Rituxan from Roche (OTCQX:RHHBY) and Biogen Idec (BIIB) is a major blockbuster and has been for many years. It was the first successful antibody against cancer. Rituxan's success has transformed cancer treatment, clearing the way for other monoclonal antibody treatments, including its Genentech sister Avastin.
Rituxan in 2011 sold 6 billion Swiss francs ($6.6 billion) worth of drugs worldwide. It is now approved for use in rheumatoid arthritis, chronic lymphocytic leukemia (CLL) and non-Hodgkin's lymphoma (NHL). Rituxan's patent expiration is around the corner: 2013 in Europe and 2018 in the U.S. A number of companies are lining up for a piece of a pie that could be worth billions when that happens. However, Rituxan is a biological drug and, as such, is not easy to copy.
Biosimilars vs. Generics
Generics of biological drugs are called biosimilars. Compared to traditional generics, biosimilars are complicated and expensive to make, and require clinical trials and approvals for each major indication. It is estimated that bringing a biosimilar to market will cost between $10 million and $40 million and take 6 to 9 years, compared with the $1 million to $2 million cost and 3-year process for generics.
As a result, biosimilars are likely to be marketed at 20% to 30% the cost of the original products, whereas generics are sold at about a 75% discount. However, even a 20% discount on the $66 billion spent in 2009 in the U.S. on the top 20 biologics is substantial. The U.S. Congressional Budget Office estimates that all biosimilars could save consumers a total of $25 billion per decade.
These drugs are not ready at the moment, but payers are going to push hard to find ways to encourage their use. The hope is that the presence of biosimilars in the marketplace will drive down the cost of the entire class of drugs so that the cost of the originator drugs will also drop. The originator product, backed by more extensive research and clinical experience, will probably always have the market share and will command more dollars.
Rituxan Biosimilar Trials
Sandoz, the generic subsidiary of Novartis (NVS), is conducting a phase 3 trial for its compound GP2013, a biosimilar version of Rituxan used to treat patients with follicular lymphoma. A phase 1 trial has also begun to test the drug's use in treating Rheumatoid Arthritis (RA).
Sandoz is already selling the biosimilar growth hormones filgrastim (a biosimilar version of Neupogen from Amgen (AMGN) and Johnson & Johnson (JNJ)) and epoetin (originally Epogen by Amgen and Johnson & Johnson) in Europe and elsewhere. Sandoz is the only biosimilar manufacturer to have more than two biosimilars on the market, and with 8-10 molecules at various stages of development.
Sandoz claims that in the past few years it has developed a robust, high-yield and large-scale process for the production of biosimilar Rituxan at its facilities in Schaftenau, Austria.
Pfizer's (PFE) biosimilar compound is PF-05280586. The company is running phase 1 and 2 trials for RA patients and phase 1 trial for patients with CD20 positive NHL. Merck's (MRK) version is called MK-8808 and is in phase 1 trial with RA patients. Celltrion, the South Korean outfit in a joint venture with Hospira (HSP), calls its compound CT-P10 and is testing it in a phase 1 trial for RA and another phase 1 trial for lymphoma.
Teva Pharmaceutical's (TEVA) compound is TL011. Teva has completed phase 1 and 2 trials for RA and is running a phase 1 for lymphoma patients. Teva has a joint venture with Switzerland's Lonza Group (OTCPK:LZAGF) to develop biosimilars. Lonza is a top drug-ingredient producer and until 2008 produced ingredients for the original Rituxan. Teva's biosimilars sales in January-September 2011 totaled just $105 million, less than 1% of its total sales. Its market was primarily in Europe, but is rapidly growing.
In 2011, Spectrum Pharmaceuticals (SPPI) signed a pact with Viropro (OTCPK:VPRO) to develop a biosimilar version of Rituxan ahead of its U.S. patent expiration in 2018. Viropro's ambitious portfolio consists of biosimilars of Lucentis, Herceptin, Avastin and others. In 2011 iBio, Inc. (IBIO), announced it had the technology for producing biotherapeutic proteins and vaccine antigens in whole green plants and has produced a functional monoclonal antibody copy of Rituxan.
With all this happening, Roche/Genentech have not remained idle. Roche is developing a subcutaneous formulation of Rituxan and is also developing new drugs intended to replace Rituxan. GA-101 (obinutuzumab) is a novel anti-CD20 antibody. In the Phase 2 GAUSS trial, GA101 was compared to Rituxan head-to-head in relapsed indolent (slow developing) non-Hodgkin's lymphoma. After completing the trial, Roche said GA101 outperformed Rituxan.
In another Phase 2 trial, the GAUDI, GA101 was put in combination with either CHOP or FC, both commonly used chemotherapy regimens. In the Phase 2 GAUGUIN trial, GA101 was used as a single agent in heavily treated, Rituxan- resistantlymphoma patients. Phase 3 trials are now ongoing.
Some skeptics question if GA101 will ever take the place of Rituxan. The data shows that GA101 is slightly better than Rituxan, substituting GA101 for Rituxan on a broad basis is unlikely, considering how entrenched Rituxan is in various regimens of lymphoma treatment. Once Rituxan faces biosimilar competition, GA101 may become Roche's own biosimilar of sorts to Rituxan and gain a portion of market share that may eventually be lost by the branded Rituxan.
Roche is also conducting trials of an injectable form of Rituxan to replace infusion in treating non-Hodgkin's lymphoma. Currently, injection is not approved in any market. Roche plans to file for approval in Europe in late 2012. If successful, this would save hospital expenses and improve convenience for patients. Roche uses Enhanze Technology from the San Diego based company Halozyme Therapeutics (HALO).
This technology enables the injection of large volumes of medication under the skin. It works by reversibly breaking down a gel-like substance called hyaluronan, which forms a barrier in the tissues between cells under the skin. In 2006, Halozyme made a deal with Roche to apply Halozyme's Enhanze technology to Roche's biological compounds, such as Herceptin and others. Roche made an initial payment for the application of Halozyme's recombinant human enzyme, rHuPH20, and will pay milestones and royalties depending on the enzyme's success. In February 2011, Roche began a Phase 3 trial of subcutaneous Rituxan.
The Investors Take
The new healthcare law permits U.S. regulators to approve copies of biological medicines like Rituxan, creating a new market and stirring up competition. Decision Resource's report says biosimilar version of Rituxan could be approved in 2013 in Europe. Forecasts suggest a biosimilar Rituxan alone could earn in excess of $800 million in the U.S. and $500 million in Europe by 2019.
The potential global market for biosimilars provides incentive to biopharma and non-biopharma companies to develop these molecules, especially in the face of their shrinking pipelines and the expiration of patents for blockbuster drugs like Lipitor and Plavix. But it requires major capital investment and risk taking.
Despite the entrance of biosimilars, Rituxan will maintain its dominance as the market-leading agent in the period to 2019, forecasts Decision Resources. Sales of the drug to treat non-Hodgkin's lymphoma will be flat. An increase in sales, however, is expected for its use in the first-line maintenance of follicular lymphoma and as single agents for newly-diagnosed asymptomatic follicular lymphoma.
Switching from infused to injected biologicals will save considerable amounts of time and money, making Halozyme a promising company. All in all, biosimilars have the potential to become a gigantic market in the next few years, with stiff competition and heavy fallout due to the tremendous obstacles in the way.