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Generic Biotechs, on the Horizon, May Spur New Wave of R&D Spending--But Can Genomics Firms Survive the Wait?

NEW YORK, Sept. 18 - A politically charged idea gaining momentum in the generic-pharmaceuticals industry may give rise to a new breed of genomic-tool and -technology customers and create a fresh wave of R&D spending, experts believe.


Hoping to take advantage of consumer complaints over soaring drug costs, the Generic Pharmaceutical Association says it plans to lobby the US Congress to instruct the Food and Drug Administration to let generic biologics on the market. If it succeeds, GPhA will likely open the door for generic pharmas to tuck in to the $15 billion in sales that will be up for grabs over the next four years as a cascade of biotech drugs loses patent exclusivity.

The move may also be a boon to fluttering genomics companies, particularly makers of bioinformatics, proteomics, and SNP-analysis tools and technologies, that might be called upon to help create generic biologics that are up to snuff in the eyes of the FDA.


"We're still working on how we're going to formally go about" approaching the FDA, says Steve Bende, GPhA's vice president of science, professional, and regulatory affairs. Bende's boss, GPhA president Kathleen Jaeger, is more blunt: "The next big legislative battle will be generic biologics."


Bende, a molecular biologist by training, is one of a chorus of life-science insiders who believes genomics companies stand to profit if the FDA gives the green light to biogenerics--a step most agree is at least three years away.


Question is, can today's genomics companies live long enough to see it happen?


Knocking down knockoff barriers


Since 1984, with the signing of the Hatch-Waxman Act, innovator pharmas have been allowed to market their branded drugs under exclusive but temporary patent protection. In exchange, generic pharmas have been allowed to manufacture and sell knockoffs of those drugs when they came off patent on the condition they undergo an abbreviated FDA approval process.


For the generic firms, the abbreviated process, which required them to duplicate a patented chemical compound to prove bioequivalence and bioavailability, is simple, fast, and inexpensive. Biologics, however, are very different from the kinds of pharmaceuticals for which Hatch-Waxman was designed.


It turns out the science behind that abbreviated process doesn't even come close to providing the kind of proof the FDA would likely demand before letting generic pharmas make knockoff biologics. After all, when Hatch-Waxman was approved, biotech drugs were still wearing diapers.


This is the big axe being swung by the Biotechnology Industry Organization, GPhA's Darth Vader.


"Our view is that the science [to prove bioequivalence between generic and branded biologics] is simply not there yet," asserts Steve Lawton, BIO's general counsel and vice president of regulatory affairs. "I just haven't seen the scientific argument on the generic side. Their argument is basically not science, as far as I can tell. It's that 'There's a lot of patents expiring and now it's time for generic biologics,' and 'Look how much money will be saved.'"


Not quite, says GPhA's Bende, who insists that most drugs will "probably need" high levels of proof. "We want the science to dictate what happens," he says. "We're not calling for substituting the word 'biologic' into Hatch-Waxman, because it's not appropriate to do for that class of drugs. We were never saying that there should be an approval process [for generic biologics] with zero clinical studies. That would be ridiculous."


To be sure, the broader economic argument isn't lost on GPhA. Over the next four years, some $15 billion in annual drug sales in the US will be up for grabs as branded biologics begin losing their market exclusivity, says GPhA. Many of the drugs have household names: The ulcer drug Prevacid, the depression drug Zoloft, the obesity drug Xenical, and the asthma drug Singulair. Just last month the acne drug Accutane, made by Roche, lost its patent protection. That drug generated $636 million in sales in 2000, GPhA says.


What is less clear is how much of that $15 billion generic pharmas can likely annex. Generic pharmaceuticals cost between 40 and 70 percent less than their branded predecessors. It's tough to glean from that if generic companies stand to pocket between 30 and 60 percent of the innovator drugs' revenue. That hypothetical metric, or even how much generic-pharma firms will wind up spending on R&D, hasn't been devised yet for biologics.


Indeed, not every one of the 60 companies on GPhA's roster is big enough or rich enough to tackle biogenerics, though Bende says he "thinks all of our larger manufacturers clearly have an interest." Teva, the biggest generic pharma firm in the world by revenue, posted $1.7 billion in receipts in 2000. Behind it were Alpharma, Watson, Ivax, and Mylan, with revenues of $921 million, $813 million, $791 million, and $790 million, respectively, according to GPhA.


By comparison, the top-five biotech companies by revenue--Amgen, Genentech, Serono, Genzyme, and Immunex--had receipts in 2001 that ranged from a high of $4 billion to a low of $986 million, according to a report by Burrill & Company.


There's still the question of the absent regulatory pathway. According to the FDA, current regulations governing biologics applications "in fact preclude the filing of abbreviated applications" a la generic pharma products. The agency also says that "significant unresolved scientific issues" currently exist that prevent generic pharmas from proving that their biologics are as "safe, pure, and potent" as branded versions.


But some say that the science, if it isn't here already, may be just around the corner. Advances in bioinformatics, microarray, and pharmacogenomics technologies "may make reliable testing of bioequivalence between brand-name products and generics more possible. ...," Eileen Smith Ewing, a partner in Boston-based law firm Kirkpatrick & Lockhart, wrote in The Washington Post recently. "It is inevitable that Congress will have to consider whether generic versions of off-patent biologics should be permitted."


BIO, apparently, hears hoofbeats. Asked if this is an important issue for the group--which is set to release a white paper at the end of the month arguing against biogenerics--Morrie Ruffin, the group's vice president of business development, says: "Absolutely. It is extremely serious to us."


What is enough science?


Though the FDA has broadly called for better science and a greater level of proof before generic pharmas can begin making biologics, the agency and its Center for Biologics Evaluation and Research, the division responsible for reviewing and approving biotech products, is notably mum.


CBER officials did not return a series of telephone calls seeking details about the kinds of studies it would like to see before embracing the idea of generic biologics. And though the generic-pharmaceutical industry and BIO are divided on this issue, they appear to agree on one point: Neither wants to say too much too soon.


Both groups say existing bioequivalence and bioavailability studies fall far short, and that generic biologics deserve more rigorous reviews. Just what kinds of studies, and how far back along the drug-discovery and -development continuum, is where they part ways.


These points comprise the linchpin that binds the hopes of genomics companies: If the FDA says generic pharmas must begin studying their knockoff biologics from the target-validation or lead-optimization stages, a greater number of genomics players--particularly those that make proteomics tools, bioinformatics software, and SNP-analysis products--stand to benefit.


According to the market-analysis group Front Line, technologies that would fit into this benchmark include 2D-gel electrophoresis, liquid chromatography, yeast-two hybrid systems, Maldi-TOF technology, and mass spectrometry.


Bioinformatics technologies would also be sought at this stage, particularly software that studies protein sequences and structure, gene expression, and protein-protein interactions.

If, however, the FDA says phase I or II clinical trials will suffice, generic pharmas will likely look for help from SNP-genotyping tools and DNA chips.


"I think the question will be, 'What kind of research will the FDA require of the generic companies," says Traci Libby, vice president of business development at Invitrogen. "If they are required to duplicate a certain amount of clinical research, there will be minimal impact on us."


If they are asked to "step back into the earlier stages of drug discovery--meaning that they actually will need duplicative target identification and validation, and basically repeating the experiments that the innovator company has done--then I think that will have the potential to give us other customers."


"I think this kind of research will have a positive impact on tool providers ... that sell consumable reagents, like Invitrogen, electrophoresis products, or various mass spec companies," Libby adds.




While Libby's sentiment echoes throughout much of the tool space--most players claim to be cautiously optimistic--others say that the "revolution," if it comes at all, would likely not come soon enough.


"I can't imagine, based on where [genomics companies] are financially today, that most of them are thinking about" generic biologics, says BIO's Ruffin, whose group, ironically, counts as members some of the genomics companies who stand to gain from biogenerics. "They're looking at their near-term valuations. This is something that's going to be playing out over the next several years, and my own sense is that this is so far down the line for a lot of them that it's not part of their immediate focus.


"They're in survival mode right now," he says, "and I don't think generic biologics compute with their near-term decision."


If that turns out to be true--the argument of whether many of today's genomics firms will be around in three or four years is far from unanimous--the generic-biologic component likely will arrive just in time to help fertilize the next generation of genomic-tool vendors.


"We're hopeful that generics will be allowed to manufacture biologics," says Laurie Little, spokeswoman for Sicor, a large US-based generic-pharma company. "We believe we're on the right side of the issue. People aren't seeing it as a matter of 'If.' They're seeing it as a matter of 'When.'"


Carol Cox, a spokeswoman for Barr Laboratories, agrees: "We are definitely part of the group that is supporting a pathway for generic biologics. This is a business we want to be in."

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