Analyst Article
BIOPHARMACEUTICALS – WHAT THE FUTURE HOLDS?
A. N. Aditya
Technical Insights, Frost & Sullivan
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The basic science underlining all biopharmaceutical drugs is that every living cell in the human body contains DNA (deoxyribonucleic acid) and contained within them are genes. Cells are able to perform their functions because of the instructions encoded within the genes. The cell activates only those genes required to produce specific proteins, even though the cell contains the entire string of DNA for that organism. The interactions between the proteins control all the processes within an organism. It is now possible to identify the exact genetic sequences that control the production of these proteins and pinpoint the exact functions of specific genes. These genes are then isolated and duplicated on a large scale to produce the desired protein, which is then extracted, purified and used for the production of the biopharmaceutical or biotech drugs, as they have come to be known.
Currently biopharmaceuticals are being developed to fight against cancer, viral infections, diabetes, hepatitis, multiple sclerosis and several other conditions and diseases. Distinct advantages include fewer side effects and stronger, effective and potent action on the target cells.
Current Market Scenario
The success achieved by companies with a few revolutionary new drugs has captured media attention in recent years. As a result, the industry has grown significantly over the past decade, and gained much attention both in the medical field and the equity stock markets all over the world.
Despite the slow growth of the overall pharmaceutical industry, the biotech sector has shown an impressive compound annual growth rate of more than 20 percent during the past five years. Factors that have spurred this high growth rate include the ability of biopharmaceuticals to target diseases such as cancer and HIV, a high rate of biopharmaceutical approval as compared to that for small molecules, and limited development of a generic version in this sector. Out of all categories, erythropoietins seem to be the largest group followed by insulins and monoclonal antibodies.
The global market for biopharmaceuticals is estimated to be about $50 billion in 2005 out of which North America (NA) alone accounts for more than 60 percent in terms of global revenues and R&D expenditures. NA is followed by Europe and Japan with approximate shares of 20 percent and 10 percent respectively. An estimated 400 to 500 biotech drugs are under clinical development for various disease conditions.
Industry Structure
The top five companies in the market alone account for close to 30 percent of the revenue earned by the industry globally. However, a majority of these companies have had success based on a small basket of products in the market and therefore are actively looking to supplement this for continued growth. The growth potential harbored by these companies is based on their financial resources and technological expertise.
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The small or medium firms are typically private, start-up companies initiated with venture capital funding. They also comprise of university spin-offs, with initial support from the educational institution but often have to depend on venture financing. Historically, Europe has held the advantage over the U.S. in this respect with a higher percentage of companies involved in research activities, but this is gradually diminishing.
CMOs (contract manufacturing organizations) have achieved first mover advantage and etched their place in the industry by building large facilities, which cost between $300 to $500 million. Additionally, their early entry has assisted them in gaining high technological experience in the difficult manufacturing process and hence a sustainable competitive advantage. It is estimated that there are a few hundred CMOs in the world, comprised of large and medium size enterprises with their facilities located in either the U.S. or Europe, but over 90 percent of CMO capaciity is held by the top 10 firms.
Production Process – Can Supply Match the Demand?
The biopharmaceuticals industry is expected to grow rapidly after 2008, owing to increased product launches from newer technologies that will mature at that time. Manufacturing capacity is likely to become one of the critical challenges, especially for monoclonal antibodies as demand is likely to exceed supply in a few years. It is predicted that with the increasing number of protein-based drugs hitting the market, production capacity as high as four times the existing capacity would be required by 2007. To counter this problem, the industry is evaluating alternate forms of manufacturing such as plant-based pharmaceutical production or transgenic animals, besides the mammalian and microbial cell culture systems.
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Most of the recently approved biopharmaceuticals were protein-based drugs and the primary method of producing these biopharmaceuticals is mammalian cell culture. With these approvals, the demand for manufacturing capacities has grown rapidly during the past decade. The demand curve is expected to rise steeply in the near future with numerous biotech drugs under the pipeline for life threatening diseases such as cancer and AIDs. In addition, the aging population and high incidence rate of diseases further contribute to the increase in demand.
Future Developments
In recent years, significant innovations have occurred in the biopharmaceutical area. A robust pipeline of new biotherapeutics point towards strong growth of the biopharmaceutical market in the near-to-medium term. Innovation in biotechnologies and sustained performance of the monoclonal antibody segment has brought in new classes of biopharmaceuticals addressing new markets as well as targeting new diseases.
The future of the biopharmaceutical industry will increasingly focus on products and, more particularly, on the diverse potential of monoclonal antibody products. Although new technologies will continue to emerge, the spectrum of supportive technologies currently available are now permitting a growing pipeline of novel therapeutics. Approvals during the past five years have already begun transforming oncology and inflammatory diseases with the prospect of more advances in these and other areas of medical practice.
New developments in the fields of genomics, proteomics and stem cell research seem attractive. However, these new developments, especially those of stem cell research, are extremely controversial and hence their speed of development remains questionable. Two other crucial issues that will affect the future progression of this industry are biogenerics and the regulatory structure. Biogenerics are essentially generic versions of the same biopharmaceutical drug that have come off patent protection and can be manufactured and sold by any company. Today there are at least 8-10 drugs that have either gone off-patent or would lose patent protection within the next three years—having global sales in excess of $5.5 billion. However, once the regulatory requirements are defined, it would affect brand product sales and capacity demand. The policies and attitude adopted by the U.S. FDA in the future would have a direct relationship with the future growth of this industry, thus impacting technology requirement or research focus currently established.
Another important area is gene therapy, which involves the insertion of genetic material into cells, encompasses repairing or replacing defective genes in order to make the target cells more susceptible to treatment. A great potential of pharmaceutical biotechnology lies in gene therapy and genetic engineering. Genetic engineering has been revolutionizing medicine by enabling mass production of safe, pure and more effective versions of proteins and enzymes that the human body produces naturally.
Regulatory Environment
The therapeutic biopharmaceutical environment is relatively new compared to traditional drugs. However, the evolution seen in biologics has been of great help in understanding where the field is moving to. Experience and familiarity with the intricacies of biologic behaviour and the ability to define a regulatory path in conjunction with the regulatory agencies is the key to success in this area. The regulatory world of fine-chemical/small-molecule drugs is abundant with clearly delineated guidelines and precedents that can be used to reliably advance a development program. In biologics, there have been constantly evolving new territories based on past relevant experiences. This is a constant challenge as the knowledge about biopharmaceuticals increases.
In the United States, new generic versions of chemical drugs are approved through an Abbreviated New Drug Application (ANDA) on the basis of essential similarity of the active ingredient and the bioequivalence of the drug to the already approved brand parent product. However, these assumptions do not apply for biopharmaceuticals since an abbreviated process for generic biopharmaceuticals does not exist. This is due to the fact that unlike small molecules, biologics such as proteins are difficult to characterize exactly, since their activity depends not only on the composition but also on conformation. Hence, a clear understanding of how process changes affect structure and biological activity does not exist, and it is believed that a minor change in process might trigger changes in biological activity. Many industry sources believe that a specific procedure for approving biogenerics will soon be in place. The best way seems to be a collaborative approach with FDA to clearly understand the ever moving target of biologics development in the genomics era.
Need of the Hour
Most of the biotech companies, which are into the biopharmaceuticals sector are research-based start-up organizations. These companies do not have the wherewithal to set up a large marketing and sales organizations to market drugs once approval is obtained. The ideal strategy that can be adopted is to form profitable partnerships with large biotech or pharmaceutical companies to handle the product commercialization. For instance, collaboration between Tanox Biosystems and Genentech is meant to leverage the expertise of both companies.
Alternative formulation technologies that will improve patient convenience and ease of administration have to be considered. Meaningful improvements in scale and yield of protein/antibody production will expand the availability of future important biopharmaceuticals. Efforts should be made to overcome barriers that include cost and risk of failure of clinical trials through phase III and beyond, financial road blocks, difficulties inherent in moving beyond basic research to large-scale and frequently changing regulatory requirements by federal oversight committees.
Conclusion
Overall, the field of biopharmaceuticals has a bright future—one with definite challenges. But the scientific, technological and clinical motivations that have driven this industry continue to grow and will drive future successes in the translation of science and technology into meaningful human therapies. Alternative formulation technologies, which will improve patient convenience and ease of administration, are now increasingly being considered. In addition, meaningful improvements in scale and yield of protein/antibody production are on the horizon—which will expand the availability of these and future important biopharmaceuticals.
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