Key Success Factors of Biosimilar & Bio-better

Key Success Factors of Biosimilar & Bio-better

HyukJong Lee(E-mail: hjlee1@bi-nex.com)

2

BA, Business Administration, Seoul National Uni-

versity

MBA, Haas School, University of California, Berke-

ley,

- Team Head of Emerging Market Research, Dae-

woo Sec.

- Associate, Goldman Saches, FICC, Hong Kong

- Able Investment (CRC, Private Equity Fund), Co-

founder

- Executive Vice President, Genexine (KOSDAQ

Listed R&D)

- Head of Development, Binex (KOSDAQ Listed

Biopharma)

HyukJong (HJ) Lee

3

Table of Contents

Ⅰ. Introduction of Biologics

III. Value Chain: Biosimilar/Biobetter

IV. Competitive Edges

II. Current Trend of Biologics

V. Investment Points of Views

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I. Introduction of Biolog-ics

▶ Synthetic Drug vs. Biologics

▶ Types of Biologics

▶ Biologics : Blue Ocean

▶ Biosimilar vs. Biobetter

5

Synthetic Drug vs. Biologics

Aspirin(180 Da)

Interferon-a(19,625 Da)

Antibody IgG(150,000 Da)

Artificially Synthesized Exist in the Body

6

Types of Biologics

Pro-tein

Cell

■ Gene Therapy

■ Genetic Vaccine

■ Aptamer

■ siRNA

■ Antibody

■ Protein

■ Cell Therapy

7

Biologics : Blue Ocean

Synthetic Drug Biologics

Component

- Small

- Synthetic product with simple

structure

- Big

- Bio-product with complex struc-

ture

Side effect - Synthetic Often - Existing in the body Rare

Market Value

- Low approval rate for new drug

- Blockbuster

- High approval rate for new drug

- Blockbuster

Develop-ment

Method- Capital concentrated - Technology concentrated

Develop-ment

Period- Avg. 11 years (U$240mln) - Avg. 8.5 years (U$180mln)

8

Biosimilar vs. Biobetter

Biosimilar Manufacturing

Process

1. Insert plasmid containing a gene for

protein of interest into a host cell.

2. Express the gene within the host cell.

3. Culture the host cell, produce and purify

the protein of interest.

Replaces original biologics after patent expiration. Biosimilar is produced in large

amount through DNA recombinant process using colon bacillus, e-coli, yeast, and an-

imal cell

Biosimilar

Biosimilar Manufacturing Process

Biobetter

Superbiosimilar

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II. Current Trend of Biologics

▶ Industrialization

▶ Globalization

▶ Current Biologics Market Trend : “Bio-better”

10

Industrialization

Biologic Market: One of Core Fields in Pharmaceutical In-dustry

Aided by Gvernment-Funded Project (ex: Smart Project), Industrialization Has Already Embarked by Big Conglomerates’ Entrance

Reference: Vision and Strategy of Biologic Industry in 2020, Industrial Researcher, 2007.6

Unit: U$mln Unit: U$mln

CAGR14.1%

CAGR18.6%

Global Biopharmaceutical Market

Korean Biopharmaceutical Market

71,807

163,783

370,723

516,835

2005 2010 2015 2020

1,016

2,860

7,417

13,070

2005 2010 2015 2020 Reference: Vision and Strategy of Biologic Industry in 2020, Industrial Researcher, 2007.6

11

Fierce Global Competition in Bio

Entering into Biosimilar IndustryMerck (2008) - Developing superbiosimilar with “Generic Technology”

Eli-Lilly (2008. 10) - Acquiring ability to develop biologics by M&A of Imclone - 40% of 59 products under R&D is biologics - Starting business development of Biosimilar

Pfizer (2009. 12) - Planning to utilize 10-15 biosimilar in 4-5 years - Gathering internal resources for biosimilar because they expect the market to grow soon - Looking for Business alliance and M&A for superbiosimilar

Japanese Pharma. – Aggressive M&A of Biotech. - Takeda (Acquisition of Millenium-RNAi), Eisai (Acquisition of Morphotech-mAb), Astellas (Acquisition of Agensys-mAb), Kissei (Applied for EPO Biosimilar ap-proval) etc. - Getting ready to compete with international big pharma. by developing business alliance and M&A of bio-venture

Globalization

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Biologics Market Trend: “Biobetter” in 1st Genera-tion Protein

Expansion of 2nd Generation Protein Therapy with Improved half-life and efficacy

Characteristics of Protein Therapeutic Market

Progress of Protein Therapeutic Market

High-Valued Knowledge-Inten-

siveRapidly Growing Wide Applicable

• Improvement of Biosimilar (Long-acting, Vitality, and Reduced frequency of administration)

• Patent Expiration of Block-buster Drug

(Price competitiveness)

OriginalBiologics

1st GenerationProtein Therapy

(Biosimilar)

2nd GenerationProtein Therapy(Superbiosimi-

lar)

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※ Neulasta (PEG-GCSF, 2nd Generation) Neupogen (GCSF, 1st Generation)

※ Aranesp (Glyco-EPO, 2nd Generation Drug) Epogen (EPO, 1st Generation Drug)

Mil

lion

US

$

Reference: Datamonitor 2008

Year

Market Dominance of Biobetter (2nd Generation)

Biologics Market Trend: “Biobetter”

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Biosimlar in mAb (Including Antibody-fusioned Protein)

1. Econimic Crisis due mainly to Fiscal Deficit Inevitable Reduction in medical expenditures

Huge price reduction pressure in new molecules as well as generic

2. Tipping Effect in Price reduction

Less weight in innovative drug development

3. Biosimlar in main trend for the time being

Why generated in Europe

Merck’s Enbrel L/I (US$720mln + Royalty & Success Incentive)

Boehinger Ingelheim’s announcement into biosimilar

Biosimilar : Main Trend

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III. Value Chain of Biosimilar & Biobetter

▶ Key Issues of Biosimilar Development

▶ Value Chain by Development Steps

▶ Biosimilar vs. Biobetter

▶ Current Technologies for Superbiosimilar

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Key Issues of Biosimilar Development (1)

Obstacles in Biologics Development

A. BIOEQUIVALENCE

- Difficulty in establishing bioequivalence or biosimilarity (especially for mAbs).

- Enormous costs for carrying out PHI/II of clinical trial and for proving its comparability.

- Differing regulations: EMEA has only recently published guidelines for antibody biosimilars.

B. LOW PRODUCTIVITY

- Manufacturing a Highly Efficient Cell Strain.

- Developing an Efficient Production Method.

C. FACILITY

- High cost of a bio-manufacturing facility (Hanwha, Samsung Electronics, Celltrion, etc.)

- Utilizing CMO (KBCC, international CMO facilities, etc.)

D. TIMING

- Patents for most original biologics expire within 3 years.

- The systemic strategy and the commercialization with the right partner are needed.

Higher Entrance Barriers Compared to Chemi-cal Generics

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Track 1

Originating Countries:

• Pros: ↑Speed (IF approval is granted)

• Cons: ↑Risk ↓Quality ↓Marketability

• Current collaborations:

- Two biosimilars have been licensed out to

Brazil (one from India, the other from China).

- Seeking ANVISA approval.

• Target market: Developing countries

• Currently Brazil only

Track 2

Originating Countries:

• Pros: ↓Risk ↑Quality ↑Marketability

• Cons:↓Speed

• Current Collaboration:

- Merck for global rights for its first

biosimilar

- Global Company S for the first mAb

biosimilar in Japan then in EU.

• Target market: The entire world

Models for Biosimilar Collaboration

Key Issues of Biosimilar Development (2)

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Value Chain by Development Steps

Cultivation and Purifying Process

(Establishing CMC)

Cell Line De-velopment

IND filing/Clinical Trial/Production Marketing

Key

Players

LG Life Science, Green Cross, Dong-A Pharma

ISU Abxis (with KBCC)

Key

Infra

- Cell Line

Manufacturing

Technology

- Improving Pro-

tein

(Long-acting, Vi-

tality),

- Technology of

Process Develop-

ment

(High Yield, Safe,

documentation)

- Clinical Trials

Through CRO

- GMP Manufactur-

ing

Facilities

- Sales Organization

- Global Partners

Bio-Ventures KBCC (Binex)

Samsung Electronics

Celltrion, Hanhwa

Biologics Value Chain by Development Steps

Needs to Overcome Major Hurdles to Commercialize and Re-quires Intimate Connections among Partners

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Biosimilar vs. Biobetter

It is Possible to Lower the Development Risk and Maximize the Profit by 2nd Generation Technology

Due to Comparable R&D Costs and Risk with Biosimilar,

Demand for Biobetter is Increasing to Generate Higher Profit

Biosimilar Biobetter

Development period

7 ~ 9 years 8 ~ 12 years

Patent Not Protected Protected by Patent

Investment Payback

Long-term, Relatively Risky Long-term, Risky

Barrier Medium High

Competition Becoming fierce Blue Ocean

Profit Medium High

Success Factor

Early Investment Size,Approval Procedure

(Determined by External Factors )

Core Technology

(Determined by Internal Factor)

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Current Technologies for Biobetter

1. Glycosylation : Improving half-life by adding sugars to proteins

Low Costs due to Biological Response.

But has Limited Applicable Range

21

Current Technologies for Superbiosimilar

2. PEGylation : Improving half-life by adding PEG to proteins

Widly Applicable but costly,

Also Needs High Technology and Has to Overcome Patent Obstacles

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Current Technologies for Superbiosimilar

3. Mutation : Improving half-life and vitality by replacing amino acids in protein (antibody) : ADCC & CDC

It is possible to improve characteristics such as efficacy and half-life, but there are issues on immunogenicity.

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Current Technologies for Superbiosimilar

Replacing Fab with Therapeutic

Protein

• Cytokine

• Hormone

• Peptide

Fc region

• Improving half-life

X X

4. Antibody Fusion : Antibody fusion with recombinant protein allows to manufac-turing a long-acting Biobetter

Low Costs and Widely Applicable,

But Patent Issues Exist

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IV. Competitive Edges

▶ Value-Creating Strategy: Global Pharmaceutical

Company

▶ Value Creating Strategy:

Domestic Bio-Venture/Pharmaceutical Company

▶ Competitive Edge Strategy

▶ Proposal

25

Global Pharmaceutical Company : Merck

Current News - 2006. Acquisition of Abmaxis (Technology : Affinity and Efficacy of Anti-body) - 2006. Acquisition of Glycofi (Technology : Humanized Yeast Expression Sys-tem) - 2008 (Early) Official Announcement of Entering into Biosimilar Industry - 2008. 12 Foundation of Merck Bio-Ventures. Expect to Invest U$1.5bln until 2015"We have the chance with the technology from Glycofi to not only make a product that has a somewhat similar profile, but a product we can im-prove… We have the unique ability to change, potentially, the potency of the product, the immunogenicity and other attributes.”

- Frank Clyburn, senior vice president and general manager of Merck Bio-Ven-tures.

Entering into biosimilar business by utilizing abundant resources to secure solid bio pipelines as a new growth engine (More Intensive Competition expected in biosimilar industry)

Many big global pharmaceuticals are exploiting the bio industry targeting bio-betters based upon “Platform Technolo-gies”

Value Creating Strategy : Global

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Domestic biotech-ventures and pharmas are de-veloping competitive bio-betters for global Market

based upon “Platform Technology”Pharma. “Platform” Technology Pipeline

HanAll

High-speed Protein Engineering

technology/Oral formInterferon, hGH, EPO, TPO,

Protein X, Protein Y, etc.

HanMi Pharma.

LAPSCOVERY Technology

G-CSF, EPO, Exendin-IV, hGH,

Interferon, FSH, Factor VII, etc.

Genexine

Hybrid Fc Technology EPO, G-CSF, GLP-1, hGH, etc.

Value Creating Strategy : Domestic

X X

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1. Portfolio Strategy by Using Bio-better

Risk

Retu

rn

New Chemical Drug

Chemi-cal

Generic

Medium-Risk

High-Return

Competitive Edges Strategy

Biosimilar

New Biologics

Medium-Risk

Medium-ReturnSize : R&D Invest-

ment

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2. Acquiring New Growth Engine based upon “Platform

Technology”

Platform

Technology

Diversified product portfolio

is made possible through

“platform” technology as

opposed to a highly risky

single product development

Ex) Albumin Fusion Technology

(HGS)

G-CSF, EPO, Exendin, hGH…

Competitive Edges Strategy

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• Aiming “antibody and protein

therapy” as they are applicable

to diverse diseases

• By utilizing “platform” tech-

nology,

a progress gap can be made up

by developing bio-betters

• Maneuvering network

• Strategic alliance with expe-

rienced

partners

Solution

• Advantageous to target

a niche market

• Slow-Start in comparison

to

global Competitors

• Insufficient experienced la-

bor force and Bio infra-

structure

Current Situation of Domestic Company

Proposal (1)

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Manufactur-ing

Clinical Test, Manufactur-

ing

Research

Producing Early Cell

Stains

Develop-ment

Pre-Clinical

Sales & Market-ing

Sale

Bio-Ven-ture

Partners

Develop &

Process(CMC)

Proposal (2)

Needs to maximize the possibility of commercial-ization through business collaboration

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V. Investment Points of Views

▶ Current Step of Korean Bio-industry

▶ Investment Proposal

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The Current Step of Korean Bio-Industry

2nd Chance for Globalization of Biologics!

1st Generation Bio-venture

Direct IPO

1998 2002 2007 2010Destiny of

1st Generation Bio-venture

KOSDQ Col-lapse

Back-door Listing

New biologics

DNA Therapy

Fail!

DNA Analysis

Liquidation

Success Story (Step-up)

Global Commercialization,

Developing New biologics

Instead of incubating the early-stage bio-ventures, intensive/selective investment on potential companies (listed or unlisted) to

create “success story” of commercialization

Foundation of BiotechDiagnosis & Equipment

Maintenance

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Investment Proposal

Resolving the Biggest Bottle-Neck of Bio-Indus-trialization!

Successful Company

Successful CompanyEarly-Stage

Bio-VentureEarly-StageBio-Venture

Potential CompanyPotential Company

1st Phage Investment(by Venture Capital Fund, Government grants, etc)

2nd Phase Investment

Expediting Bio-Industrialization by Precedent Success, and Establishing Virtuous Cycle by

Providing Proper Environment for Follow-Up Bio-Ventures!

Private Equity Invest-ment(Global Commercializa-tion)Synergy Effect(Preferred Platform Technology)

Concentration