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Carly Helfand/MEDILL

Hospira is in Phase III human testing for its biosimilar anemia drug.

Hospira, Baxter wade into new market for generic biological drugs

by Carly Helfand
Feb 09, 2012

Baxter Intl

Carly Helfand/MEDILL

Baxter International recently entered into a partnership with Momenta Pharmaceuticals to make six biological compounds.

Generic drugs have been around since the 1960s, providing consumers with low-cost versions of branded medications while preserving their chemical formulas. On Thursday, the Food and Drug Administration approved draft guidelines for a new kind of generics: equivalents of biologic drugs, or those composed of material such as sugars, proteins or even living cells. Cost-efficient versions of these complex drugs, known as “biosimilars,” are already available in Europe and Australia, and many companies have demonstrated interest in an untapped American market–-including local companies Hospira Inc. and Baxter International Inc.

“This is a business opportunity from them now that the government’s decided to go down this path,” said analyst Aaron Vaughn of Edward Jones in an interview. “There’s quite a few drugs out there-– these biological drugs that have lost their patents--where the generic opportunity, at least from these companies’ perspective, is an opportunity to make some money.”

Lake Forest-based Hospira is considered to be among the companies at the forefront of biosimilar development in the U.S. While the FDA was drafting guidelines for the production of biosimilars, Hospira got a jump start on its testing in hopes of having its product out as fast as possible once patents for its competitors begin to expire in the middle of the decade.

Baxter International, a Deerfield-based health care company comprising bioscience and medical equipment segments, announced one of the latest partnerships in the biosimilars market in mid-December. The company will join forces with Cambridge, Mass.-based Momenta Pharmaceuticals Inc., contributing $33 million to the collaboration, to produce six biosimilar compounds.

Also among those that have recently announced their intent to make a push in the biosimilars market are the world’s largest biotechnology company, Amgen Inc., and generic drugmaker Watson Pharmaceuticals Inc., which announced a partnership last month to produce biosimilar cancer drugs; and Biogen Idec Inc. and the South Korean Samsung Group Ltd. are teaming up for a joint biosimilars venture, investing $300 million.

Vaughn said that for companies vying to break into the biosimilars market, joint ventures are important.

“In biologics, it’s much more advanced,” he said. “You need people with the technical expertise that have made biological drugs in the first place. You’ve got people who know how to make the drugs and then partners which know how to distribute or whatever the case may be, but the companies that have the generic market exposure right now know how to deal with that market partnering up with the companies that make the drugs.”

Hospira launched its biosimilar Retacrit, used to treat anemia resulting from chemotherapy and kidney failure, in Europe in the beginning of 2008 and began Phase III human testing in the U.S. last month.
Spokesman Dan Rosenberg said that the uptake of biosimilars in Europe is “about where we expect it” and that he expects the adoption rate to increase as the drug gains awareness and demonstrates safety and cost-effectiveness. That success in Europe bodes well for Hospira, as branded drugs in Retacrit’s category were a $4.6 billion market in the U.S. in 2010.

“As far as the U.S. market, it’s kind of premature to speculate on adoption here, but we’re hopeful that the data we’ve gathered on Retracit will be beneficial here in the adoption process of the U.S.,” Rosenberg said.

John Putnam, an analyst for Capstone Investments Inc., said Hospira is likely to be the first to produce a biosimilar in the U.S. in Retracit’s market segment and will benefit as the first of its kind.

“In a lot of generic drugs and a lot of injectable generic drugs, there’s a huge discount to begin with, but biosimilars, because they’re unique, don’t experience quite that same precipitous price decline initially,” he said. “It comes down, obviously, as you have more competition.”

Rosenberg said the company hopes that Hospira’s involvement in the European biosimilars market will translate to success at home.

“It gives us a big advantage because we’ve already had experience overseas,” Rosenberg said. “We can use the experience we’ve had in Europe to help generate sales in the U.S. and help doctors get comfortable with the product.”

Baxter is not as far along in its biosimilars development, having announced its partnership with Momenta at the end of last year. But Baxter CEO Robert L. Parkinson said in a conference call last month that its biosimilars collaboration will allow the company to advance its expertise in biologics.

“With this collaboration, Baxter will leverage its leading clinical development and biologic manufacturing expertise, global leadership in injectables and global commercial capabilities, while Momenta will provide its expertise in high-resolution analytics, characterization and product and process development,” he said.

Baxter could end up making additional cash contributions to the research further down the line as the compounds are developed depending on the success of the venture--and according to Vaughn of Edward Jones, there’s good reason to believe that success is possible.

“They’re bringing their expertise within the manufacturing process and clinical development,” he said. “They’ve been making drugs for years now – they’re bringing that to the table. From the company’s perspective, I look at this and I say 30 million is a fair amount of money, but a good investment for the potential to get in on the ground floor of the biosimilars market. It could be a really big payoff in the long run.”

Unlike Baxter and Hospira, Abbott Laboratories, another local pharmaceuticals giant, will likely be negatively affected by the development of biosimilars. The Lake County-based company announced Jan. 25 that its biological drug Humira was responsible for more than a third of the company’s total sales in the fourth quarter of 2011. Humira, which is used to treat a variety of autoimmune diseases, recorded nearly $8 billion in sales this year, and CEO Miles D. White said in a conference call that it would “continue to be a strong and sustainable growth product going forward.”

Come 2016, however, that growth may be threatened by competitors when Humira’s patent expires. When a generic drug enters the market, around 80 percent of the branded drug’s revenues are lost over time, according to analyst Linda Bannister of Edward Jones.

But Bannister believes the damage dealt to Abbott by the biosimilars market won’t be nearly as severe. Bannister said she expects something closer to a 25 percent decline.

“There are going to be more costs involved and as a result, fewer companies are going to have the expertise or the capital to launch a competitive product to Humira,” she said.

Bannister also said the complexity of Humira could leave some doctors wary of a generic form.

“You could have doctors with patients who are well-controlled on branded Humira that aren’t willing to convert the patients to a generic product,” she said. “Some physicians are going to question whether or not it’s the same medication and whether the patient reaction will be the same.”