Biosimilars: The Good, the Bad and the Unknown -- Barron's

Credit Suisse

Biosimilars is a "must understand" theme that will have very significant impact on the global biotechnology and pharmaceutical sectors. Biosimilars pose both a threat and an opportunity for the biotechnology and pharmaceutical sectors, and even with some read-through to other multinational companies.

Public companies most exposed to biosimilar [near-copies of proteins and antibodies] impact include AbbVie (ticker: ABBV), Amgen ( AMGN), Cipla [of India], LG Chem [of South Korea], Merck Serono [of Germany], Momenta Pharmaceuticals ( MNTA), Novartis ( NVS), Pfizer ( PFE) and Samsung [of South Korea].

We note that the size of the biosimilar opportunity -- just entering a near-term $70 billion land-grab -- antitumor necrosis factors (TNFs) are the primary focus. Biologics have become a very significant part of the global drugs market. This market grew from just $20 billion (or 10% of the global drugs market) in 2000 to $159 billion or 29% in 2014, and $276 billion and 32% by 2020. Biologics dominance of the top 10 drugs is even greater with biologics representing about 70% of the value by 2015. By 2018, $69 billion of biologics will have undergone patent expiries in major markets ($35 billion in the U.S. and $34 billion in the rest of the world).

By far, the anti-TNFs represent the biggest near-term biosimilar opportunity as they make up the largest single component of the global biologics market ($30 billion or 35% of 2015 total biologics sales) and is potentially catalyzed by the December 2016 U.S. patent expiry of [AbbVie's] Humira (although there is debate around this effective date due to the likely Nov. 18 issuance of the '657 application/'135 patent -- with expiry on Jan. 4, 2025).

Implications for stocks; AbbVie and to a lesser extent Amgen and Merck ( MRK)/Johnson & Johnson ( JNJ) are the most negatively exposed to the "first wave of biosimilar" anti-TNFs. In contrast, Amgen, Coherus Biosciences [not yet public], Novartis, Boehringer Ingelheim [of Germany], Pfizer and Samsung are most positively exposed to "first wave of biosimilar" anti-TNFs.

-- Ravi Mehrotra

-- European Pharma Team

-- Vamil Divan

-- Anubhav Aggarwal

-- Fumiyoshi Sakai

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