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BioProcess Technology Consultantswww.bptc.com

Tom RansohoffPrincipal ConsultantBioProcess Technology Consultants, Inc.IBC Biopharmaceutical Development and Production ConferenceHuntington Beach, CA, USAMar 30 – Apr 2, 2015

The Potential Impact of Biosimilarson Biomanufacturing Capacity

Outline Current global biopharmaceutical capacity landscape

• Geographical distribution• Balance of supply and demand

Biosimilar trends and pipeline• Data from marketed products• Pipeline and forecasts

Future growth and market penetration of biosimilars • Survey Results• Comparison to generics• Approaches to forecasting

2 From Clone to Commercial®

From Clone to Commercial®3

Current Biomanufacturing Capacity Landscape

Antibody products continue to drive growingdemand for capacity Antibody product aggregate

demand reached ~10 tons in 2013

Sales CAGR for antibody products 13.8% compared to 5.2% for other biopharma products (2009‐2013)

Analysis based on BPTC’s bioTRAK® database related to supply and demand for biomanufacturingcapacity. Uses include:

• Forecasting future supply and demand for manufacturing capacity

• Assessing the demand and market potential for technologies and services and perform competitive analyses

• Strategic facility life cycle management

• Identifying secondary suppliers


Top Ten Biopharmaceutical Products Total 2013 sales of almost $70 billion

Six are produced in cell culture

Seven are monoclonal antibody‐related products

CAGR for monoclonal antibody‐related products 2003‐2013 was ~24%

USProduct Name Company 2013 Sales

(Billions USD)

Humira Abbvie 10.659

Remicade J&J/Merck & Co. 8.994

Enbrel Amgen/Pfizer 8.325

Lantus Sanofi 7.590

Rituxan Roche 7.500

Avastin Roche 6.748

Herceptin Roche 6.559

Novolog Novo Nordisk 4.739

Neulasta Amgen 4.392

Lucentis Roche/Novartis 4.205


Product Companies Control >70% of Cell Culture Capacity


Geographic Distribution of Cell Culture Capacity


Balance of mammalian supply and demand trending towards higher utilization rates

From Clone to Commercial®Perfusion capacity adjusted to equivalent fed‐batch capacity where appropriate

8


Biosimilars Trends and Pipeline

Market dynamics favor biosimilars growthGlobal Trends in the Pharma and Health Care Fields:

① Global pharmaceutical sales forecast to reach >$1T by 2017― Currently, biologics drug expenditure already accounts for ~20% of

pharmaceutical spend and are >33% of all drugs in development MAbs are largest and fastest growing segment

② Continuous financial pressure on healthcare systems to make significant and sustained cost reductions

― US healthcare spending by 2021 forecast to be ~20% GDP

10

③Major biopharmaceutical products are losing patent protection coupled with new regulatory approval pathways for biosimilars in major markets

From Clone to Commercial®

Biosimilars market is becoming highly competitive


All major markets now have biosimilar legislation in place

Overall demand still small relative to innovator products but growing rapidly

Large pharma companies are increasingly entering this segment

Transition underway from early recombinant proteins to Mabs

Competition in the biosimilarMabs field is significant

Significant growth of programs targeting developed markets

bioTRAK® Database, BPTC, Mar 2015.

bioTRAK® Database, BPTC, Mar 2015.

11

0

10

20

30

40

50

60

Num

ber o

f Ann

ounced

Program

s

Biosimilars Products in Development Worldwide

Marketed

Phase 3

Phase 1

Preclinical

0 50 100 150 200 250

Asia

Western EU/US

Latin America

Other

Number of Programs ‐ All Development Stages

Geo

grap

hical R

egion

Geographical Distribution of Target Markets for Biosimilars Programs

Recent developments highlight increasing activity


‐NY Times, Mar 6, 2015

‐Financial Times, Feb 25, 2015

‐Fierce Biotech, Feb 4, 2015

‐Reuters, Jan 21, 2015

Novartis/ Sandoz

Celltrion; Pfizer

Amgen

Samsung; Biogen Idec

Biosimilars experiencing high sales growth


0

2

4

6

8

10

12

14

16

18

20

2006 2008 2010 2012 2014 2016 2018 2020 2022

Follo

w‐on Biologics S

ales ($

B)

Year

Worldwide Sales Growth of Follow‐on Biologics($B)

IMS Data, adapted from 2013 IMS Health Report, “Searching for Terra Firma.”

Sales of follow‐on biologics (biosimilars, biobetters and other non‐original biologics) growing at ~30+% per year

Worldwide sales forecast to reach ~$20B (8% of total biologics sales) by 2020.


Forecasting the Future

BioPulse Survey:Predictions about Biosimilar Impact on Capacity

15

Biosimilars will probably cause a

shortage of manufacturing

capacity37%

Biosimilars will not cause any shortage of

manufacturing capacity37%

The increase will definitely cause a

shortage of capacity10%

The increase will cause a shortage of capacity, but only in certain manufacturing

markets16%


Facilities of the Future? – Manufacturing and Technology Trends


Flexible

Modular

Disposable

Continuous

From Aspen Brook Alert Survey,Oct 10, 2014

Courtesy: Tarpon Biosystems

Courtesy: Pall Corp

Courtesy: KSep

16

Forecasting demand: can we learn from generics? Biosimilars are different from generic pharmaceuticals in many ways,

but there are also similarities to consider

30 year Anniversary of Hatch‐Waxman (1984)• Enabled competition with branded pharmaceutical products

through a codified pathway supported by regulatory guidance • Provided mechanisms and boundaries for the use of innovator IP

after patent expiry • Allowed for an abbreviated clinical pathway and potential for

substitutability • Addressed a market desire for lower cost pharmaceuticals


Forecasting demand: can we learn from generics? (2) Impact of Hatch‐Waxman1

• % of pharmaceutical prescriptions filled by generics increased from ― 19% in 1984 to ― 43% in 1996 to ― 86% in 2013

• Generics have become increasingly competitive over time:― Price decreases have increased over time

Generics are now often sold at 10% of innovator prices

GPhA estimates generics have saved $1.5T over past 10 years

― The average innovator market share one year after generic entry has decreased from 45% in 2000 to 16% in 2012

― The average period of sales for innovator products prior to generic competition has decreased to 12.9 years in 2012

• GDUFA implemented in 2012

Why won’t this happen with biosimilars over time?


1 – Thayer, A. 30 Years of Generics, C&E News. 2014 Sep 29; 92(39): 8‐16.

There are some reasons to expect the magnitude of change for biosimilars will be less than for generics and will take longer:• Biosimilars require highly sophisticated process and analytical development

capabilities • Investment in clinical and non‐clinical work required for approval is likely to be

substantially greater• More marketing infrastructure will be required• Substitutability may be much more difficult to achieve• Successful biosimilar companies will likely require larger R&D and Sales &

Marketing budgets than their generic counterparts

What will the biosimilars market look like in 5 years? 15 years? 30 years?• Directionally, biosimilars are likely to be follow generics, with increasing market

share, price decreases and innovator market erosion over time• The magnitude and time frame of these changes are highly uncertain – how

can we estimate demand?

19 From Clone to Commercial®1 – Thayer, A. 30 Years of Generics, C&E News. 2014 Sep 29; 92(39): 8‐16.

Forecasting demand: can we learn from generics? (3)

What level of price erosion will occur with biosimilars?

In a recent white paper, Brill* performed an NPV‐type analysis and concluded that biosimilars are most viable for biologics with annual (pre‐biosimilar) sales of approximately $900M• A key assumption is that the biosimilar would be priced at a 20% discount to

the innovator product in Y1, rising to a 40% discount in Y4 and thereafter

Using Brill’s assumptions (e.g., for development and launch costs, market penetration rates, discount rates), we asked a related but different question:• What is the discount that could be applied to a biosimilar as a function of

innovator annual sales volume?

Two margin cases were considered:• Case 1: The margin assumptions in Brill’s case were conserved as the discount

rose• Case 2: The margins declined from the assumptions in Brill’s case as the

discount rose


Brill A, “The Economic Viability of a U.S. Biosimilars Industry,” Matrix Global Advisors Report (Feb 2015).

What level of price erosion will occur with biosimilars?Modeling results


NPV analysis conducted by BPTC using assumptions from Brill report (Feb 2015).

$‐

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

0% 10% 20% 30% 40% 50% 60% 70% 80%

Breakeven Pe

ak Reven

ue of Inn

ovator ($

B)

Y4 Discount vs. Innovator Price

Breakeven Revenue Breakeven Rev (w Margin Adjust)

Conclusion: The price erosion for biosimilars of high revenue innovator productsmay be significant in competitive markets.

Economically Viable

Economically Non‐Viable

Biosimilars Pricing in Developing Countries Motivation and Goals

• Biosimilars are most important in emerging economies due to affordability• Serve patients that cannot be served by innovators

Pricing• Significant reductions in pricing observed where biosimilars launched in India

― tPA ($2,000 USD ‐> $500 after introduction of biosimilar)

― EPO (8 manufacturers – highly competitive – “syringe now most expensive element of product”)

― Rituximab (Significant price drop; 6 years on market; market expansion)

― Insulin glargine – dropped to 40% of original pricing

• Some countries have “winner take all” tenders, leading to competitive bidding processes (e.g., recent Norway infliximab tender)

• Affordable biologics are inevitable, whether biosimilars or follow‐on biologics

Cost• Biosimilar manufacturers have an opportunity and incentive to be innovative in

reducing manufacturing and development costs• Cost and price needs to enable manufacturer to be sustainably profitable


Forecasting demand from biosimilars –Consider potential scenarios


Very early stage and high degree of uncertainty look at different scenarios

Scenario 1: Biosimilars are a “zero sum game”• Price decreases from new biosimilar entrants will be modest• Impact on demand will be limited (i.e., gains in demand for biosimilars will be

directly offset by losses in demand for innovator products)• Result: No change in overall demand profile due to competition from

biosimilars

Scenario 2: Biosimilars lead to significant price competition• Biosimilars will result in significant price decreases over time• Gains in demand for biosimilars will significantly outpace loss in demand for

innovator products on a global basis• Result: Increase in overall demand profile for products with significant

biosimilar competition• In this case, how to estimate the potential magnitude of increase in demand?

Forecasting demand from high demand scenario –Preliminary thoughts on approach


Assume US demand is inelastic (i.e., price drop will not influence demand) and represents “state of the art” standard of care [Scenario 1]

Assume demand in ROW is more elastic and treatment percentages will increase as prices decline [Scenario 2]

Definitions:• Estimated Treatment Rate = Estimated Number of Patients Treated with Product / Estimated Prevalence

• Estimated Number of Patients Treated = Sales in Geography ($/yr) / Treatment Cost ($/patient/yr)

Two cases evaluated using estimates from bioTRAK database: Herceptin (Breast Cancer) and Enbrel (RA)

0% 5% 10% 15% 20% 25%

Herceptin

Enbrel

Estd Treatment Rate, WW ex‐US Estd Treatment Rate, US

Forecasting demand from high demand scenario (2) –Potential magnitude of impact


Table below correlates predicted increase in demand for drug as a function of the percentage of the “treatment gap” that is filled in ex‐US markets by “elastic demand”

10% 25% 40%

trastuzumab 13% 31% 50%etanercept 26% 66% 105%Average 19% 48% 78%

% Treatment Gap Filled

Predicted Increase in drug demand

In this scenario, the magnitude of demand increase for just the top 10 volume products is a significant percentage of total global capacity

Conclusions: Some Likely Impacts of Biosimilars on Biomanufacturing Capacity Landscape


Biosimilars will eventually drive an increase in overall demand for biomanufacturing capacity

• Magnitude and timing difficult to forecast • Will be driven by impact of price decreases on global demand for biosimilar products

New capacity for biosimilars will be required in any event due to mismatch of ownership and geographical distribution of current capacity

• Product companies control >70% of total capacity• Demand for in‐country and/or regional supply in geographies with limited/no capacity

Some biosimilars firms are likely to adopt single‐use and/or novel technologies to • Reduce initial capital requirements and overall operating

expenses and• Enable flexible response to uncertain demand

26

Acknowledgments BioProcess Technology Consultants

• Dawn M. Ecker

• Patti Seymour

• Howard Levine


Thank You!

BioProcess Technology Consultants, Inc.12 Gill Street, Suite 5450Woburn, MA 01801

781-281-2704

[email protected]

Tom Ransohoff

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