Biotech Values

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INTERVIEW: Sandoz Says Well Placed For Biotech Generics Growth

NOVEMBER 2, 2010, 12:12 P.M. ET

By Goran Mijuk

Of DOW JONES NEWSWIRES
http://online.wsj.com/article/BT-CO-20101102-713188.html


ZURICH (Dow Jones)--Sandoz AG Chief Executive Jeff George believes the Swiss generics maker is well placed to broaden the fledgling market for copies of biotech medicines, for which regulators still need to provide a clear framework.

The Swiss firm, a unit of Novartis AG (NVS), already has a leading position in this segment, wielding a market share of roughly 50%, ahead of competitors Teva Pharmaceutical Industries Ltd (TEVA.TV) of Israel and U.S.-based Hospira Inc (HSP).

"We expect to continue to be the leader in [this market] looking forward," George told Dow Jones Newswires in an interview Tuesday.

Called biosimilars, the drugs are the closest thing to a generic for a biologic therapy.

Sandoz has three such products on the market--the first was launched in 2006. That trio of drugs generated $118 million in sales last year, with growth rates of more than 70%. Since the start of 2010, sales from the three biosimilars have jumped another 59%.

The market for biotech generics is set to become red hot. According to Datamonitor, sales could reach more than $2 billion by 2014. By 2020, the market could grow "well over $20 billion", according to estimates provided by Sandoz.

But much of the expected growth will depend on how regulators will treat this new class of generic medicines.

The U.S. Food and Drug Administration is currently discussing how this new class of drugs should be handled. In Europe, regulators are more advanced but still need to decide on the regulatory framework for copies of complex biotech medicines such as antibodies.

In contrast to traditional generics, which copy chemically synthesized drugs, biotech generics attempt to impersonate proteins that are made in living cells. Due to this complicated manufacturing process, which is prone to errors, generic versions of biotech drugs are similar and not identical versions of the original medicines. Hence, they are often called "biosimilars" or "follow-on biologics."

CEO George said new regulations should guarantee that biosmilars are safe, pure and potent medicines but at the same time regulations should only allow entry barriers that help make the medicines affordable to patients.

Manufacturing biosimilars is expensive, especially when compared to simple-to-produce chemical drugs which cost around $3 million. "It costs about $75 million to $250 million to produce a biosimilar," George said, adding that the final amount "depends on the complexity of the molecule."

Strict regulations--especially extensive testing of biosimilars--could inflate these costs and turn biosimilar ventures into a less lucrative business, analysts say. Consultancy Kalorama also said in a research report that consumer resistance due to a lack of clear regulatory guidelines and uncertainty over the safety of biosimilars could potential curb the market's potential.

But should entry barriers be reasonable, bringing biosimilars to market could help substantially slash costs for patients. According to German health research consultancy IGES Institut GmbH, biosimilars can help reduce health care costs by more than 15%.

Despite the regulatory concerns and efforts from biotech drug producers to raise the bar for generics makers and patient concerns, growth could be exponential as many biological drugs will lose patent protection in a few years time, including Roche Holding AG's (ROG.VX) cancer drugs Mabthera and Herceptin and Amgen Inc's (AMGN) autoimmune disease medicine Enbrel, analysts say.

"We have about 8 to 10 molecules in our pipeline," George said. "The focus is on the big opportunity" to launch biosimilar versions of medicines known as monoclonal antibodies, declining to specify which drugs Sandoz is working on at the moment. Competitor Teva has already said it is working on biosimilars of Roche's drugs.

As the market is awaiting a quantum leap in sales for this new class of generic drugs amid partnerships and M&A transactions--recent deals include Pfizer Inc's (PFE) deal with India's Biocon Ltd (532523.BY) to produce insulin--Sandoz can go it alone, although it will continue to invest "hundreds of millions of dollars over time," George said.

George said Sandoz doesn't need any bolt-on acquisitions.

"We are well positioned to grow organically," CEO George said, adding that Sandoz's early start in this market segment--it launched research in 1996--has allowed it to create technological expertise and attract key industry talent. Synergies with parent Novartis also help its biosimilars franchise.

"An acquisition isn't critical" and "we already have big facilities," George said. While Sandoz, which had nearly $10 billion in annual sales in 2009, owns several dozen factories around the world, the company has three facilities dedicated to the production of biotech generics.

-By Goran Mijuk, Dow Jones Newswires, [phone]; [e-mail]