DefinedHealth

Michael Rice, MBA & Nabil Mouline, MBA

Big Pharma’s ravenous appetite for biological therapeutics has led to the consumption of some huge “meals” (AZ’s $16 bln acquisition of Medimmune) and some “small plates” (GSK’s acquisition of Domantis; Merck’s acquisition of Glycofi; Bayer’s acquisition of DIREVO and many more).

Much of Pharma’s fascination with large molecules is easily explained by the lower attrition rates these programs have in comparison to small molecules, their propensity to claim the high priced specialty indications Pharma now covets and the fact that the barriers to entry for “biogenerics” or “biosimilars” are more formidable than those for small molecules.

However, a higher level driver of the push into biologicals is the opportunity to leverage one or more of at least three distinct strategies, with the potential to produce an optimal balance between scientific, regulatory and commercial risks and rewards.

These are:

1. Development of biosimilars, which given all the confusing and inconsistent nomenclature associated with this topic we define here as a biological product that is more or less therapeutically similar and/with little distinct product characteristics and/or other differentiation from a parent compound except a lower cost of therapy. There has been endless discussion and speculation over the way this type of market will develop, especially given the above-mentioned barriers to development and approval. Nevertheless, there should be little doubt that the sheer size of the projected market for just today’s commercial biological products (some projections call for sales as high as $200 bln by 2014) will spur payers and other authorities in all major global markets to produce pathways designed to allow at least some, if not many, lower cost products to enter.

2. Development of biobetters, which we define as products that are aimed at similar targets and carry similar indications as existing products, but are differentiated by some characteristic other than price (either by convenience/dosage form or a superior clinical profile or a combination of both).

3. Development of novel products capable of accessing unvalidated and/or previously undruggable targets.

As the market for biologics continues to develop and expand it will surely be exposed to at least some degree to the now all too familiar problems that have brought the small molecule blockbuster model within Pharma to its knees – branded competition, a less expensive and vastly improved generic standard of care and downward pricing pressure. It is not at all clear which of the three strategic approaches listed above represents the best path forward for each major Pharma company to:

• Minimize their risk of exposure to biosimilars.

• Exploit the opportunity represented by biosimilars, which may retain attractive margins even if sold at a lower price.

• Utilize new antibody and other platforms to produce biobetters and seize the “best in class” position in validated markets.

• Pioneer breakthrough therapies by harnessing new platforms to validate currently unexploited targets with transformative therapeutic potential.

Finally, how should the future competitive landscape and the unmet needs in current and evolving markets help to determine the optimal blend of the above strategies in each disease area and indication? Over the next several years, all major Pharma companies will need to both establish and fine tune their correct mix or they could be left standing on the sidelines for a very long time.