Biotech sector regenerates as pharma invests

The rapid pace of development in biologicals and regenerative medicines is changing the landscape of drug manufacture. Big Pharma is keen to join in but future business models look very different. Susan Birks reports

Fitch Ratings says biological drugs generated combined sales in Western Europe of more than US$7bn in 2012

The transformation of the therapeutic biotech sector could be compared to that of an ugly duckling that failed to impress following the initial biotech boom, but which has transformed into a swan – looking wonderful on the surface, yet battling undercurrents of uncertainty and underfunding below the waterline. There is no doubt that the sector is increasingly delivering novel therapies that will transform medicine in the future but huge investment is required to produce the new therapies commercially and, for many products, reimbursement models are yet to be decided.

Biotechnology has steadily provided new routes to better targeted and more effective drugs in the form of biologicals and biosimilars. The potential for even better therapies via monoclonal antibodies (mAbs) and antibody drug conjugates (ADCs) is creating further interest in this sector. Meanwhile, regenerative medicines – once just a distant dream – are now taking shape and being seriously discussed in terms of practical scale-up and manufacturing facilities.

Looking at the biopharmaceutical sector, Frost & Sullivan (F&S) says considerable growth opportunities lie ahead for biopharmaceutical contract manufacturing organisations (CMOs).1 With blockbuster biologics worth more than US$100m due to lose patent protection by 2019, F&S predicts the global biosimilars market will grow at a robust compound annual growth rate (CAGR) of 60.4% between 2012 and 2019.

‘Due to the steep cost and long time needed to build, equip and validate a biomanufacturing facility, the majority of biopharmaceutical companies prefer leveraging the expertise of CMOs,’ says F&S Healthcare Senior Research Analyst Aiswariya Chidambaram. ‘CMOs have made substantial investments in infrastructure, technology, and personnel in recent years and are capable of providing uncomplicated, timely and cost-effective services. They are also well versed with regulatory compliances and work closely with regulatory agencies, thereby reducing time-to-market.’

Increasing adoption of the ‘large molecules’ model by Big Pharma companies will also boost prospects, says F&S. Of the top 15 pharmaceutical companies, nearly 80% are expected to experience a net growth in their biologics portfolio. The Big Pharma shift to large molecules is likely to be led by mAbs and was projected to grow at a CAGR of 10.8 % from 2012 to 2017.

Where once Big Pharma players were employing technology licensing models to develop ADCs, now they are collaborating for product development

Fitch Ratings said in July that the blockbuster mAbs Rituxan, Remicade and Herceptin are meaningful targets for biosimilar drugmakers and are set to lose patent protection in Europe by 2015 and in the US by 2020.2 The maturing biological drugs generated combined sales in Western Europe of more than $7bn in 2012.

According to a recent Antibody Drug Conjugates Market report from Roots Analysis, the ADC sector is predicted to be worth $9bn (£5.75bn) by 2023.3 Shivani Singh, who contributed to the report, is optimistic about the future and says communication between ADC developers and the US FDA is on the up: ‘The process should become smoother, as companies are receiving more guidance from the FDA in the initial stages of development.’

There is also a shift in the type of partnership models being agreed among companies: Where once Big Pharma players were employing technology licensing models to develop ADCs, now they are collaborating for product development, says Singh, highlighting the example of Millennium entering into a collaboration with Seattle Genetics to obtain an exclusive licence to market Adcetris outside the US and Canada.

ADCs are ground-breaking technologies with the potential for directly targeting many types of cancer tumours

Roots Analysis predicts that ADCs in the non-oncological space will follow on from initial successes in cancer therapeutics, but for the foreseeable future oncology is where it’s at. The report’s base sales forecast envisages the total ADC market at $370m in 2013, rising to around $9bn in 2023. Many drugs are in preclinical development at companies such as GSK, Pfizer, Abbott and Roche, as well as at many smaller players. However, whether ADCs can step out from clinical trials into blockbuster status remains to be seen.

Examples of recent activity in this sector include MedImmune, AstraZeneca’s biologics R&D arm, acquiring Spirogen, a privately-held biotech company focused on ADC technology for use in oncology. MedImmune has also entered into a collaboration agreement with ADC Therapeutics to jointly develop two of ADC Therapeutics’ ADC programmes in preclinical development. MedImmune will also make an equity investment in ADC Therapeutics, which has an existing licensing agreement with Spirogen.

‘ADCs are ground-breaking technologies with the potential for directly targeting many types of cancer tumours while safeguarding healthy cells. The cutting-edge technologies developed by Spirogen and ADC Therapeutics complement MedImmune’s innovative antibody engineering capabilities, enabling us to accelerate ADCs into the clinic,’ said Dr Bahija Jallal, Executive Vice President, MedImmune.

Pall Life Sciences has launched the Allegro MVP single-use system – a new, fully automated platform that can be used across a range of upstream and downstream bioprocessing activities

Roche, meanwhile, has announced plans to invest CHF800m ($886m) within its global manufacturing network to increase production capabilities for its biologic medicines over the next five years. The investment will be spread across sites in Penzberg (Germany) and Basel (Switzerland), as well as Vacaville and Oceanside (US). Daniel O’Day, Chief Operating Officer of Roche’s Pharmaceuticals Division, said: ‘Increasing our manufacturing capacity also highlights the confidence we have in the research and development of a range of new biologic medicines.’

In addition, construction of an ADC production facility will begin in Basel, Switzerland through an investment of more than CHF190m ($211m). This investment will provide additional capacity and flexibility to support Roche’s first approved ADC, Kadcyla – a treatment for HER2-positive metastatic breast cancer – and a further eight ADCs in clinical development.

Regenerative therapies

The markets for tissue engineering and cell therapy may be harder to forecast in terms of market value but are nevertheless promising. Sydney-based Regeneus recently demonstrated that there is strong interest among investors and the medical sector in regenerative medicine and cell-based therapy. The company went public in the first Australian biotech IPO since 2011, raising A$500,000 above its $10m target. Regeneus Executive Chairman John Martin said the response indicates the time was right. ‘We felt as though the market opportunity was there; we also thought that the story was strong enough, we saw the demand, and we think that regenerative medicine and cellular therapy is an area where people are interested.’

According to CandMResearch, the US regenerative medicine market has been forecast to increase at a compound annual growth rate of 15.83% CAGR through to 2016.4 Alzheimer’s, Parkinson’s, multiple sclerosis and many other degenerative diseases are on the rise in the US, leading to a huge demand for effective ways to treat these illnesses.

Another report published in June by Transparency Market Research put the market in terms of revenue for global stem cells at $26.23bn in 2011 and predicted it would reach an estimated value of $119.51bn in 2018, with a CAGR of 24.2% from 2012 to 2018.5

Adult stem cells dominated the overall stem cells market in 2011 at over 80%. This is due to a less laborious harvesting procedure and lower probability of contamination during expansion and sub-culture of adult stem cells. However, the report says fewer post-transplant complications and lesser risk of graft versus host reaction from the recently introduced induced pluripotent stem cells will lead to its rapid inclusion in research activities and help the global induced pluripotent stem cells market to grow at a relatively faster CAGR.

The introduction of artificial organs for implantation is expected to encourage organisations to develop advanced stem cell products, therapies, and regenerative products. It will also help reduce the long organ waiting list. For instance, a custom-made windpipe can be made using regenerative products within a week. Surgeons have already successfully implanted a synthetic trachea into a 36-year-old patient with late-stage tracheal cancer at Karolinska University Hospital in Stockholm. ProTip and Strasbourg University Hospitals have carried out the first human implantation of an artificial larynx, enabling a laryngeal cancer patient to regain the ability to breathe normally through the upper respiratory tract.

Export of human commercial biological products such as stem cells is an extremely complex process involving regulations and multiple agencies

Key players currently dominating the US regenerative medicine market include Baxter International, Medtronic, Stryker, and Zimmer Holdings. All of these have treatment options in late development stages, and although many of them are still awaiting final FDA approval, consumer demand is high. Export of human commercial biological products such as stem cells is an extremely complex process involving regulations and multiple agencies. The stringent regulatory approval process is a major challenge facing the market and inhibits the entry of new products into the market.

Celltex is currently in a battle with the FDA over the regulation of its stem cells. The FDA defined Celltex as a ‘Biological Drug Manufacturer’, a designation that the company takes issue with. Celltex argues that it makes identical copies of an individual’s own stem cells and these therefore should not be subject to FDA regulation as drugs. The FDA maintains the process causes the cells to be considered biological drugs and thus is subject to those regulations. Following the latest FDA stance, Celltex said: ‘We respectfully but firmly disagree with the FDA and intend to contest the agency’s opinion within its administrative procedures. We are considering all options as we work with the agency toward a resolution.’

References

1. Biopharmaceutical Contract Manufacturing market insight, www.frost.com

2. Trekking the Path to Biosimilars – Opportunities Along the Way www.fitchratings.com

3. Antibody Drug Conjugates Market, 2013–2023 www.rootsanalysis.com/reports/view_document?report_id=21

4. Regenerative Medicine Market in the US 2012–2016 by CompaniesandMarkets.com www.companiesandmarkets.com/Market/ Healthcare-and-Medical/Market-Research/Regenerative-Medicine-Market-in-the-US-2012-2016/RPT1174128

5. Stem cells market by Transparency Market Research www.transparencymarketresearch.com/stem-cells-market.html

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