ViewPoints: Fourth-quarter results showcase biosimilar headwinds and tailwinds

(Ref: ViewPoints Desk)

Regardless as to how the biosimilars endgame may ultimately play out, it is difficult to deny the growing influence these products are having on the market.

The backstory

Last week, Roche warned that despite a number of promising new launches, such as the multiple sclerosis treatment Ocrevus and haemophilia A therapy Hemlibra, exposure of its three longstanding cancer franchises (Avastin, Herceptin and Rituxan) to biosimilar competition over the next few years will threaten, or at the least soften, profitability.

When Johnson & Johnson announced its fourth-quarter results on Tuesday, it revealed a marked decline in sales of the anti-TNF therapy Remicade; triggered to some extent by growing competition in Europe where biosimilar versions have been available for a number of years (although Merck & Co. markets Remicade in the region), but mainly driven by efforts to pre-empt biosimilar erosion in the US market through more aggressive rebating with payers.

It should be noted that Pfizer - which markets Inflectra, a biosimilar Remicade, in the US - has seen very minimal penetration for its product; in this case, biosimilars seem to be having a pre-emptive impact, even if they are not being prescribed to patients

Price concessions and rebates are likely at the core of the exclusionary contracts that Pfizer has alleged are 'anticompetitive'; it filed a lawsuit against Johnson & Johnson last year that aims to prevent the practice. The outcome of that litigation could prove instrumental in determining whether the go-to strategy for limiting uptake of biosimilars, thus far quite successful in the US market, can be maintained. See ViewPoints: As lawsuit against Johnson & Johnson is filed, FirstWord's new biosimilar report sheds light on Pfizer's Inflectra challenges in US market.

Other implications

Another biosimilar-themed trend emerged in Novartis' fourth-quarter and full-year results, which were announced on Wednesday. With a challenging pricing environment persisting for traditional, small-molecule generics in the US market, growth from biosimilar products looks increasingly important if the performance of Novartis' Sandoz division is to improve. Quarterly Sandoz sales declined 4 percent in constant currencies to $2.6 billion, while divisional revenue from 'biopharmaceuticals' grew 6 percent to $309 million; in the process elevating Sandoz as the first billion dollar biosimilar player.

Sandoz boasts five marketed biosimilar products on a global basis, the biggest portfolio of any company. Success to date has mostly come in Europe, where management described continued uptake as strong, with further launches anticipated this year.  

Asked when its biosimilar portfolio will make a more pronounced impact on overall top-line performance, Novartis management cited the two-speed regulatory and commercial dynamics of the EU and US markets. However, despite multiple barriers in the US, Novartis maintains that it is a case of 'when not if' this market provides an annual multi-billion dollar opportunity for its biosimilar business.

During Novartis' earnings call last week, CEO-elect Vasant Narasimhan described the US as "a healthcare system that desperately needs biosimilars to be successful, to create fiscal space for new medicines. Payers, the FDA, HSS are all on the side of biosimilars."

FirstWord research with US payers, published in 2017, would concur with Narasimhan’s sentiment, with many payers arguing that biosimilars of the next wave of anti-TNFs, like Enbrel and Humira, will have a huge impact and "put Amgen and AbbVie on their heels." (See Biosimilars: US Payer Perspectives [2017])

Driven essentially by European sales of its Enbrel biosimilar Benepali, Biogen's biosimilar sales grew from $101 million in 2016 to $380 million in 2017, the company reported last week. "We anticipate that increased biosimilar competition will result in further price erosion, but we still expect double-digit increases in revenue in 2018," said Jeff Capello, Biogen's chief financial officer.

Benepali and Flixabi (a biosimilar version of Remicade) are marketed by Biogen in Europe through its joint venture (JV) with Samsung Biologics (which operates under the name Samsung Bioepis). Biogen owns a 9-percent stake in the JV, but has an option to expand its ownership to 49.9 percent before mid-2018; one that the company intends to take, indicated Capello.

With Biogen looking to position itself as a specialist neuroscience player, building on its leading positions in the multiple sclerosis and spinal muscular atrophy markets, Capello hinted that the biosimilars business would potentially be divested at a later date.

Final thoughts

The market has also rewarded investors in those circumstances where the threat of biosimilar erosion has seemingly been thwarted; none more so obvious than the case of AbbVie's share price appreciation over the course of 2017.

Last year's 54 percent increase in share price was approximately double that of AbbVie's nearest Big Pharma competitor (AstraZeneca; 27 percent), ostensibly driven by the agreement it reached with Amgen in August that will delay the latter from launching a biosimilar version of Humira in the US market until 2023. (See ViewPoints: AbbVie's biosimilar settlement with Amgen could be decisive)

In Europe, however, Humira biosimilars are expected to reach the market in October 2018, with as many as 3-4 biosimilars being launched in quick succession, including Amgen’s Amgevita, Boehringer Ingelheim’s Cyltezo and Samsung Bioepis/Biogen’s Imraldi. (See ViewPoints: AbbVie's US Humira empire safe for now, but EU physicians are chomping at the bit for biosimilars)