The announcement made sense on many levels (in fact, on all levels, from where I stand). It plays to BI’s strengths, gives it access to what many consider to be a market with significant growth potential, including a strong play in emerging markets. It will also positively impact its CMO business by providing a baseline load that is not dictated by third-party customers.
Some may argue the decision is two years overdue. Better late than never. And judging by the (im)maturity of the Biosimilar market, the delay will not make a significant difference after all.
So why does it make sense for BI to be in Biosimilars?
- Production expertise: BI is the leader in biopharma production, more or less on par with Lonza. It is the only large pharma company that successfully developed a leading CMO business. It has a very good grip on scale-up processes, tech transfers and a competitive production costs. It has its own expression system technology. It has its development services. It has it all.
- Clinical trial expertise: BI just had a very successful launch of blood-thinner Pradaxa, the first follow-up to Warfarin in more than 50 years. BI has conducted or sponsored more than 1,300 clinical studies between 2001 and 2010. Structuring and managing clinical trials will be key to success in the biosimilar space.
- Marketing expertise: BI has a global presence with more than $16 billion in sales spread evenly across the world: 46% in the Americas, 32% in Europe and 22% in Asia and other developing markets.
- Deep pockets: By all accounts, the average biosimilar will require an investment between $100 million and $300 million, so any company with the goal to address this marketplace will require a strong financial backing. BI is spending nearly 25% of sales (nearly $4 billion) on R&D. It has the muscle to pull through a portfolio of biosimilars onto the marketplace organically and through partnership and licensing deals.
While the Lonza/Teva deal was the industry trend-setter back in 2009, BI combines the strength of both companies and poses a formidable challenge for the remaining players:
- Sandoz, with its first mover advantage
- Merck Bioventures, with its patchwork strategy with Parexel, Hanwha and several others
- Pfizer, with its Biocon agreement on Insulin
- Samsung/Quintiles, with their grand scheme to enter the biopharma business by leveraging massive Korean assets and hospital infrastructure
- Celltrion, with its exit from the CMO business to focus on Biosimilars
- Amgen, Roche and Astra Zeneca (MedImmune), with their focus on Biobetters
Despite the strengths, BI’s challenge will be to develop an organization that is nimble enough to drive the biosimilar business, to partner and to market those drugs in a marketplace where regulations are still being shaped. BI will also need to keep its innovator CMO business at arm’s length. It will be a delicate balancing act for the company, but a necessary one. All in all, not an easy challenge, but one worth the effort.
Andrew Badrot is chief executive officer of CMS Pharma, a provider of M&A advisory services and business strategy consulting to pharmaceutical custom manufacturing organizations. He can be reached at email@example.com.
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