Get Set and raring to go
A number of blockbuster drugs are expected to go off-patent and the biotech industry is waiting with bated breath, to witness the rise of the biogenerics. However, there are certain challenges, which, if not tackled skilfully, may change the picture completely, Nandini Patwardhan discovers.
The tracks are set, the players have geared up. Everyone is waiting for the gunshot! This is not a scene from the Olympics. This is the industry sentiment on the Indian biogenerics market. Deemed to be the next big thing for India, the dynamics of this segment are being debated by analysts and players alike.
Know the game
Everyone is bullish on this industry segment as billions worth of drugs are slated to come off-patent over the next few years and there is a buzz of activity here. Given the immense potential of the biogenerics segment, domestic players have pulled up their socks to match the steps of their international counterparts. As a result, today, domestic players have emerged and gained prominence. “The $17 million erythropoietin (EPO) market was dominated by international players such as Johnson & Johnson and Roche until 2003-04, with market shares of about 32 percent and 24 percent respectively. However, 2005 saw not just an emergence but an increasing dominance of domestic players like Wockhardt, which leads the Indian EPO market currently,” Dr Jayashree Mapari, Industry Analyst, Frost & Sullivan Healthcare Practice, India.
Like the vaccines market, price erosion is becoming a feature of this segment. For instance, according to Frost and Sullivan, the human insulin market, between November 2003 and December 2004, saw the launch of recombinant human insulin products at almost the same price by Wockhardt, Biocon and Shreya Lifesciences. This forced international players such as Eli Lilly and Novo Nordisk to slash the prices of their brands by 33 percent and 25 percent respectively. “In order to consolidate their market shares due to emergence of new players, existing companies are resorting to price cuts, and this has resulted in increasing fragmentation of the market,” reveals Mapari.
Also, there is very strong brand equity in the prescribing community for established and branded biopharmaceuticals, thereby posing a significant barrier for market entry as well as market penetration. “Strong brand equity among prescribers and users for established brands is posing as a major entry barrier for emerging players,” she explains. As a result of the market conditions that are at play in the biogenerics segment today, many domestic players are shifting their focus to other unregulated as well as developed markets.
As the competition hots up in the segment, players are looking at consolidating their position in the market. One way for innovators to do this is to come up with ‘follow on’ products with modified drug delivery systems like Pegylation, or products with improved profiles like Redipens. “These follow on products have been very well accepted by prescribers and have been observed to eat into the market share of conventional products,” explains Mapari. “The follow on products, owing to their superior drug delivery, efficacy and convenience indeed pose formidable competition to any emerging brand in a given therapeutic segment,” she adds. In the G-CSF market, the longer acting Pegylated version Neulasta had world sales of $464 million in 2002, whereas the conventional product garnered sales worth $1,380 million (according to Frost & Sullivan data). However, two years down the line, sales of Neulasta have reached $1,740, and those of Neupogen are at $1,175. Similarly the longer acting version of EPO, Aranesp has also significantly eaten into the market share of the conventional EPO, within four years of its launch. It was a mere $42 million in 2001 and has increased to $2,473 in 2004.
“What is the way we conventionally run a generic industry? You have just hit the market with newer and newer products. You have to go for the volumes and at other functions like say manufacturing. However, when it comes to biotech all these arguments break down,” says Sujay Shetty, Associate Director, PricewaterhouseCoopers. This is because players need to have a different model on account of high upfront cost of R&D and manufacturing. “It is much more expensive and much more risky as it may not necessarily lead to a successful launch. So a generic company which is planning to do a biosimilar spends a lot more just to develop that drug first and companies would definitely want to recoup their R&D over here,” reveals Shetty.
Biogenerics is a relatively new industry for many players and added to that there are a host of issues, which make this segment different from the conventional generic industry. First of all, manufacturing of biogenerics itself is many times more expensive than it is for chemical drugs. “Unlike other generics, manufacturing of biopharmaceuticals is a complex and highly expensive process. As a result there has been a spate of strategic front-end and back-end integrations among biopharmaceutical manu-facturers worldwide,” asserts Mapari. They also require cold chain to transport and maintain biogenerics. When all these factors add up, one may not end up having that big a cost differential vis-à-vis the original product. “Typically you will need 20-30 percent savings, otherwise who would want to switch over to a generic. And this is complicated because the costs are high,” asserts Shetty.
Companies are however planning to manage these exorbitant manufacturing costs. “Companies from the developed markets are turning towards developing markets like India and China for establishing low-cost manufacturing capabilities of international standards. Companies from developing countries on the other hand are looking at a wider geographical reach and spread through marketing and distribution collaborations with established players from developed markets,” Mapari adds.
A company engaged in the business of biogenerics will also have to do a lot more sales and marketing than one does as a generic company. “You must remember that in the early days, the doctors are not going to be very comfortable prescribing biosimilars and biogenerics because the effiicacies are not well known. So they may still want stick to the originals,” declares Shetty.
Lost in regulation
A Yes Bank report pegs the overall market for biologics at $40 billion (10 percent of the world pharmaceutical market) and the Indian market at $750 million
Biogenerics might not have a halo around them but what they have is a regulatory haze. Absence of well defined regulatory policies for the approval of biogenerics in regulated markets such as US and Europe hamper the market entry of the generic versions. “In the regulated markets, specifically US, the biogeneric regulatory pathway has yet to be defined. This has kept in bay the pure-play generic players from entering the market in the recombinant space,” explains Utkarsh Palnitkar, Partner, Transaction Advisory Services, Head, Business Advisory Services, National Leader for Health Sciences Industry Practice, Ernst & Young, India.
According to the report Indian biotechnology industry Fostering the Knowledge Revolution released by Yes Bank released at Bangalore Bio 2006, regulated markets are yet to evolve a simplified equivalent of ANDA for biogenerics, which is restricting the growth of the industry. Today, a number of Indian companies are establishing manufacturing capacities for biogenerics and are targeting semi-regulated and unregulated markets with a host of cost effective products. “In India, biogenerics relating to paediatric and therapeutic treatments are clearly defined from a regulatory standpoint allowing players to launch products. Post-January 2005, with a shift in IP guidelines the scope of process patenting a biologic vaccine has decreased considerably leading the way to alliances as a means to sustain growth momentum,” says Palnitkar.
However, one should not forget that these are early days for biogenerics everywhere and not just in India. “Omnitrope is the first significant approval given for a biogeneric drug. And it will take a while,” discloses Shetty. “But this is not to say that the competition is not there. It is very much there, apparently the EMEA has said that it has received close to eight applications in 2005 and they have received advice to be asked for 15 more biosimilars applications,” he adds. So understandably people are working at it.
|Name of the Drug||Year||Marketer||Indication|
|Source: Frost & Sullivan|
Numbers of the game
Today, there are more than 40 different players in the Indian biogenerics market, including both MNC companies and indigenous players. These include biggies like Johnson & Johnson, Novo Nordisk, Eli Lilly and LG Lifesciences from the foreign shores and indigenous manufacturers like Shantha Biotechnics, Biocon India, Wockhardt and Serum Institute of India. While MNCs have always been strong, the recent years have witnessed not just emergence but gradual prominence of the domestic players. For instance, out of the 13 biopharmaeuticals available in India, almost seven are being manufactured by domestic players. “Of this, seven recombinant biopharmaceuticals are indigenously manufactured by Indian companies and all these are generic versions of branded biopharmaceuticals,” states Mapari. These include recombinant Human Erythropoietin, recombinant Human Interferon-alpha (r-IFN alpha), recombinant Human Insulin, recombinant Human Granulocyte Colony Stimulating Factor (r G-CSF), Human Growth Hormone (r GH), and Follicle Stimulating Hormone (r-FSH).
The Yes Bank report pegs the overall market for biologics (biotech based drugs) at $40 billion (10 percent of the world pharmaceutical market) and the Indian market at $750 million. According to Frost and Sullivan, the size of the Indian biogenerics market was estimated to be $100 million in 2005-06 and it is growing at a rate of almost 20 percent. The firm, based on industry estimates, pegs that drugs worth $70-80 billion worth would be coming off-patent over the next few years, similarly worldwide prescription volumes of generics and biogenerics is expected to rise from $1.8 billion to $3.2 billion by 2010. It also estimates that the human insulin segment leads the market with a share of almost 50 percent, followed by Human Erythropoietin with a share of almost 16 percent. Recombinant Streptokinase has a market share of almost 13 percent, Human Granulocyte Colony Stimulating Factor (G-CSF) and Human Interferon Alpha have market shares of six percent each. Human Growth Hormone and Follicle Stimulating hormone are relatively low key products.
These are just the starting times. Over the years, with the rising healthcare costs major branded biopharmaceuticals will be beyond the reach of the average patients. Therefore with increasing cost of healthcare delivery, authorities worldwide are expected to gradually shift focus on the affordable generic versions. “This, coupled with streamlining of regulatory processes and effective protocols in place for approval of biogenerics especially in regulated markets, the first biogenerics to hit these markets would occur in 2006-2008,” asserts Mapari. “With increasing interest from international players for back-end integration, a shrinking domestic market, several Indian companies like Biocon, Shantha Biotechnics, Wockhardt and others are shifting their focus towards developed markets like the US and EU,” she adds.
Supporting this effort towards innovation is the fact that India as a biogenerics player has advantages in terms of highest number of FDA approved plants second only to the US, numbering 65. Similarly with a strong contingent of well trained scientists and lower costs of development at almost 50 percent than those in developed countries, India has very strong capabilities to manufacture high quality drugs of international standards, at competitive prices. The game is about to begin and we are all waiting!