Biosimilars and Intelligent Decision Making in the Pharmaceutical Industry
SummaryExcelling in biosimilars requires robust knowledge of the landscape and monitoring of the evolving market. Apart from the usual competitive intelligence such as competitors' activities, timelines, differentiation strategies, manufacturing capabilities, sales and marketing plans etc., factoring-in overarching holistic perspective allows one to make strategically aligned and robust decisions.
Myriad of economic and patients’ benefits arguments could be made for making the widespread use of biosimilars. At a macro level, the pharma industry, in the context of biologics drugs is divided into novel and biosimilars makers. However, there are several novel companies that seek to bring biosimilars to market. The rationale for such a strategy is justified by the existence of synergy. The company might have extensive experience of say, blood cancer market via past experience with novel drugs, and thus has the ability to excel in that therapy area. The basis of synergy might be due to following factor(s):
- Ability to manufacture biologics drug regardless of them being novel or biosimilar molecules- This is generally true as the process of making monoclonal antibodies or recombinant proteins is similar irrespective of them being novel drugs or biosimilars.
- Reduced cost of manufacturing- This happens when the biologics manufacturing plants have excess unused or underutilised capacity. Consequently, the incremental cost of manufacturing is not significant. An extension of this fact is the prevalence of pharma companies with biologics manufacturing capabilities acting as CMOs for others players in the industry.
- Existence of robust quality management system- This essentially involves a well-established capability to implement analytical methods to demonstrate biosimilarity with minimal or acceptable variance.
- Right infrastructure to conduct and expedite the clinical trials- A novel pharma has access to several trial sites and network with investigators to conduct required trials for the biosimilars drugs.
- Marketing infrastructure- A novel pharma has experience of marketing biologics drugs to the appropriate targets. The company will have necessary sales, MSL, market access team etc. in place in order to market the biosimilars as well.
In general, a qualitative assessment of the biosimilars in most cases present an attractive opportunity. However, there are fundamental factors that need to be addressed, which are often overlooked. These are appropriately probed by two rather simple questions:
- Whose money we are putting into biosimilars?
- Are we acting in the interest of the parties whose money we are using?
For any company, the money deployed is investors’ money. For a public traded company, it is shareholders’ money and for SMEs it is usually private equity/venture capitalist’ money. If we are not acting as per the mandate of the investors, then in a purist corporate finance/economics parlance, we have a ‘principal-agent’ problem. A general accepted practice is- if the money has been provided for developing novel drugs, it should you be used for that purpose rather than for developing biosimilars, generics or any other class of assets/activities. If investors wanted to invest in other areas, they could directly invest in such opportunities/companies. This is one of the key reasons when investors ask the company to be split into different entities such as established unit and novel unit etc. Various signals are interpreted and priced in the capital market when a novel pharma embarks on biosimilars drugs. Some signals are- the company has not enough growth opportunities in novel drugs, the company lack confidence in the pipeline, the company has not confidence in the next generation of biologic meant to supersede biologic which is likely to be eroded by biosimilars entry etc.
Typical biosimilars competitive intelligence programs are asset-centric i.e. they generally look at the market dynamics, landscapes, timelines, differentiation, launch plans, sales force, market access, promotions etc. However, visualising biosimilars and associated intelligence in a corporate-centric fashion such as business case, investment appraisal, commercial due diligence, licensing, M&A and transactions brings in the corporate finance/economics aspect and general holistic perspective to decision making. When assessed through multiple facets, the intelligence, its interpretation and implications become more value added. This enables managers to take more aligned and superior decisions in their quest for competitive advantage.
BiopharamVantage is a specialty healthcare consultancy that provides high quality competitive intelligence and decision-support services to pharmaceutical and biotechnology companies. If you would like to explore how we can assist you, please contact us.