Drug patents worth more than $15 billion are set to expire in 2011, including one of the biggest of all time - Pfizer's $12 billion heart drug Lipitor is set to expire late in the year. Other drug patents due to expire in 2011 include Eli Lilly's Zyprexa and J&J's Levaquin. If this were not bad enough, another $130 billion worth of drugs will lose patent protection in the next six years.
For example, in 2012, BMS's Plavix, AstraZeneca's Seroquel, Merck's Singulair, and Amgen's Enbrel, all face patent expiry. To put this into context, and into financial terms, more than twice the value of drugs will lose patent protection in 2012 compared to 2011.
This has variously been described by commentators as “Pharmageddon” and the “Patent Cliff” and the doom-mongers are predicting the end of the blockbuster drug, if not the end of Big Pharma, as we know it. After a drug comes off patent, it can be freely produced by any competitor, thus opening the market to competition from cheaper generic forms of the same drug. And when generic drugs become available, the market competition often leads to much lower prices for both the original brand name drug and the generics.
Blockbuster drugs are those drugs which generate revenue of more than $ 1 billion annually and there are many such drugs on the pharma market. So these drugs are invariably a key sources of revenue for the pharma company.
Most of the blockbuster drugs that are in the market now, are essentially for diseases like hypertension, diabetes, allergies, or some of the nervous disorders such as depression, schizophrenia & anxiety. These diseases encompassed the main causes of mortality about 20 years ago when the drugs were developed and since then these drugs have performed extremely well in treating them.
Big Pharma is now trying to develop new blockbuster drugs to keep the revenue flowing. But commentators say many drug companies are having difficulty coming up with new ones to replace the old guard. Could biotech be the answer?
The next blockbusters
The first biotech drug, recombinant insulin, was approved in 1982, and while it has taken a while for the biologics to hit the blockbuster charts, some of the world’s most successful drugs are now biologics. The market for Amgen’s EPO, used to treat anaemia was worth nearly $13 billion in 2005 approximately the same as Pfizer’s Lipitor; a genuine blockbuster.
An assessment of the drugs likely to have blockbuster status over the next 5 years shows an interesting trend. By 2016, it is estimated that only two of the top-selling drugs — Astra Zeneca’s Crestor and GlaxoSmithKline’s Advair will be based on small molecule chemistry. The list will instead be dominated by biotech products– existing products like Roche/Genentech’s Avastin, Abbot’s Humira, and Pfizer/Amgen's Enbrel but also new products which are predicted to make the charts such as HGS’s Benlysta for lupus, Eli Lilly’s Byetta for diabetes, BMS’ Belatacept for transplant rejection and Centocor’s Stelara for psoriasis.
The old blockbuster model saw Big Pharma ploughing funds into therapeutic fields with huge potential patient populations – high cholesterol, depression, high blood pressure, osteoporosis. The new model will involve a more targeted approach – rarer conditions with smaller patient populations. The advantage of biologic products in this model is that they can command premium prices which are capable of offsetting the smaller patient population. For example Roche/Genentech’s Herceptin for treating breast cancer, costs around $75,000 for a full course of treatment.
Likewise, Abbott’s anti-rheumatic, Humira, is forecast to hit sales of more than $10 billion by 2016, almost double its 2009 sales of $5.5 billion. This stellar performance should see it overtaking Roche’s Avastin, taking the number one position which Avastin is expected to occupy as soon as Pfizer’s Lipitor patent expires.
We usually think of biotech drugs coming from small VC funded start-ups or University spin-outs, and indeed that often used to be the case. However Big Pharma has seen Pharmageddon approaching for quite some time and has responded by undertaking a shopping frenzy over the last 5-10 years. The big players are seeking to plug the hole in the product pipeline by purchasing the biotech companies intact along with their entire pipelines. As a result, it is predicted that the top three positions on the 2014 blockbuster chart will be held by biologics from the large pharmaceutical companies.
Similarly, the focus is shifting towards different areas of therapy - rheumatology and cancer and away from the previous blockbuster areas of high cholesterol and blood pressure. Of the top ten drugs for 2016, three treat rheumatoid arthritis and three treat various cancers.
Unfortunately for Big Pharma, the future is not entirely plain sailing. Up until relatively recently such biotech medicines have been generally immune from generic competition. However, the establishment of a regulatory pathway for biogenerics (or biosimilars as they are known in Europe) has been the first step leading to generic competition.
These biosimilars may not take market share as quickly and as deeply as generics do for the previous small-molecule drugs, but it is expected that the generic drug companies will be aiming to scoop a piece of biotech's blockbuster status.
Biosimilar development activity is currently underway across all product classes within the various groups of recombinant proteins. Most of these drugs were launched during the 1980s, and their patents have expired over the past 5 years, creating a significant opportunity for biosimilar manufacturers. Some of these key product classes include the following :
- Growth hormones (hGH), for treating growth disorders;
- Erythropoeitins (EPOs), for the treatment of anaemia;
- Granulocyte Colony Stimulating Factor (G-CSFs), for treating neutropenia;
- Alpha interferons, used as anti-virals;
- Beta interferons, for treating multiple sclerosis; and
- Insulins, for diabetes
hGH, which has a global market size of around $2.7 billion, lost patent protection in 2006; the first biosimilars that were launched through the European Biosimilar regulatory route were growth hormones - Sandoz's Omnitrope and Biopartners' Valtropin in 2006.
EPOs with a global market size of around $12 billion, lost patent protection in 2007, and have 5 biosimilars in Europe. Likewise, G-CSFs, insulins, and interferons have lost or are about to lose patent protection and offer a multi-billion dollar opportunity to biosimilar manufacturers although as yet, no biosimilars have been approved for interferons or insulin. Insulin analogues are patent protected until at least 2013.
Although a majority of patents have expired in the past three or four years, biosimilars referencing them are only expected to be launched in the next four to five years, considering the development timelines, and the risks involved.
Clearly therefore the battle lines are being drawn and the next wave of activity in the pharma market will involve biosimilars.
The next generation of Biosimilars
Monoclonal antibodies (MAbs) currently represent the fastest growing segment within the biopharmaceutical industry. In addition, most Mabs were launched in the early 1990s and their initial patents are not set to expire until around 2014, thus making them only a medium-term target for biosimilar companies. However, MAbs are expected to pose several challenges to generic companies, given their complicated structure and larger size. Furthermore, this market is dominated by leading players such as Roche (who acquired Genentech, the other leading player), making significant barriers to market entry for generics.
Despite the difficulties of market entry, Teva Pharmaceuticals, the world’s largest generic drug manufacturer, announced in 2009 that it intended to develop a generic version of MabThera (Rituximab), Roche’s blockbuster MAb used to treat rheumatoid arthritis, leukaemia and non-Hodgkins lymphoma. MabThera has patent protection outside the US until around 2013 and until 2018 in the US. Likewise, Sandoz (Novartis’ generics arm) has begun trials of biosimilar MabThera.
With the global market for branded biologic drugs worth more than $80 billion a year and roughly $50 billion of that business set to lose patent protection by 2016, biosimilars are certainly an enticing prospect.
So pharma watchers have the chance to see some key battles over the next 5-10 years as Big Pharma moves more and more into biologics and the Generic companies move into Biosimilars. Who said that Biotech was not the next big thing ? And it’s not before time.