Filling the pharma pipeline

Pharmaceutical companies need to replenish their portfolios. But are biologics the way to go?

It means stepping outside the small molecule comfort zone, but look at where future growth will come from, and it is evident that pharma companies need to get into biologics.

A report by the market analysts Datamonitor published earlier this year, suggested that biologics represent 60 percent of the revenue growth prospects from 2004 to 2010. On the other hand, the vast majority of blockbuster drugs are still chemicals, and only three pharmaceutical companies make a significant percentage of turnover from biologics.

“There is a gap in revenues going forward, particularly in the small molecule space. This is creating a dynamic tension in the whole industry,” said Nasseem Amin of Biogen Idec at a panel discussion investigating the nature of pharma’s interest in large molecules and what that means for the drug industry at the BioEurope Conference in Düsseldorf, Germany, earlier this month.

“Given this tension, the question is who will lead the industry?” asked Amin. Just three pharma companies, Roche, Johnson & Johnson and Eli Lilly, have significant standing in the biologics market. Each achieved this by a different route: in the case of Roche through its majority stake in Genentech, Johnson & Johnson by buying Centocor and maintaining it as a wholly owned subsidiary, and Lilly by building on in house skills acquired while developing recombinant insulin.

Scramble for space

One aspect of the scramble for the biologics space will be how pharma interacts with research stage biotechs that are the innovation engines of the sector. But there are issues too, for large and established biotechs, which will be challenged to offer better partnering opportunities to their smaller brethren, perhaps highlighting their like-mindedness and superior skills in handling large molecules.

After all, unlike small molecules, current biologics blockbusters did not require a 5,000-strong sales force to reach that status. Biotechs do not necessarily need access to pharma’s marketing scale.

And to date, biologics are in a different space from small molecules in other respects, addressing different indications, and as a result are not under the same pricing pressure. This will change as more small and large molecules come through targeting the same diseases.

“It’s a legitimate question to ask who will be leading in the next decade. Will it be a one horse race, or will products continue to be moved along across the piece?,” said Amin.

Late starter

One late starter now rushing to get into the biologics space is Pfizer. From having two (subsequently failed) programmes out of a total of 80 five years ago, the world’s largest pharmaceutical company now has 40 biologics in development.

Pfizer’s first broad deal was with antibody company Abgenix Inc. (now Amgen). “We were the first partner of Abgenix. It honestly transformed Pfizer,” said B J Bormann, Vice President of Business Development. “It helped us to go down the road of biologics, and helped us to do other partnerships.”

Since then the company has made a number of partnerships and acquisition in the antibody field and beyond in aptamers, RNAi and antisense for example. Recently, Pfizer moved back into vaccines with the acquisition of DNA vaccines specialist PowderMed Ltd.

Following his appointment in July, the company’s new CEO Jeff Kindler has set the goal of becoming number one in biologics by 2010.

Having 40 programmes in development “does parallel quite well with the largest biotechs, like Amgen,” said Bormann, adding that Pfizer is now aggressively moving towards Kindler’s target.

As one of the current leaders Johnson & Johnson has put a lot of thought into how to grow its biologics business, said Denise McGinn, the company’s Vice President of Business Development.

All a question of balance

“The number one challenge is to balance the near term and the long term and how much of the portfolio goes into biologics and how much into small molecules.”

The cost structure of developing each is different, with biologics taking longer to haul through development. And while on one hand there tend to be fewer safety issues with biologics, on the other they are more likely to fail in the clinic.

Furthermore, expertise in manufacturing, and manufacturing capacity, remain in short supply.

Profit margin will be an issue in biologics, given the much higher manufacturing costs and royalty stacking, particularly in the antibody field.

This presents a further challenge in terms of public policy and public opinion said McGinn. “We need to do a good job of differentiating biologics from small molecules. If not, we will get the same regulation as small molecules, and that’s not how it should be.”

McGinn believes that the portents are not good – in the US at least – pointing out that current proposals for regulating generic versions of biological drugs are nearly identical to those covering small molecule generics. She contrasted this with the “science-based” approach to biosimilars in Europe, saying, “[The US] could learn from that.”

However the regulatory framework evolves reimbursement will – as ever – be the central issue, with pricing decisions based on cost and not just efficacy. “We are going to have to continue to show true innovation as we bring products forwards,” said McGinn.