9 Things You Need to Know About Biosimilar Drugs

9 Things You Need to Know About Biosimilar Drugs
March 28 01:00 2016

9 Things You Need to Know About Biosimilar Drugs

It’s not often that investors get an opportunity to invest in a whole new class of drugs, but they’ve got an opportunity to invest on the ground floor with biosimilars. Last year, the Food and Drug Administration approved the first biosimilar drug, Novartis’ (NYSE:NVS) Zarxio, its version of Amgen’s (NASDAQ:AMGN) Neupogen, under its new authorization granted as part of Obamacare. And there are plenty more biosimilars in the pipeline.

In short, biosimilars are copycat versions of biologic drugs, and with plenty of branded biologics — many with sales north of $1 billion annually — set to come off patent shortly, the industry has a lot of growth ahead of it.

Before you invest in the space, here are nine things you need to know.

Don’t call them generics

Branded drugs fall into two basic categories: small molecule drugs that are usually made through chemical synthesis — breaking and reforming chemical bonds — and biologics that are proteins made in living cells grown in incubators and purified from the cells, making them substantially more complex.

Small molecule drugs are what you typically think of as generic drugs. Because they’re made through chemical synthesis, the active ingredient is essentially identical.

Since biologics are made in living cells, it’s nearly impossible to make an exact replica unless a company follows the exact same manufacturing procedure as the company that makes the brand-name drug. And since that’s proprietary information, the copycat manufacturers don’t have that option.

Thus was born the term “biosimilar” because changes in cell lines, growing conditions, expression times, purification process, and other variables can have minor changes on the drug. Biosimilars are similar — but not identical — to the brand-name drug, thus the name.

They aren’t interchangeable

Because they’re only similar, pharmacists won’t treat brand-name drugs and biosimilars as equivalent.

With small-molecule generic drugs, if the doctor prescribes the brand name drug, pharmacists will automatically substitute a generic — whatever generic version the pharmacy stocks — unless the patient or doctor specifically asks for the brand-name version. With biosimilars, doctors will have to specifically prescribe the biosimilar version. In fact, the FDA has a plan to require all biosimilars to append the generic name with a four letter code to designate them as biosimilars. Novartis’ Zarxio, for example, goes by filgrastim-sndz with the sndz short for Sandoz, Novartis’ generic drug division.

The requirement of a specific prescription means biosimilar manufacturers will likely need to do at least some marketing to get doctors to prescribe their version — something makers of small-molecule generics don’t have to do.

Biologics get a special exclusivity period (but it’s basically useless for many drugs)
As part of the negotiations that set up the law to allow biosimilars, biotech companies negotiated a 12-year exclusivity period after a biologic drug was approved before biosimilars could come onto the market. That’s longer than the five years that small molecules get.

But the exclusivity period runs concurrent to the patents that the companies have on the drug. Since patents run 20 years, only drugs with long development times are going to get approved with less than 12 years of patent time remaining, especially since companies tend to pile on additional patents during clinical development…

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