specific reference to the licensing of �gsimilar biological medicinal products�h. In December 2003, the CPMP gave final approval to �gGuideline on comparability of medicinal products containing biotechnology-derived proteins as active substances—non-clinical and clinical issues�h. This guideline will come into operation in June 2004. The document is intended to give further guidance on the non-clinical and clinical data that might be required in two of the situations where comparability might become an issue.

Essentially the EMEA appears to be moving towards a requirement for increased post-marketing surveillance of safety, specifically including consideration of immunogenicity issues. This increased focus on immunogenicity will look for clinical data in the majority of cases; there will need to be further investigations over any difference in quantity or type of antibody generated. A pharmacovigilance plan and specification will also be a future requirement for biogenerics manufacturers as part of the approval process

In the US, early biopharmaceutical products were regulated under standard pharmaceutical legislation under the control of the Center for Drug Evaluation and Research (CDER). These early products were therefore governed by the Food, Drug, and Cosmetics Act and later, Hatch-Waxman. A separate process was then developed for biologicals supervised by the Center for Biologics Evaluation and Research (CBER). Approval for market for most biotechnology drugs is under the Public Health Service Act (PHSA), used to regulate vaccines and serums in the early 1900s.

In June 2003, the FDA transferred oversight for many new biotechnology therapies from CBER to CDER. The move provided FDA with an opportunity to examine its policy on generics. Much of the debate in the US hinges on whether biogenerics should go through the simplified approval process allowed under section 505(b)(2) NDA. This is a controversial hybrid statutory approval mechanism established by the Hatch-Waxman Amendments to the Drug Price and Competition and Patent Term Restoration Act of 1984. 505(b)(2) was initially drawn up to cover chemistry-based generic pharmaceuticals rather than biologicals.

The FDA has announced that the 505(b)(2) pathway is permissible for approval of 'generic'  versions of biological products that were originally

approved under an NDA as opposed to a biologics license application (BLA). Many generic companies are advocating a 505(b)(2)-like approach to approval of generic versions of more complex biologics originally approved under BLAs. Such a system might resemble certain aspects of the recent guidance by the EMEA (Directive 2003/63/EC, June 2003).

There are many arguments for and against the proposed moves by the FDA. The complexity and details of a stringent rule-based system such as that seen in the US means that it is always open to legal challenges, which will inevitably delay changes. The FDA has indicated the direction that it wants to take. Inevitably, it will take longer than hoped, due to the delaying tactics of the big pharma lobby.

Innovator strategies

As a general industry strategy, the incumbent biopharmaceutical manufacturers would be expected to employ delaying tactics to prevent the early entry of biogenerics. This is particularly true in the US but also to some extent in Europe. It is also true of particular biotechnology companies such as Amgen and Genentech, which need to protect their huge investment in innovative products.

Innovators are likely to react to the imminent introduction of biogenerics with patent litigation, price cuts and the introduction of second-generation products. Such second-generation products, rather than patent litigation, may be a more important feature of innovator strategy in future.

Barriers to biogenerics -can you make a profit?

And the final stage -the biogeneric is approved, the production and market hurdles are passed -but can the product, now packaged and on the shelves, actually make enough money to be worthwhile? So -what are the barriers to a profitable business?

• Marketing spend required
• Gaining clinician acceptance
• Appropriate pricing for biogeneric products.

In order to reach the goal of profitability, biogenerics companies need to find the right strategy. Successful strategies include:

• Picking the right partner, acquisition or collaboration
• Picking the right product.

In conclusion

The biogenerics market will be a difficult one to crack -the biology and chemistry are complex, the regulatory approval approaches are multifaceted, and market acceptance may be difficult. But for the company willing to take up the challenge, the rewards for the successful company and successful product are great and the market is likely to be wide open, at least for the first few years.

What are the characteristics of the successful biogenerics company?

To be successful, a company involved in development of biogenerics will need to:

• be well financed
• possess sufficient technical capability and be operating to Western GMP standards
• be sufficiently focused on only one or two products, since the company will need to understand the market it is entering and have sufficient finances to operate in the chosen market
• have developed or be developing relationships with the regulatory authorities
• have a strong market presence, since
  • marketing biogenerics will not be like marketing standard generics
  • there will be a need to develop relationships with clinicians, this will probably require a sales force to effectively alter clinician prescribing habits
  • good marketing capability will be essential.

What are the characteristics of a successful biogeneric product?

For biogeneric products to be successful there should be:

• no IP barrier, therefore biological products facing patent expiration all have the potential to become successful biogenerics
• the right market characteristics - the questions which must be asked here are:
  • Is the market big enough?
  • Is there potential to make a worthwhile profit in this area?
  • What is the competition like?
  • Are there many entrenched players in the market already?
  • Are there many other biogenerics players entering this market?
  • Are biogeneric players already producing this product outside the Western markets?