Biogen's Biosimilars Vs. Amgen, Johnson & Johnson

 |  Includes: AMGN, BIIB, HSP, JNJ
by: Peter Geschek

In December, Biogen Idec (NASDAQ:BIIB) has taken the lead in marketing anti-TNF biosimilars in Europe, through Samsung Bioepis, its joint venture with Korean electronics giant Samsung (OTC:SSNLF). The original contract with Samsung was signed in 2011. The joint venture is potentially a key player in the advancement of biologic follow-on products, though it has been quiet on exactly which drugs is it targeting.

According to the U.S. government trial register Samsung Bioepis is running Phase 3 trials to develop copies of Remicade and Enbrel, some of the biggest blockbusters in pharmaceutical history. European regulators recently approved Inflectra, a copycat of Remicade from Hospira (NYSE:HSP) and Celltrion, a Korean company. Remicade is sold by Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK).

The total number of biosimilars approved in Europe is 14 since 2006. Europe is well ahead of the U.S. in approving biosimilars, because European leadership sees it as an opportunity to counter the super high prices charged by mainly U.S. companies for newer biological drugs.

What stirred Biogen into action was most likely the recent European approval of Hospira's drug. Under the modified agreement with Samsung, Biogen will be marketing the joint venture's products across Europe, where there is an established market for biosimilars along with a defined regulatory pathway.


One of Samsung Bioepis' trials is testing the experimental drug SB2 by comparing it to Remicade in subjects with moderate to severe rheumatoid arthritis who received methotrexate therapy but it failed to help them. Trial sites are located in Bulgaria and Lithuania and an estimated 584 patients enrolled. The study started in August 2013 and the primary completion is expected in a year.

SB2 is given in doses of 3 mg/kg per body weight at weeks 0, 2, 6 then every 8 weeks thereafter via intravenous infusion. Remicade is used as a comparator drug, given in 3 mg/kg doses at weeks 0, 2, 6 and after that in every 8 weeks via intravenous infusion.

The primary outcome measure is ACR20 (the American College of Rheumatology 20 percent response criteria); the duration of the trial is 30 weeks. The other trial is testing SB4, a biosimilar version of Enbrel, sold by Amgen (NASDAQ:AMGN) and Pfizer (NYSE:PFE). Trial sites are in Poland and the U.K. The estimated enrollment is 498 patients. The study started in June 2013 and primary completion is expected in June 2014. The primary outcome measure is ACR20; the duration of the trial is 24 weeks.


The approved biosimilars from Celltrion and Hospira, Remsima and Inflectra both contain the same active ingredient, infliximab.The application documents have shown the drug to be similar to the biological medicine Remicade, a monoclonal antibody that has been authorized in the European Union since 1999.

Monoclonal antibodies are structurally complex substances that can locate, bind to and thereby inhibit specific molecules. Infliximab binds to TNF (tumor necrosis factor) alpha, a protein that promotes inflammatory response, causing many of the clinical problems associated with autoimmune disorders. This is the first time that the biosimilar concept has been applied to such a complex molecule. The regulatory requirement in the European Union is that a biosimilar medicine should be a demonstrably close copy of the original, approved drug.

Inflectra has been approved for the same indications as Remicade: the treatment of inflammatory conditions including rheumatoid arthritis, ankylosing spondylitis, Crohn's disease, ulcerative colitis, psoriatic arthritis, and psoriasis.

Celltrion's biosimilar version is being co-marketed with Hospira and Egis, a Hungarian company in Europe. The launch in larger markets such as the United Kingdom, France, and Germany will have to wait until February 2015 since a pediatric extension has been granted to the drug's patent. Celltrion has released data from a two-year crossover study conducted in the U.S. showing that patients with rheumatoid arthritis or ankylosing spondylitis switched from treatment with Remicade to the biosimilar Remsima showed no statistically significant changes in efficacy or side effects.

The crossover study was an open-label extension of the company's previous Planetra study and it measured efficacy and safety of the drug over a two year period. The new treatments may be sold at a significant discount compared to Remicade.

"The price of Remsima will be more than 30 percent cheaper than those of the original drugs," Kim Hyoung Ki, chief financial officer at Celltrion said in an interview during the summer of 2013. However, analysts have doubts about the initial acceptance by doctors and patients. Some physicians are skeptical of biosimilars.


Remicade is Johnson & Johnson's biggest selling drug. J&J sold $4.96 billion worth of Remicade in the first 9 months of 2013, Merck's Remicade sales were $1.65 billion for the same period.

J&J has extended Remicade's patent protection to February 2015 in the majority of European Union countries, meaning that Celltrion and Hospira will be able to introduce their product only in a limited number of markets in 2014. Remicade has patent protection in the U.S. until September 2018.

There is also a legal fine point. Remicade is protected by secondary patents, and J&J and Merck may initiate a patent infringement case against Hospira and Celltrion, as well as other would-be producers. Secondary patents are related to the manufacturing process and the makers of biosimilars have to circumvent these during the production of the drug if they want to avoid legal problems.

Johnson & Johnson and Merck currently share Remicade sales. J&J now has the lion's share of the drug's income, as a result of a settlement in 2011. J&J's original marketing partner for Remicade was Schering-Plough. When Merck merged with Schering-Plough, a dispute erupted with J&J.

As a settlement of the dispute Merck agreed to pay J&J $500 million and concede some of its sales territories and profits. Merck relinquished exclusive marketing rights to the drug in Canada, Central and South America, the Middle East, Africa and the Asia-Pacific area, while keeping rights in Europe, Russia and Turkey.

The deal did not affect the U.S., where J&J has exclusive rights. In areas where Merck kept the rights, J&J's share of the profit was raised to 50 percent from the previous 42 percent. The deal runs through 2024. So far, Remicade sales have dropped for Merck, but it remains J&J's biggest drug, accounting for 9.1 percent of the company's total revenues for 2012, with sales of $6.1 billion.

As to the acceptance of Remicade by the medical community, BioTrends Research Group found that the drug is the market leader for the treatment of ulcerative colitis in the EU5 (France, Germany, Italy, Spain and the United Kingdom), even after Humira is approved for the indication. Derrick Sung, at Sanford C. Bernstein & Co. thinks that biosimilar Remicade could capture 30-40 percent market share in Europe following its launch.


Enbrel, co-promoted by Amgen and Pfizer is one of the most successful drugs in history. Amgen sells it in the U.S. and Canada, Pfizer sells it to the rest of the world. In 2012 Enbrel was the world's second best-selling drug, earning $4.2 billion for Amgen and $3.7 billion for Pfizer from sales outside the US and Canada. Pfizer also received $1.5 billion in 2012 from Amgen as its share of the profits from the US and Canadian sales.

Amgen sold $1.15 billion worth of Enbrel in the third quarter of 2013, Pfizer earned $932 million in the same period.

Enbrel's success is remarkable. Even after 20 years on the market, sales have increased for Amgen by 7 percent in the third quarter from the same period last year and for Pfizer by 4 percent. Amgen's collaboration agreement with Pfizer to market Enbrel in the U.S. and Canada expired on October 31, 2013 and the profit sharing switched to a significantly lower royalty.

The royalty stream to Pfizer will start at 12 percent and declines to 10 percent over three years. After three years the arrangement ends and no more payment is due to Pfizer. The rights to sell Enbrel outside the US and Canada are reserved to Pfizer indefinitely.

Enbrel was set to lose U.S. patent protection in October 2012, but Amgen has worked a legal miracle and had a new patent approved in 2011 that could shield the drug for another 17 years until 2028.

The application for the new patent was originally filed in 1995, but it took until 2011 to get it through the Patent Office. It was reworked and at one point rejected, forcing Amgen to appeal. The patent law has been changed and patents now run 20 years from the date of application, not the approval, to avoid situations like this. But since this patent was filed before the law changed, the old rules apply.

The patent is owned by Roche which licensed it to Immunex Corporation which in turn was acquired by Amgen in 2002. Amgen paid Roche a one-time payment and obtained an exclusive, fully paid-up license to Enbrel.

The following U.S. patents are listed in Amgen's 10-K for 2012:

  • Methods of treating psoriasis, expiring on 8/13/2019.
  • Aqueous formulation and methods of treatment using the formulation, expiring on 6/8/2023, a formulation which accounts for the majority of Enbrel sales in the U.S. Enbrel is also sold in an alternative freeze-dried formulation that requires reconstituting before it can be administered. to the patient.
  • The recently approved fusion protein, and pharmaceutical compositions patent, good until 11/22/2028 and DNA encoding fusion protein, and methods of making fusion protein until 4/24/2029.

Enbrel was launched in the U.S. in November 1998 and is approved for the treatment of moderate to severe rheumatoid arthritis; moderate to severe plaque psoriasis in patients who are candidates for systemic therapy or phototherapy; psoriatic arthritis; and ankylosing spondylitis. It is also indicated for reducing signs and symptoms of moderate to severe juvenile idiopathic arthritis in patients ages two and older.

Enbrel is given by injection and it costs more than $20,000 a year in the U.S.

Investors' summary

Biogen reported third quarter revenues of $1.8 billion, an increase of 32 percent over the third quarter of 2012.

Non-GAAP diluted earnings per share were $2.35, an increase of 23 percent over the third quarter of 2012. Non-GAAP net income for the third quarter was $561 million. Revenue gains were driven by Tecfidera sales totaling $286 million during the third quarter. According to the market research firm IMS, Tecfidera is now the leading oral MS therapy in the U.S. after only six months on the market.

Avonex revenues decreased slightly to $733 million, while Tysabri sales increased by 46 percent as a result of Biogen Idec acquiring full rights to the therapy from Elan earlier in the year.

Rituxan revenues from the joint business arrangement with Roche were $303 million for the quarter, an increase of 5 percent. At the end of September, Biogen had cash and cash equivalents of approximately $1.0 billion. During the third quarter the company repurchased 1.7 million shares of its stock at a cost of $360 million.

Biogen has increased its guidance for 2013. Revenue growth is expected to be approximately 23 to 25 percent and non-GAAP diluted EPS is expected to be between $8.65 and $8.85.

Biosimilars are promising to become a gigantic market, first in Europe, then elsewhere in the world, and lastly in the U.S. Aggressive big players, like Biogen, are getting ready now to earn billions and in the process taking away substantial market shares from their equally large or even larger competitors.

A war of giants is just getting started.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.