So assuming legislation passes sooner rather than later—indeed, some industry watchers think it’ll be as soon as next year—it’ll be a boon for the generic drug industry. Right? Generic drug companies will easily transfer their small molecule expertise into developing biosimilars. Right? They’ll become the big players in the follow-on biologics market and make a gazillion dollars. Right?
Well, maybe not.
According to some analysts, like Cowen & Co.’s Ken Cacciatore, the market for follow-on biologics may not unfold in the way most expect. While the generic drug industry would appear to be the natural players for follow-on biologics (and indeed, they certainly think so), Wall Street is starting to look in a different direction altogether.
As we just wrote in a story for The RPM Report, Cacciatore and his colleagues at Cowen think that (surprise!) Big Pharma and biotech companies are actually better equipped to play in the follow-on biologics market. (You can read the whole story at TheRPMReport.com; if you’re not already a subscriber, you can sign up for a free trial.)
The branded companies, Cacciatore argues, have the clinical, manufacturing, and regulatory expertise to meet the relatively high bar for follow-on approvals. Sales and marketing will also be important, since the products are unlikely to be therapeutically substitutable. And when you think about the branded industry’s willingness to develop authorized generics of expired small molecules, it’s not such a crazy idea.
So who’s looking to play? Well, Pfizer for starters. In case you missed it, CEO Jeff Kindler acknowledged during Pfizer's recent investor day that there may be money to be made in follow-on biologics. And Pfizer’s not alone—there are a lot of other companies considering the jump as well. (Again, you can check out our story in The RPM Report for the complete list.)
Now, we don’t mean to suggest it is all doom and gloom for the generic drug industry. There are a few bigger generic companies—like Teva and Novartis’ Sandoz, for example—with the infrastructure and expertise necessary to compete with branded companies. But interestingly, Cacciatore points to both companies' brand-like features—not their generic capabilities—in outlining their FOB potential.
For the rest of the generic drug industry, there’s still good news. Even if Congress manages to push through legislation authorizing an abbreviated pathway, FDA’s part in all this isn’t going to happen overnight. Depending on Congress’ intent, it could take a while—perhaps even years—to develop the regulations. So for companies that aren’t ready, there’s still time to prepare.
Now, we don’t mean to suggest it is all doom and gloom for the generic drug industry. There are a few bigger generic companies—like Teva and Novartis’ Sandoz, for example—with the infrastructure and expertise necessary to compete with branded companies. But interestingly, Cacciatore points to both companies' brand-like features—not their generic capabilities—in outlining their FOB potential.
For the rest of the generic drug industry, there’s still good news. Even if Congress manages to push through legislation authorizing an abbreviated pathway, FDA’s part in all this isn’t going to happen overnight. Depending on Congress’ intent, it could take a while—perhaps even years—to develop the regulations. So for companies that aren’t ready, there’s still time to prepare.
One thing is clear: the participants in follow-on biologics aren’t going to be the same as the generic small molecule market. Wall Street is already starting to think in those terms. Industry should plan accordingly.
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