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Amgen’s Slow Road to Profits

Amgen Inc. made history last month when its drug Mvasi became the first biosimilar for cancer approved by the U.S. Food and Drug Administration. Mvasi is a copycat of Avastin, one of the bestselling biologic drugs in the world, with reported sales of more than $3 billion last year. But it’s doubtful Mvasi will get a piece of that action any time soon. Amgen is currently tied up in litigation brought on by the manufacturer of Avastin, Genentech Inc., a wholly owned subsidiary of Roche Holding AG. In a complaint filed in February, Genentech said Amgen has failed to provide manufacturing information about Mvasi to the company, which is required by law. Despite the sluggish go-to-market process, Amgen remains hopeful about biosimilars. “Both development and supply of these complex medicines are expected to be scientifically challenging and capital intensive,” the company said in a statement on its website. “Biosimilar manufacturers, like Amgen, will benefit from having significant biologics expertise, infrastructure and investment to successfully bring these medicines to market.” Meanwhile Amgen has sued Sandoz Inc., Apotex, Inc., and Hospira, Inc. – all manufacturers of biosimilars of Amgen’s existing drugs – using similar legal arguments. The outcomes of these lawsuits have been mixed, as the complaints stem from different sections of the Biologics Price Competition and Innovation Act of 2009, which set guidelines for biosimilar development. In June, the Supreme Court sided with Sandoz against Amgen; but just two weeks ago, Amgen was awarded more than $70 million in a suit against Hospira, Inc. Analyst Eric Schmidt of Cowen Inc. an investment firm in New York, has followed Amgen for over 20 years. Schmidt said he understands the need for such lawsuits. “Amgen is defending its branded business, and you have to defend your branded business at all times,” he said. Patent litigation is a routine process in pharmaceuticals, according to experts. A Duke University study found that for a biologic drug to “break even” it requires anywhere from 12 to 16 years of exclusive marketing. “Unfortunately, these drugs are not only very expensive to discover, they are expensive make,” said patent attorney Kevin Noonan, partner at Chicago-based McDonnell Boehnen Hulbert & Berghoff. With only 12-year regulatory exclusivity on new biologics, drug companies are eager to defend their products nearing the end of exclusivity, said Noonan. ‘Patent dance’ Most pharmaceuticals are made of chemically manufactured molecular compounds. Biologics, on the other hand, are large protein molecules, composed of thousands of small molecules in varying orientations, usually made in genetically engineered cells that are proprietary to the drug manufacturer. Since the cell cultures in which they are made cannot be replicated, a biosimilar drug cannot be an exact copy of the original – hence the term “similar.” However, biosimilars are like generic drugs in a sense that it has “no clinically meaningful difference in terms of safety and effectiveness,” from the product it is imitating, according to the FDA. The Biologics Price Competition and Innovation Act of 2009 was enacted to jumpstart the so-called “patent dance” process. This is a process in which the original manufacturer of a drug and the biosimilar manufacturer exchange product information to resolve any patent infringement issues. This is similar to the Hatch-Waxman Act of 1984, which paved the way for commercialization of generic pharmaceutical drugs. Amgen officially started pursing the biosimilar business at the end of 2011. Amgen’s chief executive Robert Bradway was its chief operating officer at the time.  “Biosimilars provide an exciting long-term growth opportunity for Amgen,” said Bradway in a statement announcing the decision.  However, even for established biotech company like Amgen, the approval process for its biosimilars has been an arduous one. Biologics with all their complexities generally have many more patents that need to be sorted out than a small-molecule drug. Noonan said the law had great intentions, but perhaps lacked in detail. “They (lawmakers) think about the law and the big picture, but they don’t think about the nitty gritty details of patent litigation,” he said. Under the law, biosimilar manufacturers must provide the original biologic patent owner with manufacturing information when the drug is accepted by the FDA to be reviewed. This allows the original manufacturer to review any patent violations and begin litigation. But biosimilar companies are wary of providing the manufacturing information, as they worry their trade secrets will be used by the reference product sponsors for other products, according to Noonan. But the FDA still moves forward with the process of approving the biosimilars. It may take years for an FDA-approved biosimilar to reach patients. For example, Amgen’s very first biosimilar Amjevita was approved by the FDA a year ago. The current sales date for Amjevita in the U.S. is 2023, thanks to a legal settlement reached last week. For Mvasi, the release date is unknown. “The patent information exchange under the regulatory scheme governing biosimilars is ongoing,” said Kelley Davenport, spokeswoman for Amgen, in a statement to the Business Journal. “Therefore, we are not providing launch details or pricing information for either product at this time.” Why biosimilars? Despite the delays, the FDA is ever enthusiastic about biosimilars. In a statement announcing Mvasi’s approval, FDA Commissioner Scott Gottlieb said bringing biosimilars to patients “is an important way to help spur competition that can lower health care costs.” Biosimilars are marketed at a lower price than biologics, albeit it may be only 15 percent compared to 90 percent price reduction for generics. However, any bit can help for patients who are paying upwards of $100,000 per year, a typical cost of treatment for Avastin. Dr. Robert Rifkin medical director for biosimilars with McKesson Specialty Health and The US Oncology Network, currently treats his patients with Zarxio, a biosimilar of Amgen’s Neupogen. Zarxio, is less costly than Neupogen, and is a great fit for patients seeking alternative payment methods, he said. “We use biosimilars largely to increase patient access and decrease cost,” said Rifkin. “We are hoping biosimilars will get a widespread uptake so that we can get drugs to patients much more easily.” Head-scratching strategy The biosimilar market is expected to reach $36 billion by 2020, according to market research company Netscribes Inc. However, even with its potential for market share, investors are generally unenthused about Amgen’s biosimilar pipeline, according to Schmidt at Cowen. The consensus of the investment community is that biosimilars are not particularly important for Amgen’s future, said Schmidt. “Typically, in the pharma world, the best drugs are cutting edge,” Schmidt said. “Branded, unique and differentiated product has the best longevity and the best profit margins.” Schmidt said while biosimilars may not be the future of Amgen, the company is making smart business decisions, and it has pre-existing capabilities that allows it to make a little money in the biosimilar market. Unfortunately for Amgen, the process to profitability has been slower than expected. Currently the company has 10 biosimilars in its portfolio, with two approved by the FDA. When Amgen announced its business venture into biosimilars, it left many investors scratching their heads, according to Schmidt. “The whole field of biosimilars moves slowly and they (Amgen) are going to fall short,” said Schmidt. “Amgen is a large company, and even if biosimilars get going it will barely amount to 10 percent of the company’s top line.”

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