Bellevue Asset Management Biosimilars - an imperfect copy but a perfect investment
Bellevue Asset Management / Bellevue Asset Management : Biosimilars - an imperfect copy but a perfect investment . Processed and transmitted by NASDAQ OMX Corporate Solutions. The issuer is solely responsible for the content of this announcement.
A wave of expiring biotech patents will lead to a surge in growth for manufacturers of biosimilars during the coming years. Read how Bellevue Asset Management's Healthcare Team selects the best candidates from a crowded field of specialists to address this trend.
Average life expectancy is increasing around the world and creating a variety of challenges for health care systems. The prevalence of certain diseases such as arthritis, cancer, diabetes, stroke, high blood pressure and cardiovascular disease or neurodegenerative diseases such as Alzheimer's will steadily increase for years to come. Biologically produced medications that alleviate the symptoms of these diseases and also target pathogens at the molecular level will play a pivotal role in the treatment of these conditions. The cancer drugs Rituxan, Avastin and Herceptin are good examples of biologic drugs derived from antibodies and proteins that are generating billions of dollars in sales.
From an investor's standpoint, it is interesting to note the wave of patent expirations in the biotech industry that began in 2015 and will last until about 2022. Many of the drugs coming off patent are prescribed to treat autoimmune diseases and cancer. Biosimilars are highly similar copies of these drugs. Over the next ten years they are projected to generate savings of USD 44 bn in healthcare costs in the USA alone.
Conventional generic drugs are copies of brand-name drugs with relatively simple molecular structures. Cost of clinical development and production are accordingly low. Biosimilars are a completely different story. They mimic proteins and antibodies with complex protein structures. As implied by the term "biosimilar", an exact replica is virtually impossible to produce due to the complexity involved. The greater objective when developing biosimilars is to achieve a high degree of similarity with regard to the molecular structure, biologic activity, and the clinical result of the originator or "biological reference" product, and be just as safe.
The regulatory hurdles are therefore quite demanding. Europe is in the vanguard on this front with a five to eight-year lead over the US and the rest of the world. European regulators approved the first biosimilar under a new regulatory pathway in 2006 and have approved another 22 biosimilars since then. Meanwhile in the US, the first biosimilar was not approved until 2015. The guidelines for approving biosimilars issued by the World Health Organization in 2010 were almost completely based on the European approach. Experience had shown that it was possible to standardize regulatory requirements and guidelines and establish better definitions thanks to technical advancements in analytical and diagnostic testing.
One reason why the regulatory hurdles are so high is because the production of biosimilars is very challenging, given the complexity of the protein structures. Each stage of the production process has its challenges. The modification of host cells, the production of recombinant protein and the management of bacteria, yeast or other cell cultures pose specific difficulties. Additional steps include cultivation in certified bioreactors, the purification of the proteins and, ultimately, the formulation of the final compounds in cartridges, syringes or vials.
Five to eight years can pass between the start of development and the market launch of a biosimilar. Total costs can add up to USD 200 to 500 mn. The production facilities alone can cost anywhere from USD 50 to 300 mn. Scaling up production is a basic requirement for the actual clinical testing phase, which can last between 3.5 and 4.5 years. Then there are the development costs themselves, which in Europe and the US amount to USD 150 to 200 mn. Because cell characteristics can change with time in culture, production facilities are subject to continual monitoring. For example, the target product quality profile for Rituxan, an anti-cancer drug, comprises more than 200 variables.
While development and marketing costs for biosimilars are usually higher than for conventional generic drugs, sales of biosimilars are likely to be more sustainable than the sales of generic products. When medical specialists, health insurers and patients come to realize that these new biological products are just as effective and safe for patients as the reference biologics, the companies making them stand to earn good money. Ultimately it's the price that will make the difference. Biosimilar manufacturers will have to bear in mind, however, that a steep discount of 50% or more compared to the branded-drug price will clearly erode their own profitability. There are certain incentives for insurance providers and biosimilar producers to negotiate exclusive contracts that hold out the prospect of higher production volumes and cost savings.
Who will come out on top?
In summary, sales from biosimilars should compare favorably to the typical sales cycle in the conventional generic drug business, where prices of copy-cat drugs steadily decline due to the large number of competing manufacturers. With biosimilars, the first two or three firms that receive regulatory approval for a particular product will be the dominant players or, in isolated cases, share the market with the originator drug maker. This is especially likely in public tenders where insurers negotiate reimbursement practices based on the "first come, first served" principle.
The market potential for biosimilars is huge. With a number of billion-dollar drugs about to lose patent exclusivity, for example Avastin and Herceptin in the treatment of cancer, or Humira and Enbrel for rheumatism, the fastest growth for biosimilars is still to come. According to estimates from Sandoz, the leading biosimilar drug maker, sales of biosimilars will increase ten-fold to USD 14 bn between 2015 and 2020.
The number of players entering this attractive field is steadily growing. At the global level, they include international pharmaceutical companies, biotech companies and generics manufacturers. There are also numerous specialists active at a regional or local level, especially in developing countries. A number of factors will determine the success of a biosimilar manufacturer. These include: Meeting the minimum technical requirements, setting up cost-effective production capacity, launching a product quickly after a branded drug's patent has expired, and capturing a critical mass of market share.
Biosimilars in BB Adamant's healthcare portfolios
Bellevue has already positioned its fund portfolios to benefit from this trend. The BB Adamant Global Generics (ISIN B-EUR LU1318739486) offers the greatest exposure to biosimilars with more than 30% of its portfolio invested in this theme. Oliver Kubli, Lead Portfolio Manager, speaks about the investment strategy and fund positioning in the recent video update (English subtitle).
Biosimilars have an approximately 20% weighting in the portfolios of the BB Adamant Biotech (ISIN B-USD LU0415392322) and BB Adamant Medtech (B-EUR LU0415391431) funds, and the latter includes companies not only from Europe and North America but also from Asia. About 25% of the Lacuna BB Adamant Asia-Pacific Health (P-EUR LU0247050130) fund's assets are invested in biosimilar manufacturers that operate in Asia-Pacific. This mix of fund products offers investors a range of opportunities for participating in the above-average growth of the biosimilar market.
For further information:
Bellevue Asset Management AG, Seestrasse 16 / P.O. Box, CH-8700 Kusnacht/Zurich
Tanja Chicherio, Tel. +41 (44) 267 67 09, firstname.lastname@example.org
Bellevue Asset Management
Bellevue Asset Management is an independent and highly specialized asset management boutique focused on managing equity funds for selective sector and regional strategies, in particular for African equities, Swiss/European entrepreneurial equities and healthcare equities, and multi asset strategies.
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Source: Bellevue Asset Management via Globenewswire
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Bellevue Asset Management
Seestrasse 16 / P.O. Box Kusnacht/Zurich Switzerland
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