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From APIs to ABIs
Indian pharmaceutical companies are gearing up to capture
a major chunk of the biogenerics market. The pickings are bound to be good,
but managing active biological ingredients (ABIs) is not as simple as active
pharmaceutical ingredients (APIs). Viveka Roychowdhury explores the strategies
at work
 The
world's first biotech drug, Epogen (erythro-poietin, for anaemia) from Amgen,
is slated to lose patent protection in 2011 and many more will follow closely.
In fact, big pharma has been anticipating and preparing for this opportunity
all through the last decade. Plans have now come to fruition, as the slow morphing
of the pharma industry into biopharma becomes more visible.
For the pharma industry, it was a 'diversify or die' situation. Revenue growth
is slowing down, R&D spend is up while drug approvals are getting sparser.
Blockbuster drugs like Lipitor are also going off patent and pharmacos had to
diversify their product basket and biologics/biogenerics seems like a good way
to hedge their bets.
Most companies chose the inorganic route to jumpstart their
biological pipeline. One of the earliest big deals was Astra Zeneca's buyout
of MedImmune for $16 billion. Biogen Idec, another large US-based biotech firm
is also currently the target of a takeover bid. Recent examples of the same
strategy in the domestic market include Ranbaxy Laboratories's acquisition in
Zenotech, Reliance Lifesciences acquiring Genemedix and Avesthagen acquiring
Siegfried Biologics GmbH, to speed up entry into the biotech market.
Indian players are obviously hoping to repeat their success
with generics in the biogenerics market as well. Wockhardt and Shanta Biotech
have targeted Amgen's Epogen while Biocon has laid its bets on a biogeneric
version of Eli Lilly's Humulin and Novo Nordisk's Novolin, (recombinant human
insulin, for diabetes).
Pros and cons
 "For
large integrated pharma companies looking at entering the biologics space
the issue is scalability… in terms of manpower, infrastructure and
regulatory compliance. The main hurdle is bridging the gap between suitability
and availability of skilled personnel"
- Utkarsh Palnitkar
Healthsciences Industry Leader
Ernst & Young India
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Biotech drugs have many advantages over small molecule chemical
drugs. From a business point of view, they are difficult to replicate and require
larger investments. This creates higher entry barriers and ensures fewer players
in the segment. From a therapeutic point of view, biotech drugs tend to have
fewer side effects than pills.
However, biologics is a different ball game altogether. While
moving beyond the pill, pharma companies have to grapple with new obstacles.
The basic difference between chemical-based manufacturing and biotech-based
drugs is the fact that with biologics, most often, the product is the process,
or is the result of a fermentation procedure, or the natural action of cells,
to produce proteins, etc. The biotechnologist controls cellular growth by manipulating
biochemistry conditions, harvests or recovers the desired product, purifies
it and formulates it into a stable medicine, which can be delivered to a patient
in a safe manner. This basic difference makes it very difficult to 'copy' a
biologic. Thus generic copies of biotech drugs are more correctly known as 'bio-similars'
as they can only be similar to and not the same as the original. These realities
call for more stringent manufacturing conditions, different skill sets, and
on a macro level, a larger investment horizon.
As always, choosing the right start-up strategy is crucial
to breaking into a new market. Once started, management has to work on two key
levels—gearing up operations and getting the finances in place.
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Globally, the regulatory framework for New Biologic Entities (NBEs) is
more or less similar to small molecules with more tests involved at each
and every step, points out Palnitkar of E&Y India. In June, the US
moved one step closer to opening up the biosimilars market, when the US
Senate gave the thumbs up to the Biologics Price Competition and Innovation
Act, 2007. In the European Union (EU), the pathway for some molecules
has been put in place like erythropoetin, human growth hormone, etc.
Analysing the situation in India, Palnitkar says that to date, all biopharma
products in India pertained to biogenerics only and none to novel candidates.
Over the past year there have been a series of developments in the biotech
regulatory process. In April 2006, the draft National Biotechnology Development
Strategy was released for comments. Based on comments from key constituents
and relevant ministries and departments, a final cabinet note has been
prepared, and awaits final approval.
Features of the draft National Biotechnology Development Strategy:
- Seeks to promote innovation in small and medium biotech companies
- Calls for establishing a single National Biotechnology Regulatory
Authority and providing a faster and more efficient clearance for all
biotech products
- Proposes exempting all biotechnology segments from compulsory licensing
requirements
- Allowing expedited foreign direct investment up to 100 per cent using
the "automatic route"
- Suggests continuing all existing biotech fiscal incentives through
2010.
- Offers increased incentives for commercialising scientific research—often
critical for spurring technology transfer.
- Proposes that for all publicly funded projects, one-third of the
value of the patent would go to the scientist who created the IP, one-third
would go back for funding R&D, and one-third to the institution
that created the project.
The NBRA will be administered by the Department of Biotechnology of
the Ministry of Science and Technology of India. The government is working
closely with the US regulatory bodies such as FDA and EPA to evolve a
world class robust science based regulatory structure to expedite application
of biotechnology in agriculture, veterinary and medicine sector.
India's Department of Biotechnology, created in 1986, has announced
support for setting up numerous biotech parks, some of which have already
been established. These parks are intended to spawn biotech clusters by
bringing companies, universities, and R&D institutes together in one
location. The finance minister has proposed concessions for incubatee-entrepreneurs,
to strengthen entrepreneurial R&D.
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Scaling up operations
 "A
kind of reverse integration is gradual and less risky, than going all out
for biologic space"
- Dr Rustom Mody
Head (Quality & Strategic Research)
Intas Biopharmaceuticals
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On the operations side, the most critical phase in the evolution
of a pharma into the biologics space, or for a small biotech company looking
to move from discovery stage to therapeutic application, is the scaling up process.
"Most failures of technologies occur because of glitches
at this stage," points out Venkat Ramana Kolanu, CMD, Jupiter Bioscience.
"Researchers developing these technologies do not normally have the facilities
for scale-up or do not consider it important in their realm to scale up the
technologies. The most critical areas which are overlooked are identification
of cheaper raw materials to replace costly inputs used in lab scale, down stream
processing, purification and packaging on the commercial scale."
"Time for process optimisation during scale-up (scale-up related process
changes) can be time-consuming," concurs Dr Rustom Mody, Head-Quality and
Strategic Research, Intas Biopharmaceuticals Private Limited (IBPL).
While there are no guarantees or fixed formulae for scale-up
success, Mody lists three solutions to reduce this uncertainty. "The first
is developing a robust lab-scale process by understanding the critical process
parameters and controlling them. Secondly, a 1,000 fold scale up may be taken
through stages of five to 20 folds of linear scale-ups, depending on the ease
of scale-up. The third measure would be to have process machinery that can handle
larger volumes. Although this is cost intensive, it reduces variability in the
product, arising from sub-lots," suggests Mody.
| Focus on technology
According to Jupiter Bioscience's Kolanu, services
based business models on contract manufacturing, contract research and
outsourcing of clinical trials will be less risky as an entry strategy
and will enable the company to make an entry compared to only product
based approach of development and commercialisation. He also suggests
that entry into the ABI space should be based on platform technologies,
because a product-based approach would leave the company open to the risk
of price competition from the west and in recent years from Japan, Korea
Taiwan and China. A company with a sound background in R&D would obviously
have better chances of success in moving from APIs to ABIs as it has already
has experience in these methodologies.
Try in-licensing
Another common start-up strategy to catch up and make
a quick entry into the biopharma sector would be to license technology
from innovators, who could be academic/research institutions or R&D-based
pharma companies. The company would thus save time spent on R&D development
and regulatory clearances, which is more cumbersome for biologics.
Target high potential segments
Kolanu's shortlist of therapeutic segments for
biopharma wannabes includes cardiovascular,
cancer and leukeamia drugs, methicillin resistant bacterial infections,
rheumatoid arthritis, mental disorders and central nervous system disorders.
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Finding the funds
Some would argue that funding is more important than scaling
up the operations. Corporate strategy on this front would depend on the size
of the company. "For large integrated pharma companies looking at entering
the biologics space, the issue is scalability," says Utkarsh Palnitkar,
Health-sciences Industry Leader, Ernst & Young India.
"Scalability in terms of manpower, infrastructure and regulatory compliance
(if looking at regulated/lesser regulated markets). For a large/medium-size
pharma company entering the bio-pharma sector it is not difficult provided the
man-power needed is in place. The main hurdle is bridging the gap between suitability
and availability of skilled personnel," he adds.
Mody of IBPL points out that if the company has deep pockets,
it can right away acquire companies that have already established themselves
in the biologic space, to speed up entry in to market. The Ranbaxy, Reliance
Lifesciences, and Avesthagen acquisitions fall into this category.
Smaller companies and start-ups, in contrast, find it difficult,
if not impossible, to attract funding for their biotech ventures, which are
deemed riskier than pharma projects. "In recent years, investors have shown
a clear preference for later stage financing rounds—a trend that continued
in 2006. A slight improvement in early-stage financing might reflect the first
returns from various government initiatives to motivate seed and early stage
funding. Nevertheless, funding of early stage start-ups remains a serious issue
for the sustainable development of the industry," points out Palnitkar.
Strategies at play
Echoing the need to first get the finances in place, Kolanu
says, "The biologics space is far more capital intensive, and thus, sufficient
capital should be raised before entering the biologics space. The preferred
financing options for entry into biologics till the products are established
successfully is to be funded through the equity route or quasi equity instruments.
Thus the entry strategy for pharma companies entering the ABI sector should
be long term focused without any pressure of immediate results or revenues as
it may not happen so early."
Balancing risks and rewards
Another approach to reducing risk is to go about it in a step wise manner. "A
kind of reverse integration is gradual and less risky than going all out for
biologic space," advocates Mody.
Analysing his company's game-plan, Mody says IBPL's strategy
was to extend its R&D capability through networking with professional CROs.
IBPL's recent tie-up with Canada-based Viropro Inc was struck to leverage certain
proprietary technologies and expertise of Viropro towards co-development of
molecules dedicated towards bio-therapeutic products. IBPL has sent an initial
sum of $50,000 as a down payment to Viropro and has recently completed a site
inspection of Viropro's premises as part of the process. IBPL expects to commercialise
the product and market it in India, Sri Lanka, Bangladesh, Pakistan, Nepal,
Burma, Thailand, Laos, Cambodia, Malaysia and Vietnam; Viropro will retain all
of Africa.
"IBPL has undertaken planned initiatives to enhance R&D work on novel
bio-therapeutic molecules and has been aggressive on establishing co-development
partnerships with several technology companies in North America," says
Mody.
| According to Mody of IBPL, most new pharma companies
enter the biopharma space in the following step wise manner:
Step 1: Use their marketing arm to launch
finished biologic product in-licensed from a generic manufacturer.
Step 2: The company then tries to get the
bulk (from the same company whose product is marketed) and does in-house
filling and marketing, with the introduction of analytical capabilities
for the finished product testing.
Step 3: The company then acquires technology
for drug substance manufacturing.
Step 4: In the last stage, the company sets
up its own R&D for additional products.
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Organic evolution
Another barrier is the lack of well defined information.
"The entry into the biologics space requires much longer time than the
synthetic chemistry route because, unlike the API space where the processes
are clearly defined for making the API and can be easily replicated from a literature
search, in case of ABIs the processes for manufacturing the product is not clearly
defined and it takes considerable amount of time to establish the processes
on the commercial scale especially with respect to yields, specifications and
product purity, etc," points out Kolanu.
The Hyderabad-based Jupiter, started out two decades ago
as an R&D based API manufacturer. Five years ago, it was one of the earliest
to sight the rising biotech sun and started investing to develop a basic understanding
of biological processes such as screening and isolation of microorganisms for
therapeutic applications, characterisation and scale up on fermentors to understand
the issued related to scale up and yields. "Cloning of microorganisms and
drug targets to improve yields and get the desired products have been carried
out on the bench scale with the help of partners drawn from the research institutions
in India and abroad," says Kolanu.
Like Mody, Kolanu too thinks the partner route will be preferable. "However,"
Kolanu cautions, "care has to be taken in selection of the partner as the
partner should have preferably commercial products in the market. As for research
based partners the major issue is most of them do not have any established technology
on the commercial scale."
Regulation restraints
Another key challenge is regulation. Drug recalls over safety concerns like
the Vioxx incident have made regulators risk-averse. With biologics, the regulation
oversight is even more stringent, given the fact that even small variations
in the process can result in loss of purity or efficacy of the entire batch
of output. A worse case scenario is that the medicine could actually be potentially
harmful to the patient.
Therefore while the US market has been open to generics for the past decade,
it is only in June this year that the US Senate gave the thumbs up to the Biologics
Price Competition and Innovation Act, 2007. This Bill incorporates safeguards
which will hopefully weed out poor quality products.
The first condition is that analytical studies showing similarity to the reference
product will need to be done for biosimilars seeking market approval. The second
stipulation is that clinical studies should show safety, potency and purity
of the products.
"Globally and within India, the regulatory frame-work
for biologics is more complicated compared to synthetic products. Patent rights
are also obtained with much more difficulty compared to synthetic APIs,"
says Kolanu.
Mody points out that the regulatory framework is expected
to change significantly as regulatory bodies controlling the approvals have
significantly improved in the couple of years with transparency and proper mechanisms
in place, however, there is scope for further improvement in terms of approval
time.
"The regulators are increasingly becoming aware of the
international regulatory requirements. However for biogenerics, international
requirements (e.g. for establishing biosimilarity of mammalian cell-derived
products) are not fully met by all manufacturers as no distinct guidelines are
in place. This is expected to change soon, with the introduction of monographs
for seven rDNA products in the Indian Pharmacopoeia," concludes Mody.
Bullish on biologics
In spite of these pain points, interest in the biotech industry is on the rise.
Quoting the ABLE-Biospectrum survey, Palnitkar says that the industry in 2006-07
clocked $2.08 billion in revenues, registering 30.98 percent growth, over the
previous year's figure of $1.45 billion. It has sustained a 30 percent growth
for five continuous years. The biopharma segment still accounts for over two-thirds
of the industry. During 2006-07, it has recorded sales in excess of $1.45 billion
and accounted for 71 percent of the total industry revenues. The biopharma sector
regis-tered 26.87 percent growth.
As Palnitkar opines, “Growth prospects are extremely bullish and the projected
size of the biotech industry would be about $5 billion revenue by 2010.”
The Indian biotech industry is expected to get another shot
in the arm thanks to the Special Economic Zones (SEZ) Act which came into force
in February 2006. "The Indian government conceptualised SEZ’s as far
back as 2000, but the absence of an SEZ Act deterred the flow of money into
the zones. That changed in February 2006, when the SEZ Act came into force,
with the launch of India's first biotech SEZ, the Serum Bio Pharma Park. The
SEZ Act is expected to facilitate large flow of foreign and domestic investment
to the SEZs, and contribute to improvements in infrastructure and productive
capacity, generation of additional economic activity and creation of employment
opportunities," reasons Palnitkar. The stage seems set for early bird Indian
players who have put in place their biotech strategies. The next few years could
well see their revenues escalate as they reap the fruits of their labour.
viveka.r@expressindia.com
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