Biologics are already a $150-billion-plus industry globally, and revenues could nearly double by 2020, accounting for more than a quarter of the pharmaceutical market.1 Analysts also expect the worldwide biosimilars market to grow, reaching approximately $35 billion by 2020.2
To date, much of the biosimilars focus from global pharmaceutical manufacturers has been on developed markets. However, we believe the greatest untapped growth in biosimilars markets may not be from the EU, US, and Japan where biosimilars face brand-on-brand competition from their reference therapies and the potential entrance of bio-betters. Instead, long-term growth may derive from competition against non-consumption in emerging markets for biopharmaceutical manufacturers.
Many emerging markets have relatively poor access to biologic drugs and may be attractive targets for drug manufacturers that are able to effectively develop and market less expensive treatments for millions of new patients – affording the opportunity to compete against non-consumption, rather than established, branded therapies.
From a regulatory standpoint, biosimilar pathways have been established in most emerging markets, even if the approval processes may differ from those in existing markets.
This focus on new and potentially high-growth markets raises several important questions.
First, are biosimilars a winning strategy? Major biopharma companies with existing production capabilities and mature sales and marketing structures globally are best equipped to compete in emerging markets, but what kind of margins can they realistically expect?
Second, what should be the extent of the investment in emerging markets, and what kind of business model should be built to sustain an ongoing program?
Emerging markets initially are unlikely to provide the level of profitability that might be expected in the more established systems. Factoring in demographics and financial considerations, there may be a need to sell biosimilars at lower prices than in the US, and the upfront manufacturing and marketing likely will be substantial.
Third, will it bring sufficient return on investment, given the expense of developing and marketing these complex molecular treatments? Will that, combined with anticipated lower prices in emerging markets, be enough to drive significant growth?
Biosimilars are not generics. They don’t project the extent of consumer cost savings that generic drugs have since the early 1980s. Biosimilar costs assumed by the customer are expected to be much higher than the small co-pays experienced with generic small molecule drugs.
Some companies may also look to bio-betters as a more cost-effective alternative. They follow the same regulatory path as the originators, but serve as an improvement in terms of clinical efficacy or new clinical indications than the original therapy.
Our view is that the untapped demand of emerging markets and large pockets of non-consumption provide a substantial opportunity for long-term growth. The smart play may well be to make emerging markets a centerpiece of a global marketing strategy.
1 IMS Health, Searching for Terra Firma in the Biosimilars and Non-Original Biologics Market: Insights for the Coming Decade of Change, 2013
2 Allied Market Research, Global Biosimilars / Follow-on-Biologics Market, July 2014