Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The hot new thing in pharma -- "biosimilar" drugs -- is getting so crowded that soon nobody will want to go there any more.

Biosimilars are a relatively new wave of generic-like drugs that substitute for biologic drugs, which are made with living cells rather than chemicals. Many big pharma companies have jumped into the market with both feet.

In an interview on Wednesday, though, Brent Saunders, CEO of Allergan PLC -- which is developing four cancer-drug biosimilars in partnership with Amgen Inc. -- predicted many companies would eventually retreat from biosimilars. Allergan, he noted, likely won't do much with biosimilars beyond its current projects.

Saunders is on to something: The market simply won't be able to support the current crowd of entrants. 

Biosimpact
Some of the world's best-selling drugs will see sales fall as a result of "biosimilar" competition
Source: Bloomberg
Includes only J&J Remicade sales

The U.S. biosimilar market is far from settled. The FDA is still trying to figure out exactly how to regulate the drugs, and there's a lot of patent and other litigation outstanding. They haven't been on the market long enough to predict how swiftly they will be adopted. And there are reasons to think their uptake will be slower than that of traditional generics, given their current lack of easy substitutability. 

That gives big companies with big research, marketing and legal budgets an advantage. Such companies are more likely to muscle into the market first. The trouble is that later entrants will likely slash prices to compete, ruining the party for everybody. 

"It's great for society, but it's bad for business," Saunders said of the inevitable discounting that will result from competition.

And make no mistake; a big crowd is coming. 

Pileup
A huge number of multi-billion-dollar drugs face looming competition from biosimilars
Source: Bloomberg Intelligence

Amgen, Allergan, Boehringer Ingelheim GmbH, Pfizer Inc., AstraZeneca PLC, Merck & Co. Inc., Biogen Inc., and Novartis AG all have made substantial investments or have partnerships to develop biosimilars. Alongside them are a range of other competitors, from Chinese and Indian upstarts to Samsung Biologics Co. Ltd., part of the giant Korean conglomerate better known for producing cellphones and TVs.

Right now, there are structural barriers in place that give larger biopharma companies an advantage in biosimilars. Those barriers are all but certain to deteriorate over time, Saunders warned, which will make the biosimilar business look very much like a standard generic-drug business -- but with substantially higher R&D, legal, and manufacturing costs.

There's a reason Novartis and Pfizer are the only big biopharma companies still with generics businesses, and that Sanofi is trying to get rid of what it has: Early returns may be nice, but peter out rapidly.

Expect the same thing to happen to biosimilars, and for biopharma interest to peter out with it.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net