Biogen and Fellow Boston-Area Biotechs Ready for Biogenerics

6/24/09

Boston-area biotech companies have kept a close eye on how U.S. regulators decide to govern the approval of copycat versions of biotech drugs. Now I’m seeing more signs that some of these companies could actually become major players in the business of making biogenerics (which are also called biosimilars, follow-on biologics, and other names, depending who you’re taking to.)

Cambridge, MA-based Biogen Idec (NASDAQ:BIIB), for starters, has very quietly established a subsidiary called Eidetica Biopharma to develop and manufacture what Biogen calls biosimilars, according to unnamed sources with knowledge of the subsidiary. There’s scant information available on Zug, Switzerland-based Eidetica, but it’s clear that this firm is a sign that Biogen is looking to get a piece of the biogenerics pie.

Biogen is just one of several examples, though, of life sciences companies that are taking an interest in biogenerics as a potential revenue stream. Many already have the infrastructures and the internal brainpower to produce original biotech or biologic drugs. And a barrier to entering the business of making biogenerics is the huge investment required to build biotech drug plants, which must also be approved by regulators before the facilities can market products manufactured there. There are also businesses, such as Merck & Co.’s GlycoFi, of Lebanon, NH, where innovative technology has overcome some of the technical challenges of making copies of biotech drugs.

Scientia Advisors, a life sciences consulting firm in Cambridge, MA, has fielded a lot of inquiries lately from companies in the Boston area and elsewhere about the viability of the biogenerics market, Amit Agarwal, a partner at Scientia, tells me. He says the interested parties include all companies with the facilities to produce biologics. “What we’re seeing is that they are at least considering this market,” Agarwal says. “It’s out there and it’s not just coming from the usual suspects.”

The future of the biogenerics market, at least in the U.S., is very much up in the air at the moment. Biogenerics have been near the top of the biotech industry’s policy agenda for years, but the issue has heated up recently as U.S. lawmakers look to overhaul the healthcare system. There are biotech companies that fear an invasion of biogeneric drugs into the marketplace could hurt their sales, as well as their ability to fund the development of novel biotech drugs. But some lawmakers see the approval of these copycat treatments as important to controlling the rising cost of drugs. And at the center of the current biogeneric debate is how to formulate a regulatory pathway to approve these drugs.

Some of the key issues in the biogenerics debate are related to the inherent differences between biologics and small-molecule, chemical drugs. Biologics, typically made in processes that involve living cells and bioreactors, are often protein-based drugs with complex structures that cannot be duplicated like their small-molecule brethren. This means that biogeneric drugs aren’t exact copies of the originals, creating all manner of questions about whether the knockoffs should be required to undergo additional clinical trials to prove their safety and effectiveness. As I mentioned, there are local firms that have entered this market because they believe than can overcome some of the technical obstacles.

GlycoFi, for instance, has recombinant yeast technology that enables it to have greater control over the molecular form of protein-based drugs than is otherwise possible. Merck, which purchased GlycoFi for $400 million in 2006, is using this science as the technical backbone of its recently launched biogenerics business unit, Merck Bioventures. Here’s our recent story about the leading role that GlycoFi is playing in the biogenerics unit. In fact, Merck has even begun to call its copycat biotech drugs “bio-betters,” because it believes it can engineer the proteins to be better than the originals. (Henri Termeer, the chairman and CEO of Cambridge, MA-based biotech powerhouse Genzyme (NASDAQ:GENZ), poked fun at the bio-betters moniker during a recent interview, an audio recording of which is embedded in this post from last week.)

Indeed, Cambridge-based Momenta Pharmaceuticals’ (NASDAQ:MNTA) calling card since it was founded in 2001 has been its technology that enables it to control the structure of its biotech drugs, specifically sugar chains on protein drugs. More recently, Waltham, MA-based Synageva BioPharma has raised more than $63 million in venture and private equity dollars to develop both novel and biogeneric drugs based on a proprietary process involving the production of therapeutic proteins in egg whites.

As for Biogen, I caught up with the company’s executive vice president of corporate and business development, Michael Lytton, after he spoke at the Convergence conference on June 12 in Newport. Lytton, a former venture capitalist at Oxford Bioscience Partners, gave some interesting insights on issues related to biogenerics—or as he calls them, biosimilars—but he declined to discuss Biogen’s corporate strategy on this front.

A key point that Lytton made, and which has come up previously in discussions on this topic, is that the competition in the biogenerics business is likely to be different than competition in the generic drugs business. For one, biogenerics may not be that much cheaper than the originals, due in part to the high manufacturing costs, meaning that knockoffs may need to have better safety or other traits to be competitive with the originals. This would be unlike the generic drug business, which relies almost entirely on the lower cost of its products to compete.

“One really key question is what will be the pricing, and what will be the factors that companies compete on,” Lytton said. “I certainly think it will be more than price, but it’s unclear exactly what will be the competitive dynamic.”

For insights into the latest chapter of the debate, read the Federal Trade Commission’s controversial report on biosimilars and how they should be regulated. The FTC, importantly, recommended that the government not grant biotech companies 12 to 14 years of exclusivity on each biotech drug, a requested period during which the FDA would not be able to approve biogeneric versions of the treatments. Here is a link to the Biotechnology Industry Organization’s rebuttal, which says that 12 to 14 years of exclusivity would be needed to recoup a company’s investment to develop the original.

It’s difficult to pin down reliable  market figures on the potential size of the annual biogenerics business, due in part to looming questions about how the U.S. government will ultimately regulate the approval of biogenerics. Yet it’s likely to be a multibillion-dollar market opportunity in the coming years, based on the thinking that many biogenerics could command a price close to the originals, and also that so many biotech drugs are due to lose patent exclusivity over the next several years.

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