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Key Success Factors of Biosimilar & Bio-better

HyukJong Lee
(E-mail: hjlee1@binex.com)
www.companyurl.co.kr

HyukJong (HJ) Lee

BA, Business Administration, Seoul National University MBA, Haas School, University of California, Berkeley,

- Team Head of Emerging Market Research, Daewoo Sec. - Associate, Goldman Saches, FICC, Hong Kong - Able Investment (CRC, Private Equity Fund), Cofounder - Executive Vice President, Genexine (KOSDAQ
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Table of Contents
. Introduction of Biologics II. Current Trend of Biologics Value Chain: Biosimilar/Biobetter

III.

IV. Competitive Edges V. Investment Points of Views

I. Introduction of Biologics
Synthetic Drug vs. Biologics Types of Biologics Biologics : Blue Ocean Biosimilar vs. Biobetter

Synthetic Drug vs. Biologics

Aspirin (180 Da) Artificially Synthesized

Interferon- (19,625 Da)

Antibody IgG (150,000 Da) Exist in the Body

Types of Biologics
Gene Therapy Genetic Vaccine Aptamer siRNA Protein

Antibody Protein

Cel l

Cell Therapy

Biologics : Blue Ocean

Synthetic Drug - Small Component Synthetic product with simple structure Side effect - Synthetic Often Market Val- - Low approval rate for new drug ue - Blockbuster Develop- Capital concentrated ment Method Develop- Avg. 11 years (U$240mln) ment Period - Big - Bio-product with complex structure - Existing in the body Rare - High approval rate for new drug - Blockbuster - Technology concentrated Biologics

- Avg. 8.5 years (U$180mln)

Biosimilar vs. Biobetter

Biosimila Replaces original biologics after patent expiration. Biosimilar is produced in large r
amount through DNA recombinant process using colon bacillus, e-coli, yeast, and animal cell

Biosimilar Manufacturing Biosimilar Manufacturing Process

Process
1. Insert plasmid containing a gene for protein of interest into a host cell. 2. Express the gene within the host cell. 3. Culture the host cell, produce and purify the protein of interest Superbiosim . Biobetter ilar

II. Current Trend of Biologics

Industrialization Globalization Current Biologics Market Trend : Bio-better

Biologic Market: One of Core Fields in Pharmaceutical Industry

Aided by Gvernment-Funded Project (ex: Smart Project), Industrialization Has Already Embarked by Big Conglomerates Entrance

Industrialization

Global Biopharmaceutical Korean Biopharmaceutical Market Market Unit: U$mln Unit: U$mln
CAGR 14.1%
370, 723 163, 783 71, 80 7
Reference: Vision and Strategy of0 Biologic Industry in 2020, 0 0 0 Industrial1 Researcher,1 2007.6 0 2

516, 835

CAGR 18.6%
7, 41 7 2, 86 0

13, 07 0

2 5

2 0

2 5

2 0

1, 01 6 2 2 2 2 0 0 Strategy of Biologic Industry in 2020, 0 0 Reference: Vision and 0 1 1 2 Industrial Researcher, 2007.6 5 0 5 0

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Globalization

Fierce Global Competition in Bio

Entering into Biosimilar Industry
Merck (2008) - Developing superbiosimilar with Generic Technology Eli-Lilly (2008. 10) - Acquiring ability to develop biologics by M&A of Imclone - 40% of 59 products under R&D is biologics - Starting business development of Biosimilar Pfizer (2009. 12) - Planning to utilize 10-15 biosimilar in 4-5 years - Gathering internal resources for biosimilar because they expect the market to grow soon - Looking for Business alliance and M&A for superbiosimilar Japanese Pharma. Aggressive M&A of Biotech. - Takeda (Acquisition of Millenium-RNAi), Eisai (Acquisition of Morphotech-mAb), Astellas (Acquisition of Agensys-mAb), Kissei (Applied for EPO Biosimilar approval) etc. - Getting ready to compete with international big pharma. by developing business alliance and M&A of bio-venture

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Biologics Market Trend: Biobetter in 1st Generation Protein

Expansion of 2nd Generation Protein Therapy with Improved half-life and efficacy

Progress of Protein Therapeutic Market

Original Biologics

1st Generation Protein Therapy (Biosimilar)

2nd Generation Protein Therapy (Superbiosimilar)

Patent Expiration of Blockbuster Drug (Price competitiveness)

Improvement of Biosimilar (Long-acting, Vitality, and Reduced frequency of administration)

Characteristics of Protein Therapeutic Market High-Valued

KnowledgeIntensive Rapidly Growing

Wide Applicable
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Biologics Market Trend: Biobetter

Market Dominance of Biobetter (2nd Generation)

Million US$

Year

Aranesp (Glyco-EPO, 2nd Generation Neulasta (PEG-GCSF, 2nd Generation) Drug) Neupogen (GCSF, 1st Generation) Epogen (EPO, 1st Generation Drug)

Reference: Datamonitor
2008
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Biosimilar : Main Trend

Biosimlar in mAb (Including Antibody-fusioned Protein)

1. Econimic Crisis due mainly to Fiscal Deficit

Inevitable Reduction in medical expenditures

Huge price reduction pressure in new molecules as well as generic

2. Tipping Effect in Price reduction

Less weight in innovative drug development

3. Biosimlar in main trend for the time being

Why generated in Europe Mercks Enbrel L/I (US$720mln + Royalty & Success Incentive) Boehinger Ingelheims announcement into biosimilar

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Value Chain of Biosimilar & Biobetter Key Issues of Biosimilar Development

III.

Value Chain by Development Steps Biosimilar vs. Biobetter Current Technologies for Superbiosimilar

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Key Issues of Biosimilar Development (1) Obstacles in Biologics Development Higher Entrance Barriers Compared to ChemiBIOEQUIVALENCE cal Generics
A. -

Difficulty in establishing bioequivalence or biosimilarity (especially for mAbs). Enormous costs for carrying out PHI/II of clinical trial and for proving its comparability. Differing regulations: EMEA has only recently published guidelines for antibody biosimilars.

B. LOW PRODUCTIVITY
-

Manufacturing a Highly Efficient Cell Strain. Developing an Efficient Production Method.

C. FACILITY
-

High cost of a bio-manufacturing facility (Hanwha, Samsung Electronics, Celltrion, etc.) Utilizing CMO (KBCC, international CMO facilities, etc.)

D. TIMING
-

Patents for most original biologics expire within 3 years. The systemic strategy and the commercialization with the right partner are needed.

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Key Issues of Biosimilar Development (2)

Models for Biosimilar Collaboration
Track 1
Originating Countries: Originating Countries:

Track 2

Pros: Speed (IF approval is granted) Cons: Risk Quality Marketability Current collaborations: - Two biosimilars have been licensed out to Brazil (one from India, the other from China). - Seeking ANVISA approval.

Pros: Risk Quality Marketability Cons:Speed Current Collaboration:

-

Merck for global rights for its first biosimilar Global Company S for the first mAb biosimilar in Japan then in EU.

Target market: Developing countries Currently Brazil only

Target market: The entire world

5/14/12

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Value Chain by Development Steps

Biologics Value Chain by Development Steps
Needs to Overcome Major Hurdles to Commercialize and Requires Intimate Connections among Partners Cultivation and Cell Line De- Purifying Process IND filing/Clinical velopment (Establishing CMC) Trial/Production
-

Marketing

Cell Line

- Technology of Process Development (High Yield, Safe, documentation)

Clinical Trials Through CRO

-

K ey In fr a Key Play ers

Manufacturing Technology
-

Sales Organization Global Partners

GMP ManufacturFacilities

Improving

ing

Protein (Long-acting, Vitality),

LG Life Science, Green Cross, Dong-A Pharma ISU Abxis (with KBCC)

BioVentur es

KBCC (Binex)

Samsung Electronics Celltrion, Hanhwa 18

Biosimilar vs. Biobetter It is Possible to Lower the Development Risk and Maximize the Profit by 2nd Generation Technology
Biosimilar Development period Patent Investment Payback Barrier Competition Profit 7 ~ 9 years Not Protected Long-term, Relatively Risky Medium Becoming fierce Medium Early Investment Size, Approval Procedure (Determined by External Factors ) Biobetter 8 ~ 12 years Protected by Patent Long-term, Risky High Blue Ocean High Core Technology (Determined by Internal Factor)

Success Factor

Due to Comparable R&D Costs and Risk with Biosimilar, Demand for Biobetter is Increasing to Generate Higher Profit
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Current Technologies for Biobetter

1. Glycosylation
: Improving half-life by adding sugars to proteins

Low Costs due to Biological Response. But has Limited Applicable Range
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Current Technologies for Superbiosimilar

2. PEGylation
: Improving half-life by adding PEG to proteins

Widly Applicable but costly, Also Needs High Technology and Has to Overcome Patent Obstacles
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Current Technologies for Superbiosimilar

3. Mutation
: Improving half-life and vitality by replacing amino acids in protein (antibody) : ADCC & CDC

It is possible to improve characteristics such as efficacy and half-life, but there are issues on immunogenicity.

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Current Technologies for Superbiosimilar

4. Antibody Fusion

: Antibody fusion with recombinant protein allows to manufacturing a long-acting Biobetter

Replacing Fab with Therapeutic

Protein

Cytokine Hormone Peptide

Fc region Improving half-life

Low Costs and Widely Applicable, But Patent Issues Exist

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IV. Competitive Edges

Value-Creating Strategy: Global Pharmaceutical Company Value Creating Strategy: Domestic Bio-Venture/Pharmaceutical Company Competitive Edge Strategy Proposal

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Value Creating Strategy : Global

Global Pharmaceutical Company : Merck

Current News
- 2006. Acquisition of Abmaxis (Technology : Affinity and Efficacy of Antibody) - 2006. Acquisition of Glycofi (Technology : Humanized Yeast Expression System) - 2008 (Early) Official Announcement of Entering into Biosimilar Industry - 2008. 12 Foundation of Merck Bio-Ventures. Expect to Invest U$1.5bln until 2015 "We have the chance with the technology from Glycofi to not only make a product that has a somewhat similar profile, but a product we can improve We have the unique ability to change, potentially, the potency of the product, the immunogenicity and other attributes. - Frank Clyburn, senior vice president and general manager of Merck Bio-Ventures.

Entering into biosimilar business by utilizing abundant resources to secure solid bio pipelines as a new growth engine (More Intensive Competition expected in biosimilar industry) Many big global pharmaceuticals are exploiting the bio industry targeting bio-betters based upon Platform Technologies

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Value Creating Strategy : Domestic

Domestic biotech-ventures and pharmas are developing competitive bio-betters for global Market based upon Platform Technology
Pharma. Platform Technology High-speed Protein Engineering technology/Oral form Pipeline

HanAll

Interferon, hGH, EPO, TPO, Protein X, Protein Y, etc.

LAPSCOVERY Technology HanMi Pharma. G-CSF, EPO, Exendin-IV, hGH, Interferon, FSH, Factor VII, etc.

Genexine

X Hybrid Fc Technology

EPO, G-CSF, GLP-1, hGH, etc.

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Competitive Edges Strategy

1.

Portfolio Strategy by Using Bio-better

New Chemical Drug

Return

New Biologics Biobetter Medium-Risk High-Return Medium-Risk Biosimil ar

Chemica l Generic

Medium-Return Size : R&D Investment

Risk

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Competitive Edges Strategy

2. Acquiring New Growth Engine based upon Platform Technology

Diversified product portfolio is made possible through platform technology as opposed to a highly risky single product development Platform Technology
Ex) Albumin Fusion Technology (HGS) G-CSF, EPO, Exendin, hGH

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Proposal (1)
Current Situation of Domestic Advantageous to target Company
a niche market

Solution
Aiming antibody and protein therapy as they are applicable to diverse diseases

Slow-Start in comparison to

By utilizing platform technola progress gap can be made up by developing bio-betters

global Competitors

ogy,

Insufficient experienced la

bor force and Bio infrastructure

Maneuvering network Strategic alliance with experipartners

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enced

Proposal (2)

Needs to maximize the possibility of commercialization through business collaboration

Research Manufacturin g

Producing Early Cell Stains

Clinical Test, Manufacturing Develop & Process (CMC)

BioVenture
Developmen t

Partner s
Sales & Marketing

Pre-Clinical

Sale

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V. Investment Points of Views

Current Step of Korean Bio-industry Investment Proposal

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The Current Step of Korean Bio-Industry

2nd Chance for Globalization of Biologics!

1998 2002 KOSDQ Collapse 2007 1st Generation Bio-venture Destiny of 1st Generation Bio-venture 2010 Success Story (Step-up)

New biologics DNA Therapy DNA Analysis Diagnosis & Equipment Foundation of Biotech

Direct IPO Back-door Listing Maintenance Liquidation

Global Commercialization, Developing New biologics

Fail!

Instead of incubating the early-stage bio-ventures, intensive/selective investment on potential companies (listed or unlisted) to create success story of commercialization
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Investment Proposal

Resolving the Biggest Bottle-Neck of Bio-Industrialization!

1st Phage Investment (by Venture Capital Fund, Government grants, etc) 2nd Phase Investment Concentration

Private Equity Investment (Global Commercialization) Synergy Effect (Preferred Platform Technology)

EarlyStage Bio-Venture

Potential Company

Successful Company

Expediting Bio-Industrialization by Precedent Success, and Establishing Virtuous Cycle by Providing Proper Environment for Follow-Up BioVentures!
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