Patent cliff to compel global pharma to turn into biotechnology

` Source: IRIS (24-DEC-12) Bio-technology drugs differ from conventional drugs in the sense that they are developed using living cells. Conventional drugs, on the other hand, are chemically synthesized. While biotech drugs are difficult to develop and manufacture, they are often more effective. This is especially true in therapeutic areas like oncology, where conventional drugs perform poorly."Despite the fact that biotech drugs have so far been overshadowed by conventional drugs, we see the patent cliff (and the absence of new conventional drugs) will compel global pharma majors to seriously turn to biotechnology," Sudarshan Padmanabhan, analyst, HDFC Securities.Meanwhile, a biotech patent pipeline worth +USD 75 billion is expiring over the next 6-7 years, comparable to that of conventional drugs. Price erosion in bio-generics will be much lower than conventional generics, as manufacturing barriers will prevent 'generic flooding' post patent expiry. Gilead's acquisition of Pharmasset for a whopping USD 11 billion in 2011 is indicative of the interest that conventional drug makers have in the biotech space, Padmanabhan said.As the US, EU and other countries grapple with ways to cut healthcare expenditure, they are likely to be more accommodative towards bio-generics. The US has recently released draft guidelines for launching bio-generics. While this does not mention any specific time-lines, it shows the intent of the USFDA to ultimately adopt and promote bio-similars, he opined.Recent trends suggest that even companies outside the pharmaceutical world are willing to commit high stakes. In 2011, Samsung entered into a JV with Quintiles (90% owned by Samsung) to form Samsung BioLogics, aiming to provide contract manufacturing for bio-similar drugs. It also paid USD 255 million for 85% stake in a JV with Biogen Idec later that year. Several M&A deals have been struck globally, in pursuit of newer opportunities. While biotechnology has an alluring appeal, there are several barriers. The cost involved in developing bio-similars ranges from USD 20-100 million (excl plant cost), while conventional generics it is USD 1-4 million. Failures abound. Merck was forced to acknowledge that a novel yeast-based protein (Glycofi) that it acquired in 2006 could not produce a bio-similar with structural similarity to the innovator product. After paying USD 400 million to buy Glycofi, Merck termed the project as a 'junk' version of erythropoietin.Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.