The Rise of Chinese Biosimilars

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The Chinese healthcare market has transformed dramatically in the past few years. There have been many reforms centred around the country’s vision of becoming a healthcare technology powerhouse in the next couple of decades and ‘innovation’ has become a buzzword touted by both foreign and local players alike. But in a generics-heavy market where biologics represent only 12 percent of annual revenues, ‘innovation’ is often used aspirationally rather than realistically. However, one asset the Chinese market undeniably possesses is speed.

 

This is best seen in the growth of the Chinese biosimilars market. Biosimilars are a relatively recent development in the pharmaceutical industry, meaning market penetration is still fairly low, even in many developed markets, much less emerging markets. Prior to 2019, not a single biosimilar had been approved in China. However, a McKinsey analysis found that biosimilars could account for a growing share of sales in emerging markets, projecting double-digit growth annually for key emerging markets from 2018-2025. In particular, they estimate that the biosimilar market in China might quadruple from USD 2 billion in 2018 to USD 8.1 billion in 2025.

 

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The European Medicines Agency (EMA) was the first regulator to create a regulatory framework for biosimilars. The first biosimilar, Sandoz’s Omnitrope, was approved in 2006 for the treatment of growth failure in children. Unusually, the US was a laggard in the biosimilar race, only approving its first biosimilar in 2015: Zarxio (also by Sandoz) for neutropenia. In that same year, the Chinese Center for Drug Evaluation released its first (and thus far, only) guidance on biosimilars, outlining the key principles for their R&D, evaluation and approval. In 2017, the Chinese government launched a pilot Marketing Authorization Holdership (MAH) program that allowed pharma companies to contract CDMOs to manufacture their biologic assets.

 

Since then, biosimilar (and in general biologic) R&D and manufacturing has really accelerated within China as a diverse range of players seek to expand within the newly created market segment. 22 February 2019 marked the momentous occasion of the first biosimilar approval in China, developed by local biotech Henlius. HLX01 is a biosimilar of Genetech/Roche’s best-selling cancer drug Rituxan. Rituxan was the first ever monoclonal antibody the US FDA approved for cancer and generated USD 4.3 billion in sales in 2018 – also the year in which it lost exclusivity in the US market. In Europe, the loss of exclusivity came five years earlier in 2013, with correspondingly significant declines in sales. Fortunately for the Swiss drugmaker, these losses have been somewhat offset by significant gains in the China market. In 2017, Rituxan’s China sales were estimated at USD 258.6 million according to IQVIA data.

 

The launch of HLX01 in 2019 is sure to challenge that. However, Roche has not sat idly by waiting for encroaching competitors. In 2017, Roche slashed Rituxan’s prices by about half in order to add the drug to China’s National Reimbursement Drug List (NRDL) during a highly-anticipated update to the list, the first since 2009. In general, Chinese patients see out-of-pocket cancer drug costs fall by over two-thirds after the drugs make it onto the NRDL. As Hong Chow, Roche China GM commented in a PharmaBoardroom interview in March 2019, following the 2017 update where Rituxan and three other cancer drugs were added to the NRDL, “while we had prepared for a negative impact in the short run, we actually ended up seeing immediate high new patient uptake, which became the key driver for our sales growth of 28 percent for Roche Pharma China in 2018.”

 

Since China can still be considered a ‘fresh’ market for innovative medicines, many Big Pharma companies see it as a way to bolster sluggish sales in mature markets. So far, the strategy has worked for MNCs like AstraZeneca and Sanofi as they have posted stunning double-digit growth in the past couple of years. However, as the Chinese biosimilars market advances apace, they cannot rely on this as a cure-all. According to the Chinese regulator, the NMPA, China has over 200 biosimilars in the clinic – the most globally. Part of this largesse stems from the rise of the nascent biotech scene in China. Established in large part by US-educated Chinese with significant industry experience, many of them see the development of biologics as a steppingstone towards the holy grail of first-in-class or best-in-class therapeutics.

 

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Henlius may be the first but it is hardly the only company eyeing the Chinese Rituxan market. Fellow Chinese biotech Innovent Biologics made headlines by becoming the first Chinese company to launch a locally developed PD-L1 drug in China in 2019. They also have a highly successful out-licensing deal with Eli Lilly, one of the firsts for a Chinese biotech. Their Rituxan biosimilar, IBI301, which was co-developed with Eli Lilly, is currently under review by the NMPA. Innovent CEO Dr Michael Yu explained in an interview with PharmaBoardroom in January 2019 that “Innovent started in August 2011 with the mission to discover and commercialize high-quality biologics that are affordable for ordinary people. In China, the development of the biologics industry is far behind more developed countries like the US or Europe,” adding, “for any company in our industry, regardless of their size, you should consider China as a potential growth opportunity.”

 

Given the bustling activity within the Chinese biosimilars market, it seems that he is not alone in his opinion. A number of leading CDMO players like Swiss company Lonza and Boehringer Ingelheim’s CMO have also built (or are building) significant manufacturing operations in China to be ready for the demand. Korean Samsung Bioepis has partnered with Chinese company 3SBio to bring in multiple biosimilar candidates into China, including SB8, a biosimilar candidate of Roche’s Avastin.

 

Another South Korean player, biosimilars-focused Celltrion, has also set its sights on China. It recently announced that it would build its first overseas manufacturing facility in Wuhan, China, though it is unclear how these plans have been affected by the unfolding coronavirus crisis. This would not be Celltrion’s first foray into China: in July 2019, they partnered with Hong Kong conglomerate Nan Fung Group to create a new company in China to manufacture and commercialize three of Celltrion’s biosimilars. Celltrion established its international reputation by launching Europe’s first monoclonal antibody biosimilar, Remsina, for Janssen’s Remicade, in 2015 (ultimately marketed by Pfizer’s Hospira). Merely three years later, Remsina has already captured over half of the infliximab market in Europe.

 

With so much energy and dynamism within the biosimilars market in China, the industry is certainly a dark horse – but quickly gaining on the competition on a global scale.

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