Whatever their PR guys say, it's all about making money

Within the rapidly changing biotech market, top-tier players such as Amgen, Genentech, Biogen and Genzyme are targeting sustainable profitability through the formation of multi-brand houses supported by globalised marketing strategies. At the same time, emerging players such as IDEC, Oxford GlycoSciences (OGS) and Isis, with evolving expertise in proteomics, small molecule drug discovery and genomics-based drug development, are competing for funding.

(Pharmafile) -- Datamonitor believes that increasing market pressures to generate profitable business models with long-term growth prospects will demand well-diversified and highly competitive pipelines. The need to develop an environment of sustainable profitability has created a wave of intrabiotech acquisitions, including Amgen’s $16 billion purchase of Immunex, Millennium’s $2 billion offer for Cor Therapeutics and MedImmune’s $1 billion acquisition of Aviron.

Amgen/Immunex will retain leadership
Datamonitor forecasts that the current marketed products from the 18 leading biotech companies will generate revenues of $14.9 billion in 2004 and $15.5 billion in 2006. Total revenues from current pipeline products will reach $4 billion in 2004 and $6.9 billion in 2006. Overall, the current portfolios of the 18 leading firms will generate combined revenue of $22.4 billion. Following the acquisition of Immunex, Amgen’s pipeline is expected to generate revenue of $3.9 billion, accounting for 55.6% of the total pipeline revenue generated by the 18 leading biotech companies in 2006.

However, its main US competitors – Genentech, Biogen, Genzyme and Gilead – will experience slower revenue growth. In 2006, Genentech’s current marketed portfolio is forecast to generate revenue of $2.6 billion while its current pipeline will generate revenues of $985 million, followed by Biogen’s forecast marketed and current pipeline portfolio revenues of $1.2 billion and $324 million, respectively. Despite their 2000 losses, Genzyme and Gilead will manage to reach sustainable profitability with their current pipelines generating 2006 revenues of $1.8 billion and $594 million, respectively.

Among emerging players, Datamonitor’s analysis suggests that four companies – Isis, IDEC, SCIOS, and OGS – have the means to generate sustainable profits over the next four years. Datamonitor forecasts that IDEC and SCIOS will lead the emerging biotech sector with total ethical income reaching $445 million and $342 million in 2006, respectively. These will be followed by Isis, the oncology and inflammation expert, and OGS, the proteomics leader, with total forecast revenues of $161 million and $80 million, respectively.

Niche markets and cancer will drive biotech launches
The oncology and niche disorder markets will generate a combined pipeline income of $4.8 billion in 2006, representing 69% of the total pipeline income generated by the 18 leading firms. Other key foci of the biotechnology industry are the inflammatory disease and immune disorder markets, particularly rheumatoid arthritis, psoriasis and Crohn’s disease, which are forecast to account for $1.1 billion in pipeline revenue by 2006. Notably, the major therapeutic areas targeted by the pharmaceutical industry, such as CNS and cardiovascular disease, are relatively underserved by the biotechnology players. In part, this reflects both the lack of relative unmet need in many of these diseases and the competitive difficulties for an emerging player up against the established pharmaceutical giants. Datamonitor’s analysis suggests the CNS and cardiovascular markets combined will generate pipeline revenue of only $592 million in 2006.

Amgen’s new product launches are set to dominate both the niche and oncology markets, with the growth of the anaemia treatment Aranesp (darbepoetin alpha), the neutropenia drug Neulasta (pegfilgrastim) and the prostate cancer agent Abarelix. With a total of four cancer roll-outs expected, Amgen is forecast to account for 81.6% of the new oncology revenues in 2007, while Aranesp alone will account for 71.4% of the revenues forecast from niche markets.

In September 2001, Amgen announced that the FDA had approved Aranesp, a longer-lasting form of its blockbuster anaemia drug Epogen, to treat anaemia caused by chronic kidney disease. Aranesp is an analogue of erythropoietin, but has a longer circulating half-life and appears to act more quickly. The drug represents the largest revenue growth opportunity for Amgen since the launch of Epogen and Neupogen. While its longer half-life will give it a competitive advantage in some markets, the most important factor is that Aranesp will allow Amgen access to the world-wide anaemia market.

The successful EU commercialisation of Aranesp represents an additional key move in Amgen’s global growth strategy. Amgen is investing heavily to promote Aranesp in Europe, since, unlike the US, it has fewer relationships with nephrologists that it can leverage in this region. Datamonitor believes that Aranesp could ultimately generate revenue above $2 billion and is currently the most valuable pipeline drug of the major biotechnology players.

Supporting Aranesp and Neulasta (Amgen’s follow up to Neupogen), Abarelix is a peptide analogue of gonadotropin-releasing hormone (GRH), co-developed with Praecis Pharmaceuticals, which is expected to offer several key advantages over existing therapies for prostate cancer. The two major strengths of Abarelix lie in its rapid onset of action (which allows the drug to overcome the problem of testosterone flare) and its depot formulation. Abarelix offers a theoretical advantage over existing GRH analogues (TAP’s Lupron and AstraZeneca’s Zoladex) that are agonists, because they stimulate the production of testosterone before suppressing it. However, Datamonitor believes that strong marketing campaigns are needed to shift physician preferences away from existing therapies. Amgen is expected to co-market Abarelix with Praecis in the US, Canada and Japan, and Sanofi-Synthélabo intends to market the drug in Europe, Latin America, the Middle East and some countries in Africa. The FDA accepted an NDA in January 2001 and granted the drug priority review status. The drug is also in phase II trials for the treatment of endometriosis. Datamonitor forecasts Abarelix sales of $350 million in 2004 and $450 million in 2006.

Genzyme finds its niche
Genzyme has evolved as a specialist in niche markets following the success of Cerezyme for Gaucher’s disease, which generated revenues of $570 million in 2001. However, the company is set for further success with three new product launches targeting combined 2006 revenues of $512 million. With Aldurazyme (alpha-iduronidase) for Hurler’s syndrome and Pompase for Pompe’s disease, Genzyme is hoping to secure revenues in relatively untapped markets.

Genzyme is developing Fabrazyme (agalsidase-beta), a protein-replacement therapy for Fabry’s disease, which is estimated to affect between 2,000 and 4,000 people globally. The company’s well-orchestrated therapeutic strategies in Europe finally paid off when following a series of successful trials in Europe, it received marketing authorisation for Fabrazyme in August 2001. However, it has not yet been approved in the US. In October 2001, Genzyme announced that the FDA had asked for additional information before the final approval of Fabrazyme. Transkaryotic Therapies, Genzyme’s main rival in the Fabry’s disease market, has also received a request from the FDA for additional data for its Replagal BLA.

Genzyme has already started marketing Fabrazyme in France under a specific reimbursement programme and at an annual cost per patient of between $150,000 and $180,000. The company has confirmed its intention to market Fabrazyme in Europe on a country-by-country basis, as pricing and reimbursement approvals are obtained. In promoting Fabrazyme in these countries, Genzyme will draw on a decade of experience in marketing Cerezyme. It has a substantial and long-standing European commercial infrastructure that includes over 750 employees in 15 countries. Fabrazyme will be sold by Genzyme’s existing Cerezyme salesforce in Europe, which maintains close relationships with physicians who specialise in the treatment of genetic disorders. Assuming the drug gains US approval in mid-2002, Datamonitor forecasts sales of $136 million in 2004 and $210 million in 2006.

Immune boost for Genentech
Nine major products, split between six biotech companies, are set for launch by 2007 in the inflammation and immune disorder markets. Genentech will be the major beneficiary with the launch of the anti-asthma drug Xolair (omalizumab) and the psoriasis agent Xanelim (efalizumab), which, despite continuing approval delays, are expected to generate combined revenues of $385 million in 2006.

The immune disorders market is set to remain a major focus for the biotech companies post-2006, with 14 products currently in phase II trials that could be launched shortly after 2006. Emerging players such as Millennium, Vertex and Xoma all have two drugs in the pipeline, while IDEC has three new drug candidates.

Therapeutic proteins maintain their lead
Following in the success of insulin, epoetin (Amgen’s Epogen and Johnson & Johnson’s Procrit) and filgrastim (Amgen’s Neulasta), therapeutic protein treatments are set to dominate the technological focus of new biotechnology launches. With 2007 revenues forecast at $3.8 billion, accounting for 54% of total new product sales, these drugs are set to dominate the new launches in the cancer and niche markets. Amgen’s Aranesp and Neulasta will be the key drivers of therapeutic protein success, although Genentech’s thrombopoietin, indicated for thrombocytopenia, is also set to grow the class.

Enzyme and protein inhibitors are another major technological focus of the major biotechnology players, accounting for forecast sales of $1.5 billion in 2007. These agents form the bulk of the pipeline projects outside of the oncology and cancer markets, accounting for 55%, 62% and 100% of the immune disorders, CNS/cardiovascular and infectious disease pipeline value, respectively.

Gilead’s Viread (tenofovir disoproxil fumarate) is a once-a-day oral nucleotide reverse transcriptase inhibitor (NRTI) for the treatment of HIV/AIDS. The drug gained US approval in late 2001 and EU approval in February 2002 and represents the first in a new class of HIV therapies. The drug is a nucleotide reverse transcriptase inhibitor (NRTI), which is hoped will give a distinct resistance profile to the well established nucleoside reverse transcriptase inhibitors, combinations of which comprise GlaxoSmithKline’s Combivir and Trizivir. With the support of strong clinical data and an expanded salesforce, Gilead should see its current reliance on Ambisome sales somewhat alleviated as Viread sales grow. This will be a key factor in driving Gilead’s transition to sustainable profitability over the next five years.

Can monoclonal antibodies fulfil their potential?
In the 1980s, the advent of monoclonal antibodies was hailed as the next major breakthrough in medicine. However, to date, the potential has not been fulfilled, with many products failing to complete the clinical trial process. Both Xolair and Xanelim, Genentech’s new launches, are monoclonals, and their turbulent efforts to gain approval are symbolic of the struggle many companies have had with such drugs. Despite this, Datamonitor’s analysis suggests that monoclonals will account for $1 billion in pipeline product sales for the top 18 biotechnology companies in 2007, led by anti-cancer agents and products targeting the immune disorder markets.

IDEC has developed a new monoclonal antibody, Zevalin, which is intended to deliver targeted immunotherapy by means of injectable radiation to target sites containing specific anti-cancer antigens, such as lymphatic B-cell tumours. In September 2001, IDEC announced that the FDA’s Oncologic Drugs Advisory Committee had recommended approval of Zevalin for the proposed treatment of rituximab-refractory follicular, B-cell non-Hodgkin’s lymphoma. In January 2002, IDEC announced that it had received the Complete Review Letter from the FDA regarding the company’s BLA for the drug. The letter was followed by full approval in mid-February, paving the way for launch. Zevalin is given in a fixed dose, unlike GSK’s Bexxar (tositumomab). Bexxar’s measured dosing is technically better for patients, although Zevalin’s fixed dosing is still attractive because it requires less training. Its simple administration is likely to result in the drug being used on an out-patient basis.

Industry outlook for 2002
Building profitable models and productive supply chains with increasingly globalised focus in diversified therapeutic areas will be the most significant challenges that the biotech industry leaders will face in 2002. Datamonitor expects the top-tier players to strengthen their marketed portfolios and drive a consolidation wave over the next five years that will derive increasing revenue growth and equity returns. Players such as Genentech and Biogen will have to follow Amgen’s example and expand their portfolios. Emerging players will be engaged in a long-term struggle to reach and sustain profitability.