By Kim Da-ye
Biosimilars are widely seen as a new engine of Korea’s economic growth. Samsung Group vowed to invest 500 billion won in it until 2014.
The drug company that pioneered its production now boasts of the largest market cap not only among pharmaceutical firms but also among the KOSDAQ-listed.
Then, will biosimilars, generic versions of biotechnology medicines, the effectiveness of which are yet to be proven, satisfy such hype? Those in the industry would sing in chorus but signs are telling us that many hurdles await.
Generic medicines are copycats of innovative drugs whose patents expired, and biosimilars are generics for biologics or biotechnology drugs. Because of the complicated structure of protein-based biologics, it is impossible to create identical copies. That is why biotech medicines’ copycats are called biosimilars.
That very name suggests challenges biosimilar manufacturers face. Unsure if small differences could cause a big disparity between innovators and their biosimilars, doctors may be reluctant to prescribe biosimilars.
The European Union, the first to introduce a guideline for the approval of biosimilar drugs, saw only a small profit — $60 million in 2008 and $100 million in 2009 according to health data provider IMS Health.
That pours cold water on the rosy expectations for the rapid growth of the biosimilar sector. The Korean government touted a recently released blueprint to foster the industry, “Developing biosimilar drugs costs one 10th of the cost of developing a new and original medicine and takes half the time it takes for new and original medicines to reach the market. But it is 10 times as likely to succeed as the medicine it copies.”
Furthermore, the biosimilar industry depends on the U.S. market in which many popular biotechnology drugs including arthritis-treating Enbrel and Humira will see their patents expire between 2012 and 2019.
The data from intelligence firm Datamonitor indicates that the U.S. will account for 72.2 percent of the worldwide biosimilar market in 2013 and 82.9 percent in 2014. Europe will see its share plunging from 76.3 percent in 2012 to 26.4 percent in 2013 and 16.3 percent in 2014.
The U.S. market won’t be easy for Korean firms to penetrate. “The U.S. wants to give incentives to innovators rather than generics. It encourages investment in research and development for innovators by allowing high prices on new drugs,” Kim Tae-hee, an analyst of Dongbu Securities, said in a recent report.
With the introduction of the healthcare bill, U.S. President Barack Obama tried to loosen regulations on biosimilar drugs. But the attempt was met with resistance from patent-holding major drug firms. Biosimilar manufactures cannot produce copies of the reference drugs for 12 years after they are approved by the U.S. Food and Drug Administration (FDA).
In addition, biosimilar manufacturers should provide information on their products to the producers of the innovators they copy. The latter could decide which patents the biosimilars would violate and ask for licensing. If the former refuses to buy the license, it may lead to litigation.
Players
Despite such hurdles, biosimilar manufacturers have been feted here in Korea, especially in the stock market.
Celltrion, the nation’s foremost biosimilar producer, touts the largest market cap in value of all listed stocks on the KOSDAQ market at 4.02 trillion won. The market cap of KOSPI-listed Dong-A Pharmaceutical, the nation’s largest pharmaceutical firm, is only a third of that at 1.39 trillion won. Celltrion also saw its stock price climbing up from 2,270 won in Jan. 25, 2008, to 34,650 won recently.
Celltrion was an early bird in the biosimilar market, and is equipped with a large production facility capable of a 50,000 liter cell culture. It is now building another 90,000 liter facility which will start production by 2012.
Size matters because many competitors are honing their edge although the market for biosimilars is yet to be established globally. Indian and Chinese firms have been gearing up to dominate the market with their competitiveness in production costs and proximity to the emerging markets that Korea regards as crucial to occupy in advance.
Celltrion has so far followed the strategy of turning from a contract manufacturing organization (CMO) — a type of outsourcing contractor providing base materials — to a firm making its own biosimilars. Based on skills and the knowledge it acquired by producing base materials, Celltrion can develop its own medicines including a biosimilar for the breast cancer drug Herceptin.
Celltrion’s biosimilar products are at the end stage of clinical trials. Because biosimilars aren’t identical to their innovators, they go through an intensive three stage clinical trial. Celltrion’s Herceptin clone is under the third stage in multiple countries while a copy of the rheumatoid-arthritis treating Remicade is under various stages at home and abroad.
Celltrion has partnered with Hospira, a U.S. pharmaceutical firm specialized in generics, which would help the firm enter the crucial U.S. market.