[Ip-health] Big Pharma No Threat to Biotech...Yet

Thu Dec 11 17:41:56 2008

http://www.thestreet.com/story/10452527/4/big-pharma-no-threat-to-biotech-y=
et.html
TheStreet.com
Biotech
Big Pharma No Threat to Biotech Yet
Adam Feuerstein
12/10/08 - 03:09 PM EST

The biotechnology industry and its investors need not worry yet about
Big Pharma's push to make copycat versions of the top-selling biotech drugs=
.

A whole host of things have to go right before drugmakers like Merck(MRK
Quote - Cramer on MRK - Stock Picks) or Novartis(NVS Quote - Cramer on
NVS - Stock Picks) can compete in the biotech arena. For starters,
Congress has to pass legislation creating a regulatory pathway that will
allow drugmakers to sell so-called bio-generics or bio-similars.

But I don't see Congress as the biggest challenge. The real hurdle for
drugmakers will be perfecting the manufacturing process for these
biologic copycats. Talk to manufacturing experts from companies like
Genentech(DNA Quote - Cramer on DNA - Stock Picks), Genzyme(GENZ Quote -
Cramer on GENZ - Stock Picks) or Amgen(AMGN Quote - Cramer on AMGN -
Stock Picks) and they'll tell you that making biologic drugs is a tough
thing to do. And expensive.

It took these companies years to figure out how to cultivate and
genetically engineer living cells so that they produce the proteins and
antibodies that can later be filtered and refined into successful drugs
like Avastin or Myozyme or Aranesp. By comparison, most drugs sold by
Big Pharma are manufactured relatively easily from synthetic chemicals.

It's a simplistic analogy, but I think of the manufacturing process for
biologic or biotech drugs like making beer or wine. Small changes to the
recipe, or even to outside conditions like time or temperature, can
result in different-tasting end products. The same goes for biotech
drugs, and sometimes these variations can have negative effects.

The Food and Drug Administration is going to be very sensitive to these
changes, to make sure that patients aren't prescribed a drug that is
ineffective or unsafe. In fact, U.S. regulators already take a very
tough line.

Look at Genzyme, which has run into big delays trying to convince the
FDA that Myozyme, its drug for Pompe disease, made at a new, larger
manufacturing facility is the same as the old Myozyme made at a
smaller-scale facility.

Genzyme isn't trying to make a new version of Myozyme, the company just
wants to make more of it. Yet, the FDA required Genzyme to run a
clinical trial testing the Myozyme made at the larger manufacturing
plant. Even then, regulators seriously questioned the outcome and data
that came from that trial.

My point here is not to say that drug companies like Merck will be
unable to make their own biologic drugs. It's simply to say that the
process is complicated and there are no guarantees of success.

Merck said Tuesday that it would rely on technology that uses yeast
cells to produce the proteins in its biotech drugs. The company predicts
its first product will be an anti-anemia drug similar to Amgen's
Aranesp, which is made in mammalian cells.

Since Merck hasn't tested its anti-anemia drug in humans yet, we have no
way of knowing whether these yeast cells can produce an anti-anemia drug
that is as safe or effective as Aranesp made in mammalian cells.

Maybe yeast cells are a better way of making biologic drugs? Or maybe
Merck just needed to find a way to steer clear of mammalian cells so
that it didn't risk violating existing patents held by companies like Amgen=
?

Does anyone want to make a wager that at some point, the FDA rejects or
significantly delays a Big Pharma biotech drug because a red flag pops
up in the clinical data? It's going to happen. Trust me.

When most people think of generics, they think of a lower-priced drug
that is chemically identical to its brand-name counterpart. But biotech
copycats, by definition, will not be identical. That's why the term
bio-similar is more accurate than bio-generic.

If Merck is successful in getting its anti-anemia drug on the market, it
won't be a generic version of Aranesp in the way that pharmacies sell a
generic simvastatin as a cholesterol-lowering substitute for Merck's Zocor.

Will doctors choose to prescribe a relatively new and unproven
anti-anemia drug from Merck, or continue to prefer Aranesp due to its
long track record?

Price will of course play a role in the success or failure of copycat
biotech drugs. Merck says its anemia drug will be less expensive than
Amgen's Aranesp, but by how much?

It costs more money to produce a biotech drug than a conventional drug,
plus companies like Merck have to recoup the capital expenditures
required to build new biologic manufacturing plants. Merck is also going
to need to market its biotech copycats, which means hiring and paying
for a sales force.

All these costs likely mean that a Big Pharma push into the biotech drug
market will create competition for existing biotech companies but not
necessarily as much pricing pressure. We won't see a scenario where a
flood of generic drugs drops the price 80% or more and where the
brand-name drug disappears.

Perhaps we'll see prices lowered by 10-15% with older "brand name"
biotech drugs still maintaining significant market share.

During its presentation Tuesday, Merck said that sales of biologic drugs
totaled $94 billion last year and will grow to $187 billion in 2014.
With declining revenue due to generic competition of their own, it's no
wonder Big Pharma companies like Merck want a piece of the biotech action.

Bio-similar drugs are coming to a doctor's office near you. The push for
health-care reform will create a legal pathway for these biotech
copycats in the next year. After that, the onus will be on conventional
drugmakers to prove they have the technical expertise to manufacture
these new biotech drugs well enough to pass muster with regulators.

At this point, there are scarier things for the biotech industry and its
investors to worry about.

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--
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: (202) 387-8030
Cell: (202) 422-2687
www.essentialaction.org/access/