Significant Changes Ahead for the Chinese Biologics and Biosimilars Industry

In the absence of a Chinese regulatory definition of “biosimilarity” there are no marketed biosimilars of recombinant protein biotherapeutics in that country. Unlike the US and Europe, China does not have a regulatory path for the development of biosimilars and all biotherapeutics must follow the same path to approval whether they are novel drugs or new versions of existing ones. Standards that commonly define biosimilarity such as biophysical properties, methods of analytical characterization and verification of equivalent clinical efficacy and safety have not been set by the Chinese regulatory authorities. Drugs that might be considered biosimilars are more accurately described as alternative versions or copies of the originator’s protein or what are commonly referred to as follow-on biologics (FOBs).

Change in the way biologics and biosimilars are developed and sold in China is on the horizon. In October of 2014, the Chinese Center for Drug Evaluation (CDE) which is part of the CFDA published the country’s first draft guidance on the development, manufacturing and commercialization of biosimilars. The CDE recently issued guidance on stability studies necessary for approval of biologics. These are two of many steps that the country has made since it began revamping its drug regulatory process in 1985. The biosimilars draft aligns with guidelines that govern biosimilars in Europe and the US and their publication signals the interest of the CFDA to develop biotherapeutics that are on par with western standards.

Like the rest of the world, there is a tremendous need for affordable biotherapeutics in China and the era of biosimilars promises to fulfill this need. Recombinant protein therapeutics such as interferons, growth hormones, recombinant insulins, erythropoietins, and monoclonal antibodies have revolutionized the treatment of stubborn and profound conditions such as infectious disease, autoinflammatory disease, cancer and diabetes. Given the high cost of discovery, development and manufacture of recombinant biologics, they are among the most expensive on the global market. Patent exclusivity of some of the largest selling and most expensive biologics has ended or will be ending within the next few years. Biosimilars offer hope that these powerful medicines will reach more patients.

The recent actions of the CDE and CFDA demonstrates the country’s interest in bringing high quality and affordable biotherapeutics to its citizens and raises interesting questions about the future of this class of drugs. If adopted, how will a new regulatory path for Chinese biosimilars change the way all biologics are marketed? Will adoption of the guidelines yield intended increase in availability and quality of alternatives to brand biologics? Will Chinese manufacturers be able to meet GMP standards set forth in the guidelines and will they reach capacity to meet greater demand? Will multinational corporations face erosion in their market share to higher quality, Chinese manufactured drugs? Will world-class Chinese biologics and biosimilars become a force in the global marketplace?

THE BUSINESS OF BIOLOGICS IN CHINA TODAY

Biologics represent a small but growing part of the total pharmaceutical market in China. According to estimates, sales of biologics amounted to 2% ($1 billion) of the $75 billion Chinese pharmaceutical market in 2013. China has moved into second place behind the United States in pharmaceutical sales and is expected to maintain is annual growth of 10% to 20% for the near future. Biologics are expected to be a major contributor to this growth.

Access to very effective, but expensive biologics is an acute problem in China and barrier to market expansion. For citizens in urban regions of China, medical insurance pays for a major fraction of the cost of their medicines. Drugs are reimbursed based on whether they are included on the National Drug Reimbursement (NDR) list. However, many of the first and second generation recombinant biologics are not on the list and reimbursement is low or non-existent. These patients must find other ways to pay for these drugs, either through private insurance plans or on their own. A majority of the country’s citizens live in rural regions where availability of medical insurance is limited and annual income is very low. For these patients, access to expensive biologics is beyond their means.

Quality will influence the growth of biologics in China. The government, its citizens and its healthcare providers are concerned about the quality of drugs that are available to them. The recent regulatory actions of the CDE demonstrate the government’s desire to assure that quality biologics reach its citizens. Although brand biologics, imported from the west or manufactured in China by western firms have a significant share of the market, Chinese manufactured FOBs compete with these products. There is a multitude of firms that produce and sell FOBs of first generation recombinant protein products throughout the country. There are at least 9 firms that sell versions of Amgen’s Epogen (erythropoietin) for anemia and 18 firms that sell versions of Amgen’s Neupogen (filgrastim) for neutropenia. Even though competition between these firms should drive down cost, their production capacity is very small and their quality control processes do not meet global standards. Urban Chinese citizens and healthcare providers have high interest in quality, are concerned about these products and reluctant to use them if given a choice. There is real demand and market opportunity for affordable Chinese drugs that match the quality standards required of western produced products.

In the absence of domestically produced, high quality biologics, western manufactured brands enjoy market advantage in spite of their high cost. These drugs retain significant market share, especially with affluent urban citizens who can come up with the extra money to pay for them. Sanofi and Novo Nordisk hold a major share of the diabetes market with their recombinant insulins, Lantus and Victoza. Enbrel (Amgen) and Humira (Abbvie) were launched in 2013 for rheumatoid arthritis and ankylosing spondylitis.

Recombinant insulins are in demand in China where diabetes is a major health problem. According to the International Diabetes Foundation, 9% of the Chinese population (~100 million people) suffer from some form of diabetes or its complications. According to a 2014 report by Chinese Research Intelligence the CAGR (compound annual growth rate) of sales of insulin glargine in a Chinese sample hospital market exceeded 70% from 2005 to 2013. The diabetes market is expected to continue to grow to $3 billion by 2016. Recombinant human insulin such as Lantus (insulin glargine) and Victoza (liraglutide) are blockbuster drugs in the west, generating billions of dollars in revenue. Lantus has been sold in China since 2004. Victoza was launched in 2011. A 10 to 15 day course of Victoza costs 878 yuan ($140) and, China has become one of the top markets beyond the US, Europe and Japan with sales of $22 million in 2013. At least two insulin glargine FOBs, Basalin (Gan and Lee Pharmaceuticals; Beijing) and Uslin (United Laboratories International; Hong Kong) have been launched since 2005 and more versions are under development by other firms. Basalin holds second place in market share behind Lantus.

HOW WILL A NEW REGULATORY PATH FOR THE DEVELOPMENT OF BIOSIMILARS INFLUENCE THE FUTURE OF BIOLOGICS IN CHINA?

The Chinese government and the country’s healthcare providers and patients are anxiously seeking safe, efficacious and more affordable biotherapeutics that are superior to the FOBs currently available to them. The draft of the guidelines for biosimilars signals the aim of the CFDA to bring high quality affordable biosimilars of top biologics to the country’s population. The stated purpose of the guidelines is to guide research and development of biosimilars and promote the development of the biopharmaceutical industry in China.

The guidelines are designed to match and even  exceed global standards set by the European EMA, US FDA and the World Health Organization. They represent the first Chinese regulatory definition of a biosimilar as a recombinant therapeutic protein with the same amino acid sequence as an approved biologic drug and similar in quality, safety and efficacy. They call for data that proves that the developed biosimilar meets all the characteristics of this definition. They describe a stepwise approach to development which includes guidance on analytical testing, animal testing and human clinical evaluation. Comparative studies must demonstrate no meaningful difference between the candidate and reference drug. Only biologics that are approved in China can be used for comparative studies.

According to Michael Yu, CEO of Innovent Biologics, the new biosimilars guidelines will have significant impact on the entire biologics industry in China. They clearly define the requirements for approval and raise the bar for firms that wish to compete in this business. Makers of FOBs that do not meet these higher standards will find it difficult to remain in the market unless they have the capability to change. Importantly, if the new guidelines are adopted, they will assure improved products for the country’s citizens.

If approved this year, the new guidelines chart a course for higher quality biosimilars, but it will take time for Chinese firms to bring world-class biosimilars to the country’s population. Major challenges will be in the area of manufacturing where there will be demands on capacity, process control and quality systems.

Development and manufacturing of biosimilars is a complex and costly endeavor. The cost to set up and validate a recombinant protein manufacturing operation that can fulfill western quality standards requires time to develop and validate quality processes. This can take 4 to 6 years and cost $200 to $800 million. Operations that meet accepted quality standards of Good Manufacturing Practice and have capacity to meet an anticipated large demand will be necessary. Only a few existing firms are capable of reaching large industrial scale production of recombinant proteins. According to Michael Yu, the combined bioreactor capacity for the entire country is less than 30,000 liters. By comparison, South Korea, a major global producer of biologics and biosimilars, has a capacity of 500,000 liters.

The transition from an infrastructure of a large number of small manufacturers with limited quality systems to one that can produce GMP-compliant biologics or biosimilars at large scales will require investment, expertise and time. There has been notable effort on the part of Chinese firms to become world class producers. These companies are aiming to establish GMP facilities for biopharmaceuticals in the near future. Innovent Biologics is building a $140 million facility in Suzhou's Biobay Industrial Park with funding from foreign and domestic investors. One of Innovent’s aims is to build the first GMP-compliant recombinant biologics plant in China with 15,000 liter capacity designed to meet CFDA, EMA and FDA standards. 3SBio Inc (Shenyang) has built a manufacturing facility aimed at being EMA compliant. Shanghai Henlius Biotech, a joint venture between Fosun and Henlius Biophramaceuticals began construction of a 10,000 square meter GMP facility for mAbs in 2014. The new facility is also intended to fulfill commercial production needs for monoclonal antibody drugs. Henlius has a pipeline of 4 mAbs including versions of Rituxan, Herceptin, Avastin and Humira which have been submitted to the CFDA for approval for clinical trials as new drugs.

Large pharma already has major R&D centers in China and may look to build manufacturing facilities of their own or contract with a domestic firm. There are obvious advantages to making their products locally and China offers incentives to do so. Sanofi, has 3 manufacturing facilities in the country. If the economic outlook for biologics improves and more domestic Chinese manufacturers gain expertise and capability, it remains to be seen whether other large pharmaceutical manufacturers will begin considering China as a place to make their products?

The hope is that a regulated biosimilars industry will make these drugs more affordable and accessible to insured Chinese patients. According to Michael Yu, Chinese biosimilars are expected to achieve discounts of up to 50% over branded biologics. Domestically produced biosimilars will also have market advantage over imported brands and greater discounts could be achievable. The regulations will assure higher quality. If these drugs achieve significant discounts they might reach more patients who are covered by insurance if they are listed on the NDR. However, the majority of the uninsured population may still not be able to afford the drugs in the absence of coverage. According to reports, efforts are underway to rectify this problem.

Given time, capital investment and the development of expertise, there is no question that Chinese firms will be able to produce quality biologics and biosimilars at a large scale.

When they accomplish their goals, will they seek to reach global markets? South Korean companies such as Celltrion and Samsung BioEpis are bringing their products to the west. Celltrion launched its infliximab biosimilar, Remsima in Europe in 2014 and has submitted a 351(k) application for approval in the US. Both companies have formed alliances with major pharmaceutical giants Hospira and Merck. Alliances enable these companies to reach lucrative global markets.

Some Chinese firms already market their drugs beyond their boarders. 3SBio Inc makes Epiao (recombinant erythropoietin) which is registered in 17 countries. Shanghai CP Guogian has exported Yisapu to Colombia since 2006 and has expanded to other Latin American countries and India. Partnerships can facilitate a global strategy. For example, in 2013 US-based Oncobiologics struck a deal with Zhejiang Huahai Pharmaceutical Co. Ltd., of Linhai, to develop, manufacture and commercialize biosimilars of Humira, Rituxan, Avastin and Herception in more than 30 un-named developed markets.

It remains to be seen if other Chinese manufacturers will follow these leaders. To date, no Chinese manufactured recombinant protein is sold in the US or major European countries.

The business of biologics is at a turning point in China. The draft of the new guidelines for biologics and biosimilars will have major impact on the quality of these drugs and their accessibility to a larger cross section of the Chinese patient population. The Chinese biotechnology industry is investing in the expansion in capability and capacity to meet the anticipated demand. These drugs will surely be a major contributor to China’s rapidly growing pharmaceutical industry.

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