Like many prior hot, new trends, the "emerging" biogenerics market has been greatly oversold long before the first such product has even seen the light of day in the major markets. Although biogenerics are popping up in a few smaller countries, confusion about regulatory issues has kept any from being approved in the United States or across Europe. Still, the rise of high-priced blockbuster biotechnology drugs and increasing pressure to cut health care costs should, on the face of it, have drawn a lot of attention to the issue of biogenerics. (See Table 1 for top-selling biotechnology products.) According to IMS, biotechnology products now constitute 27% of the active R&D pipeline and garnered 10% of global pharmaceutical sales in 2004, giving them about $55 billion in worldwide drug sales.

Table 1: Global Sales of Selected Leading Biotechnology Products

Product	2004 Sales (millions)
Epogen and Procrit	6,190
Avonex	1,420
Neupogen	1,175
Humulin	998
Cerezyme	839
Humatrope	430
Nutropin and Protropin	354
Intron A	318

Source: Adapted from MedAdNews, May 2005, and additional sources.

Some determined action by Novartis's Sandoz unit during 2005 may help push biogenerics center stage. Sandoz sued the FDA over one biogeneric application (for Omnitrope, a form of human growth hormone) and partnered with small biotech Momenta Pharmaceuticals on a second application: This one was for a generic copy of Sanofi-Aventis's blockbuster drug Lovenox (enoxaparin sodium).

Now that the U.S. government has instituted its new Medicare prescription drug benefit, its biotechnology product bills are likely to skyrocket, which could also help push this topic into Congress's focus. Even if clear approval pathways are laid out, however, several key questions remain: Who will actually profit from developing these products? Which products are the best biogeneric candidates? And, what does all this mean for the rest of the biotechnology industry?

Overcoming Regulatory Inertia

The overwhelming hurdle facing biogenerics today is the need for clear approval requirements from the regulatory agencies involved. Limited progress has been made to date, although Europe is leading the charge for once. In January 2006, the European Medicines Agency (EMEA) announced that draft guidelines for the first four biogeneric products—recombinant human insulin, somatropin, erythropoietin (EPO), and recombinant granulocyte colony-stimulating factor (rG-CSF)—will be finalized in the first quarter of 2006. At the same time, guidelines on quality and on "non-clinical/clinical issues" will also be finalized. The EMEA reports that it had already received three biogeneric applications by the end of 2005 and expects to receive eight more in 2006, though these applications are unlikely all to be for different original biotech products. In December 2005, the EMEA reported that it had provided scientific advice to companies on the development of 15 other biosimilars.

In contrast, the FDA has over the past year done almost nothing to move toward clearer biogeneric regulations. In June 2005, then acting FDA commissioner Dr. Lester Crawford admitted that although the agency was making some progress toward creating a regulatory pathway, formulating strict guidelines was proving difficult. The agency then announced that it would post a white paper instead, but, with Dr. Crawford's subsequent departure and replacement by a temporary successor (Dr. Andrew von Eschenbach), this white paper has failed so far to materialize. The FDA may be waiting for legislative action that will give it clear authority to create a biogenerics approval process. Some experts think it will take the crushing force of biotechnology drug expenses on the new Medicare prescription drug process, which went into effect in January 2006, before Congress will propose that legislation. If so, we might speculate that even this step might still take two to three years.

Some companies have argued, and hoped, that the 505(b)(2) provision of the Hatch-Waxman amendments to the Federal Food, Drug and Cosmetic Act was a clear enough path for an abbreviated approval of a biogeneric. Based on the FDA's actions to date, the agency seems unconvinced that this is the right tack to take—hence, the additional deliberation and delay. Contacted last week, the agency reported it still has "no updates in this area."

Two recent events may force the FDA to act more quickly. In August 2005, Momenta Pharmaceuticals announced it had filed an abbreviated new drug application (ANDA) with the FDA seeking marketing approval of M-enoxaparin. Momenta has used its unique sugar sequencing technology to develop this generic version of Sanofi-Aventis's Lovenox in collaboration with Sandoz. Lovenox is a widely prescribed low-molecular-weight heparin that earned Sanofi sales of $2.4 billion in 2004. (For more on Momenta's move, see next week's PharmaWeek.)

Then, in September 2005, Sandoz filed a lawsuit against the FDA seeking a ruling on its pending NDA for Omnitrope, a generic form of human growth hormone, alleging that its application remained in "perpetual limbo." The FDA subsequently sought to have this lawsuit dismissed. Sandoz filed an NDA for Omnitrope in July 2003. More than a year later, the company announced the FDA had notified it that the agency was simply unable to reach a decision on whether to approve the application. The agency said it completed its review without identifying any deficiencies in the application. It just could not decide on the application because of scientific and legal uncertainties. Meanwhile, Sandoz launched Omnitrope in its first market, Australia, in November 2005. The company said that the product would be priced at up to 25% less than the current Australian price level for human growth hormone.

What Do We Know Already About Regulatory Requirements?

Given the relatively complex nature of biotech products, compared with conventional chemical generics, it is already clear that whatever else the FDA decides, substantially more data will be required to obtain approval for a biogeneric. Proving biosimilarity is simply much more difficult. Unlike small-molecule copycats, for biogenerics, the nature and extent of the data needed will also depend very much on the product involved: Regulatory guidelines must be defined product by product.

The EMEA has elaborated upon what it means by a "biosimilar" product (others use the term "follow-on generics") and how it must compare to the original. However, in practice, the details may not suffice. In October 2005, Tom Bols, director of government affairs in Europe for Amgen—a company with a considerable turnover at potential risk to erosion by biogenerics—noted that the product-specific guidelines gave an indication of what data would be needed, but they were still somewhat vague, and companies might still need to seek specific scientific advice from the EMEA.

The European authorities will, as anticipated, demand clinical as well as preclinical data to prove safety and comparability. The United States is expected to follow suit—eventual international harmonization on these requirements is possible. One big disappointment for would-be biogenerics developers is that regulators have made no mention so far of any ANDA-style shortcuts, such as exist in the United States for conventional generics.

Who Are the Prospective Biogenerics Developers?

Once the key regulatory hurdles are surmounted, what type of companies are most likely to want to develop biogenerics? Regulatory authorities, in particular, do not seem to have yet spent much time analyzing this question, but it is key to the evolution of this field.

If the current European regulatory proposals stand, development time for biogenerics will be much longer than for conventional small-molecule generics. The scope of the requirements means that, in organizational terms, the development of biogenerics demands a culture and mentality closer to that of proprietary pharmaceutical developers than to that of conventional generics firms. In light of this, it is worth asking what types of companies have both the incentive and the determination to pursue the biogenerics opportunity all the way to the market?

What about established pharmaceutical companies? If regulatory demands for biogenerics prove exacting, then such companies are probably better off developing entirely novel biotech products instead. The regulatory requirements for these products are usually much clearer, and in most cases, companies will stand to make far better commercial returns by taking this road.

As a result, it is not surprising that few established pharmaceutical companies have found biogenerics an attractive prospect. Sandoz's struggle over Omnitrope's approval has been very discouraging. In the late 1990s, Merck KGaA was one other pharmaceutical company staking an interest in biogenerics; it declared that it would be one of the first companies to enter biogenerics. But since then, the company appears to have become much less interested in the field.

How good a fit are biogenerics for conventional generics firms? Are these companies able to adapt their culture and mentality sufficiently to develop such complex drugs? We can get a clue to the answers from the fact that several leading U.S. generics companies (Barr, Ivax, Andrx, Watson, and Mylan) decided to set up proprietary branded product development: After only a few years, just two, Barr and Ivax, remain active in this arena. The latter is in the process of being acquired by the Israeli company Teva, a firm that has also diversified from a generics base into the proprietary field.

One reason generics companies are dropping out of the race is the sheer scope of demands these projects require. When trying to get a foothold in novel drug development, such companies have tended to opt for late-stage projects of moderate size requiring only limited additional resources to reach the market. Such below-average risk projects tend to have lackluster payoffs. Generics companies also tend to be much less tolerant of delays and setbacks, whereas established pharmaceutical companies have learned to take these problems in stride.

Given these circumstances, most generics companies will have a hard time coming to grips with the demands of biogenerics. Indeed, even Ivax and Barr, which have stayed with proprietary drug development, appear to have been putting very little emphasis on biogenerics. (Table 2 lists some potential players in biogenerics.) A few exceptions exist. For example, the largest Croatian generics drug company, Pliva, is taking a different course. Until recently, Pliva was also increasing its stake in proprietary product drug development. In June 2005, however, the company announced it was exiting this field to concentrate on generics again. In contrast to the U.S. companies mentioned above, however, Pliva says that it is maintaining a strong commitment to biogenerics. It has established international alliances in this field, including one with Barr. Several other non-U.S. generics companies are active in developing biogenerics, including Stada and the aforementioned Teva, both of which are prominent generics firms.

Table 2: Potential Players in the Biogenerics Field  

Company	Possible Products and/or Comments
Barr Laboratories	G-CSF (with Pliva, in North America)
Beckpharma	Various products under consideration
Biopartners	Somatropin, interferon-alfa
Cangene	Leucotropin, HGH
Mayne Pharma	EPO and G-CSF (with Pliva, in Europe)
Microbix	Urokinase
Momenta Pharmaceuticals	M-enoxaparin
Sandoz (Novartis)	Omnitrope (HG)
Pliva	EPO and G-CSF (with Mayne, in Europe)
Rhein Biotech	HBV vaccine
Stada	EPO, filgrastim, interferon-beta 1A
Teva	HGH

EPO = Erythropoietin; G-CSF = Granulocyte colony-stimulating factor; HBV = Hepatitis B virus; HGH = Human growth hormone.

A Range of Complexity

Biogenerics lie between standard generics and new chemical entities (NCEs) in terms of risk, resources required, and development time. Because the degree of complexity inherently involved in each type of biotech product varies considerably, regulatory and development requirements are also likely to vary considerably. We suspect that the regulatory demands for some products will prove too exacting for any company to want to get involved. This situation will allow some originators to continue marketing their products unchallenged.

Even for the more attractive propositions, only a handful of companies, or less, may be interested in a specific drug. As a result, the biogenerics commercial opportunity will be split in only a few ways in these cases, which is some consolation for companies that develop such drugs. But even with only one or a very limited number of biogenerics players for a given product, there will still be price competition, which will be a constraint on the size of the commercial opportunity.

A Free Run for Some?

The question of which companies will develop biogenerics is further complicated by the role of regulatory agencies in Europe and the United States. These agencies have neither the experience nor the means to gauge the likely level of commercial interest in any single potential biogeneric. As a result, they will not recognize cases where they have made the regulatory requirements so off-putting that there will be basically no generic "takers" for that drug. This is a distinct possibility for compounds that are very complicated to make but address less lucrative markets. So far, regulatory authorities do not seem to be under any pressure to try to predict—let alone ensure—that particular biogenerics are going to be attractive for any company to develop. Instead, regulatory authorities are much more likely to emphasize safety, thus increasing the cost of any biogeneric development program.

In this setting, companies will pluck the low-hanging biogeneric fruit, neglecting the less attractive drugs. As a result, some branded biotech products are unlikely to face cheaper biogeneric competition, even in the long term, allowing original products a free run at their existing high price level. At this point, political pressure will start to be exerted to stimulate generic competition; the dilemma might be solved by orphan-drug-style inducements. Even if such programs are developed, further delays will occur before that particular biogeneric is available, simply because these drugs will require substantial development time under any circumstances.

The message for biotechs with marketed products is, "The more difficult a biological is to reproduce, the longer the market life of the original brand will be." Taking this concept into account, it is likely that some prospective novel biologicals currently considered unattractive commercial prospects for development could actually prove more profitable than they appear. If the product's market life at full price could be years longer than expected, the product may be worth developing after all.

There is, after all, a spectacular precedent for this scenario. The sales of Wyeth's hormone replacement therapy (HRT), Premarin, peaked in 2001 after 59 years on the market. Premarin's trade name derives from its source, pregnant mare's urine; it consists of conjugated estrogens, which have proven very difficult to copy and also meet the standards required by the FDA.

Payors are unlikely to have such a laissez-faire attitude toward allowing products to remain on the market without any downward price pressure, particularly expensive products addressing more urgent medical needs than HRT. But we believe it will still take several more years than expected, in many cases, for competition with original biotech products to emerge. And there will likely be cases where no biogeneric is ever developed. This potential lag in competition is an important factor that should be taken into account when forecasting biotech product sales.

Next Week in PharmaWeek: More coverage of this topic in "Biogenerics Part II: Momenta's Big Move."

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