New Delhi: Top Indian drug makers Ranbaxy Laboratories Ltd, Dr Reddy’s Laboratories Ltd, Wockhardt Ltd, Cipla Ltd and Biocon Ltd are honing their strategies to corner a slice of the emerging ‘biogenerics’ pie, as regulators in the US, following Europe’s example, rally for these off-patent biotechnology drugs to reduce rising health-care costs.
The market for biogenerics, which are copies of biopharmaceuticals or drugs developed from complex proteins and living organisms, is estimated to be worth over $16 billion (Rs67,200 crore) by 2011, especially as Europe paves a regulatory pathway for such medicines and US legislators begin drumming up support for laws making such copies legal.
But, these biotech-generated drugs are so complex and involve huge molecules that any copy, dubbed ‘biosimilars’ in Europe, cannot be therapeutically identical to the original drug, and developing them can be expensive and time-consuming, say industry insiders.
Biopharmaceutical drugs have clocked strong growth rates because they address clinical needs thought unmanageable as recently as two decades ago and also command premium prices. Examples range from medicines that pinpoint and target cancer cells much more accurately than sledgehammer-like chemical drugs, or red cell boosters and human growth hormones. The industry has helped create giants such as Amgen Inc., the world’s biggest player in the segment, with sales that have tripled to $14.3 billion in the past five years and the $9.3 billion Genentech Inc. whose drugs are among the most expensive prescriptionsdispensed.
Smelling a big opportunity, top Indian drug manufacturers have either begun working on these biogenerics in-house or have struck strategic collaborations to add bio-generics to their product pipelines.
Ranbaxy, the biggest Indian drug maker by sales, has struck an alliance with Hyderabad-based Zenotech Laboratories Ltd to develop its first biosimilar medication GCSF, or filgrastim, a copy of Amgen’s oncology medicine, Neupogen, which sold nearly $4 billion last year, and also sell 11 other cancer drugs. Ranbaxy’s minority stakes in Krebs Biochemicals and Industries Ltd and Jupiter Bioscience Ltd, with specialities in fermentation-based drugs and small proteins, underscore the Gurgaon drug maker’s ambitions in biogenerics.
“Though our strategy to enter the segment will be through alliances or strategic investments in specialty companies, we can access technologies and products in this area,” says Ramesh Adige, executive director at Ranbaxy.
Ranbaxy’s closest rival Dr Reddy’s is already selling GCSF in India and some less-regulated countries in Asiaand Africa.
“We have over 100 people working on several products going off-patent in the next two years. We are exploring the regulated markets for variants of these bio-drugs and eventually novel biologics,” says G. V. Prasad, the Hyderabad-based chief executive of Dr Reddy’s.
In Mumbai, Cipla has already tied up with Bangalore-centred Avestha Gengraine Technologies Ltd and Japan’s LTT Bio-Pharma Co. to launch biosimilars, and is scouting for partners in China, Russia and Cuba to enter the segment. Cipla’s chief executive, Amar Lulla, confirms the overseas plans, but is tight-lipped on the products it will pursue.
Wockhardt—it sells three insulin products and blood disorder drug erythropoietin (EPO) in India, the Commonwealth of Independent States, African and Latin American countries—has clinical development going on in five drugs. Bangalore’s Biocon, India’s biggest biotechnologycompany, has developed insulin, GCSF, clot-dissolving streptokinase and an EPO developed till through the last stage of human trials. Of this, insulin has been sold in India since 2004.
The next stop for all of them is Europe and then the US.
“We are addressing the US and European market opportunities for insulin and GCSF and targeting a 10-15% market share,” says Kiran Mazumdar- Shaw, chairman and managing director, Biocon, who pegs the total market opportunity for biosimilar insulin, GCSF and EPO at $1 to $5 billion over the next three to five years. She says she is ready to expand manufacturing capacities “if the US and Europe open up simultaneously”.
According to a report by consultant Frost&Sullivan, these two markets should be worth $16.4 billion by 2011 with an average annual growth rate of 70% and Indian companies can potentially grab up to $224 million.
While European regulators approved the first biosimilar— Sandoz’s human growth hormone, Omnitrope—a year ago, the US Food and Drug Administration has not yet approved any. The first biosimilar may take another three years to break into the US market, which is the largest market for biopharmaceuticals with $30 billion in sales.
A handful of members in the US Congress are working on a draft law that can allow copies of these drugs. Those championing the cause, Democrats Hillary Clinton and Henry Waxman (who co-authored a landmark law in 1984 that allowed generics into the US drugs business), along with patients groups, are, however, running into stiff opposition from patent-holding firms, which claim that knock-offs pose a health hazard and should undergo extensive clinical testing before beingapproved.
Yet, the charms of the market are many. Extremely complex technology and accompanying higher investment will mean high, entry barriers, better margins, reduced competition and a low price erosion, estimated to be as low as 20-25%. Copycat versions of drugs normally see the prices drop by 90-95%, making it less attractive to make generic versions of them.
The challenges are equally daunting, spanning technological, financial, regulatory and distribution arenas. “Developing a biosimilar can cost up to $20-30 million while a normal non-patented drug costs$1 million. Moreover, these drugs are protected by hundreds of patents and it is very hard to break them, thereby raising the cost and risk of litigation,” cautions Prasad ofDr Reddy’s.
Sujay Shetty, an associate director at consultant PriceWaterhouse Coopers, adds that costs mount as they are technologically harder to manufacture and undergo clinicaltrials. “Switching is not easy in these drugs and that will require a huge, front-end marketing expertise while convincing the doctors to prescribe,” adds Wockhardt’s executive director, MurtazaKhorakiwala.
Yet, the top Indian drug makers are betting big on the segment. Prasad says that bio-pharmaceuticals are a strategically important capability, with so many drugs coming out of it that no company with global ambitions can afford to ignore. And biosimilars are just the first step as most companies veer towards patentable bio-pharmaceuticals. Glenmark is already treading that ground—a research centre in Switzerland and a team of 15-20 scientists are set to bring its first novel biological drug into human trials by 2009— and Dr Reddy’s is set to follow.
“Biogenerics will require a change in mindset as it is not a volume game, like conventional generics. Innovator biotech companies don’t have to work too hard for now…it is the generic drug manufacturers who have the task cut out for them,” says Shetty.