The biogenerics threat looms large 

The therapeutic proteins market is becoming increasingly attractive to generic competitors, which pose a significant threat to the revenue streams of some of the most established classes. As generic manufacturers move in, who stands to gain and will existing therapeutic protein manufacturers survive the competition? Datamonitor's Nicole Lamble takes a look...

There are a number of drivers for the introduction of generic competition. Firstly, the market potential for biogenerics is sizable, with over half of the 2001 therapeutic protein market being susceptible to generic erosion of market share by the end of 2005, equivalent to $13,500 million.

Secondly, due to the high prices of therapeutic protein products, any cost savings to the payer, regardless of how small, could be a significant driving force. Consequently, many generics manufacturers are beginning to make strategic moves within this area.

Over $13.5 billion of the $27 billion therapeutic proteins market in 2001 is susceptible to generic competition by the end of 2005 through the loss of patent protection. This revenue provides a large incentive for generic pharmaceutical companies to move into this market.

Big savings?

However, it is not only the generics industry that stands to benefit from the emergence of biogenerics, as each country's health service also benefits from the availability of lower priced generic products.

The large potential market for biogenerics will ensure that eventually a regulatory process will be established allowing the emergence of generic competition in this market.

Datamonitor's analysis suggests that an approval pathway will be established by 2006 but that the uptake of biogenerics will be initially very slow.

The main reason is that although biogeneric products will be positioned at a lower price point to branded biologic products, they will be unable to offer the significant step change in pricing seen in small molecule generics, due to the higher costs of biogeneric development and manufacturing. The cost savings to healthcare payers will therefore, not be as great.

Expensive entrance fee

However, the high barriers to entry that exist will result in the pioneering companies that develop biogenerics for the major markets, having to make considerable investments to gain access to the market.

These include the high cost of manufacturing biologic products, the expense of gaining regulatory approval for this new class of products and the investment required to reassure the medical community about product safety.

Generic companies can expect to face considerable opposition from pharmaceutical companies with branded biologic products, adding numerous court cases to the hurdles that must be negotiated.

The lack of manufacturing capacity adds to the existing hurdles that companies developing biogenerics are facing. While a number of companies have opted to invest in manufacturing facilities in developing markets such as China, where costs are lower, many other companies are facing the prospect of attempting to form alliances with contract manufacturing organizations.

Customer loyalty

While this represents a viable option, the companies are having to compete with other companies that manufacture branded products. The risk is that contract manufacturing organizations are likely to remain loyal to the innovator biopharmaceutical companies rather than moving into the biogeneric market and risk souring relationships with their current 'bread and butter' clients.

However, the manufacturing crisis may not be such a hurdle if biogenerics cannot enter the market until after 2007 when an approval pathway is introduced because capacity should have been stepped up.

Certain classes of proteins are attracting greater interest because they are more commercially viable. The number one market is the erythropoietin class, with Amgen's Epogen, a product that is still experiencing double digit growth and achieved sales of $2,150 million in 2001 as chief target

Stimulating innovation?

Overall, due to the aggressive preservation of market share by established players within the therapeutic proteins market, the biogenerics industry will not become fully established until after 2010.

By this time, a number of biogeneric companies will have launched products, driving down the price of therapy in relation to branded products. Consumers and physicians will then also have gained confidence in the safety of biogenerics, produced using different processes to the original product, and this in turn will slow the growth of the therapeutic protein market.

However, this decline will be reclaimed and growth will continue by pharmaceutical companies developing innovative products that supersede available biogenerics.

If you found this week's Expert View useful, you may be interested in Datamonitor's reports:

- Global Generics Guide: Capitalizing on an $82 Billion Opportunity priced $10,800

- Therapeutic Proteins: Strategic Market Analysis and Forecasts to 2010 priced $6,100

- Strategic Perspectives: Impact of the Cancer Generics Market - A Coming of Age priced $6,100

To order this report - click here! - then search by title.