A First Mover in the Coming Biosimilar Wave: Coherus Biosciences and the FDA UDENYCA Approval

Nov 19, 2018 | Biosimilars, Blog

Introduction

TrialSite News is committed to shining the light of transparency on drug development and clinical trials with a concentrated focus on research sites and centers as well as commercial catalysts, or commercial sponsors. Today’s article focuses on a biosimilar venture with the theme of competition and the implications for healthcare drug costs. Most people are generally aware that our healthcare system is not in optimal condition and is in fact moving in the wrong direction when considering costs and outcomes quality as benchmarked with developed countries. Overall health costs as a percentage of economic output in the United States have grown from 14.5 percent to 17 percent over the past decade and approaches $4 trillion dollars. To transcend existing healthcare challenges for an overall more competitive international benchmarking comparison, we face an underlying societal challenge. This challenge involves considerable and uncomfortable self-reflection, not to mention sweeping change at every level in the healthcare “value chain” from individual (patient) to provider, to payer to appliance/device or drug maker. Simply targeting one group—such as biopharmaceutical sponsors—is not overly productive, or accurate for that matter, but is nonetheless a convenient target.

Drug development and commercialization ventures face an unbelievably complex, competitive, expensive and risky (legal, regulatory, and scientific) environment. The prerequisite capital requirements command considerable returns. There is no way around that universal fact embedded in a market economy. Only deep and far-reaching political, social and economic discussions involving uncomfortable ideological stances will ever get to the root of what possibly needs to get done for true systemic healthcare change for net good for all, and most are not ready, or least not yet willing to do so. Consequently, “bad guys” are needed. Hence, commercial sponsors face increasing scrutiny from every direction.

In our short existence, TrialSite News has already provided original research and content addressing core health issues we believe obvious and necessary to address. These core health issues range from population health vantage to the obesity epidemic of which has exponential primary, secondary and tertiary cost implications. Just in our first few months we received considerable flak by some readers that want simple good-guy/bad-guy answers, rather than holistic, comprehensive, in-depth and objective analyses of systemic societal problems associated with our uniquely American healthcare challenges. Biopharmaceutical drug makers of course merit critical attention.  Drug prices need to come down across the board, so here we go. Although only 2 percent of Americans receive specialty biologic drug treatments, they account for as much as 35 percent of aggregate drug spending as recently reported in the Nov. 10-16 2017 edition of The Economist.

The Coming Biosimilars

The biopharmaceutical industry has made great strides over the past decade by successfully developing and commercializing waves of new biotech drugs that help patients in many therapeutic areas from oncology to autoimmune disorders. These biologic treatments are powerful, beneficial and incredibly expensive. An example would be Humira—the world’s leading drug as measured in sales approaching $20 billion—for a range of autoimmune disorders. Humira can cost up to $2,200 per month with costs than can approach $30,000 per year. Note that the average American household income equals $62,000 and that a Humira prescription eats away at half of the household income. Of course, those that are covered with insurance don’t pay full costs and the sponsor will provide discounts and subsidies, but the point is made clearly through the implications of the costs of this life-saving therapy.

Another example would be Amgen’s Neulasta, which is a leading biotech cancer drug made by Amgen with global sales of approximately $3.7 billion. It costs approximately $6,200 per treatment, but this can vary. In Europe the average biotech pricing has declined in great part due to biosimilar competition, resulting in the biopharmaceutical market preparing for waves of incoming biosimilar competition. Consequently, biotech drug prices in many cases will face downward competitive pressure. To date, only two biosimilars have been approved in the U.S.: Fulphilia (Mylan) and UDENYCA (Coherus Biosciences).

Coherus Biosciences

Just this month the United States Food and Drug Administration (FDA) approved a rival Neulasta biosimilar called UDENYCA—developed and commercialized by Coherus BioSciences (Coherus), a California-based biosimilar venture. Pricing is still to be determined, however, with this product entry markets can expect competition and resulting pressure towards lower prices for this specific chemotherapy treatment. An FDA departmental press release notes that, “the biosimilar, referencing Neulasta, has been approved to decrease the incidence of infection, as manifested by febrile neutropenia, in patients receiving myelosuppressive chemotherapy associated with a clinical significant incidence of febrile neutropenia.” The biosimilar was approved in Europe in July 2018. Neulasta maker Amgen sued Coherus for patent infringement, but the District Judge ruled in favor of the biosimilar company. Many will expect an Amgen appeal. 

Coherus posits that UDENYCA is clinically differentiated with positive PK/PD immunogenicity studies in over 600 healthy subjects during its comprehensive clinical trial phases. 

Coherus represents a new entrepreneurial crop of biosimilar market entrants that undoubtedly will impact the health care system by placing downward pressure on drug prices. Who is Coherus Biosciences? 

First and foremost, they are a commercial biosimilar sponsor that has been launched and organized to supply the emerging biosimilar market. They envision fulfilling biosimilar products in a market worth $40+ billion when considering the biologic drugs now facing patent expiration over the next several years.  Essentially complex copycats of branded biotech drugs, the biosimilars have made a bigger impact in Europe in terms of imposing material pressure to reduce drug prices. Biosimilars were first allowed in Europe in 2004 and in the United States in 2010—the same year Coherus was founded. Biosimilars represent a key piece in the competitive drug market puzzle—ultimately leading to more dynamic markets, competition and selection for value-based care models. In the U.S., biosimilar companies face tougher conditions than in Europe, according to accounts such as policy constraints and roadblocks, the infamous “patent thickets,” as well as other activities deemed by some as “anti-competitive” tactics by branded incumbents. However, the tide is turning. Coherus, having achieved a major milestone with the FDA approval, represents a growing trend in the health care drug marketplace. But the voyage is not easy, nor will it become easier.

Founded in 2010, they successfully filed and floated an IPO in November 2014. According to the website Crunchbase, they have raised $252 million to date. Based in Redwood City, California, the biosimilar company engages in the development of late-stage clinical products, including: CHS-1701 pegfilgrastim biosimilar—a granulocyte colony-stimulating factor product candidate; CHS-1420 adalimumab biosimilar—an anti-tumor necrosis factor product candidate; and CHS-0214—an etanercept biosimilar for rheumatoid arthritis and psoriasis. It is also developing a pipeline of products in therapeutic areas, such as oncology, immunology, and ophthalmology, comprising CHS-3351—a ranibizumab biosimilar, CHS-2020—an aflibercept biosimilar, as well as CHS-131—a small molecule for multiple sclerosis. Coherus BioSciences, Inc. has licensed an agreement with Selexis SA and Genentech, Inc.. The company was formerly known as BioGenerics, Inc. and changed its name to Coherus BioSciences, Inc. in April 2012.

Presently, Coherus has been in research and development (R&D) mode—the company reported a loss of approximately $238 million by the end of 2017, according to publicly available financial information, such as its latest 10Q filed with the Securities Exchange Commission (SEC). It has produced little revenue. According to its SEC 10Q, the company did ink some revenue-focused partnerships with Japanese pharmaceutical company Daiichi Sankyo, but these were terminated. With the FDA approval (and EMA approval previously), the company’s options become far more interesting and its financial situation should change soon. Coherus’ present market capitalization is $834 million (as with many biotech/biosimilars) and the valuation has tremendous growth built into the valuation model. Its current cash position is slightly under $50 million. 220 employees identify as Coherus employees on social professional network LinkedIn. The company will seek to raise at least $75 million tranche after the UDENYCA approval that occurred this month.

The company acquired InerKrin for $5 million—CEO Dennis Lanfear was Chairman of InteKrin (basis for the MS therapy in pipeline) at the time, and it was a “related party transaction.” Coeherus initiated a restructuring last year after the FDA issued a response letter for UDENYCA, denying approval. The company had to cut costs and change the division of labor to move forward, but still achieved FDA approval early this November.

Coherus must be admired for not only what they have accomplished in such a brief period, (8 years represents a blip in time when considering the established world of clinical sponsors) but also their aggressive market goals. As with anything in life and in business—especially the business of bioscience—the road from vision and goals to reality is a long, arduous and risk-intensive and costly process, but the stakes are vast. Not only would investors reap enormous returns, but in theory, consumers will greatly benefit due to infusion of competitively priced biosimilars in key therapeutic areas. We provide a table summarizing the Coherus Bioscience pipeline:

 

Product/Total Market Size Therapy Area Target/Revenues Status/Comments
UDENYCA Oncology Amgen $3.7 billion annual revenues/Nuelasta Approved EU & USA
CHS-1420  (anti-tnf)

$5 Billion

Autoimmune Disease AbbVie $20 billion annual revenues/Humira They are positioning to enter market when Humira patents expire in USA in Aug 2022. In SEC filings they do acknowledge they will need more investment for manufacturing activities prior to BLA. They have multiple trials ongoing.  
CHS-0214 (anti-tnf)

$25 Billion

Autoimmune Disease Amgen $7.8 billion (via Immunex acquisition)/Etanercept/Enbrel They are deprioritizing till they find commercialization partner. They have conducted several trials. They will need significant additional investment for manufacturing activities should they seek to proceed with CHS-0214. Moreover, the therapeutic protein in etanercept is subject to certain originator-controlled U.S. patents expiring in 2028 & 2029. Assuming validity and enforceability till these dates they must ensure they are licensed to sue them—if not they will not commercialize in the U.S. which of course is the largest market.
CHS-131 CNS (MS); Metabolic Oral, Small-Molecule Drug Candidate They must secure a well-capitalized partner to develop and commercialize this target
CHS-3351 (pre-clinical)

$10 Billion

Ophthalmology Roche approx. $1.5 billion /Genentech in USA Ranibizumab

Novartis $1.5 billion/Lucentis in Europe

Report active process dev, preclinical & mfg. exercises. TrialSite News staff believe they will need commercial partner (sponsor or CRO) with expertise in therapeutic area. Considerable investment required
CHS-2020 (preclinical)

$10 Billion

Ophthalmology Regeneron $3.7. billion /Aflibercept/Eylea They report they have initiated pre-clinical development. As reported above there is a lengthy and expensive path to commercialization and will require partnerships

 

Coherus seeks to be a formidable player in the global biosimilar market. This market will continue to grow due to the following:

  • Through 2020, dozens of blockbuster biologic drugs each with upwards of $1 billion revenue tags will lose patent exclusivity in select pharmaceutical markets
  • Regulatory authorities seek to streamline biosimilar approval pathways
  • Growing political, social and consumer pressure to lower drug prices
  • Payers and governments seek to contain drug costs—in the United States over 120 million people are on some form of public payer model
  • The populations across developed economies continue to age overall further increasing health costs and contributing to elements listed above

Biosimilar sponsors such as Coherus face considerable obstacles and challenges including significant technical and scientific challenges in context of biotech replication from heterogeneity, arising from the physicochemical complexity of biologic therapeutics.

  • They have little operating history, (only 8 years) and face a tremendously complex regulatory and compliance environment  
  • They have incurred significant losses since their inception and will continue to do so in the foreseeable future, although with the recent FDA approval the company’s opportunities for revenue are now real
  • They will need to raise considerable sums of capital before profitability is possible. If financing becomes too expensive, or not available, the company faces severe obstacles and challenges
  • Although UDENYCA has been approved, this is only one of a portfolio that must be successful for the entire vision to be materialized. The clinical development and commercialization process is risky, and they may face scientific, legal and/or regulatory and financial challenges that stop any other product candidates from achieving FDA approval
  • Global biosimilar regulatory regimes are complex, dynamic and risky, and evolving legal and regulatory climates or changes for biosimilars could make seeking approval more difficult, complex and elusive in the future
  • The development of the appropriate manufacturing processes to achieve a requisite degree of biosimilarity to the original drug, as well as within a variability range considered acceptable by regulatory agencies represents a highly complex, expensive and overall uphill journey
  • Even if they can secure approval of more in the pipeline, reference product owners will fight back—legally and in the marketplace. The incumbents have in many cases considerably more capital, talent and market brand share. In many cases their marketing and medical departments will put forth compelling arguments as to the biosimilar product safety
  • The specter of incumbent patent litigation lurks behind every turn and poses considerable dangers to upstart biosimilar ventures such as Coherus

In connection to the above, a patent dispute mechanism established under the Biologics Price Competition and Innovation Act of 2009 requires biosimilar sponsors to disclose their biosimilar regulatory approval application to the originator. This opens thinly capitalized, vulnerable biosimilar upstarts, such as Coherus, to dangerously expensive and time-consuming patent litigation, causing delays, blockages, etc.

The FDA approval milestone is a big one. UDENYCA is positioned well and the company is ready to seize the moment as Coherus presents to the investor community, due to the following market characteristics:

 

Favorable Market Characteristics
  • Rapid adoption opportunities & high penetration in key segments
  • Favorable reimbursement in 340B hospitals
  • Favorable unique J-CODE allows control of ASP
Strong Market Position
  • High quality clinical package
  • U.S. manufacturing infrastructure & capabilities
  • Experienced commercial leadership; sales apparatus in place
Limited Competitive Set
  • Pegfilgrastim biosimilar development appears challenging
  • Multiple clinical and regulatory failures in the U.S. and E.U.
Large Originator Market
  • Neulasta sells ~$4 billion per year in the U.S.
  • $5 billion market size worldwide

 

When one takes the time to study and attempts to understand the complex, competitive biologic drug landscape, it is simply just assumed that a company such as Coherus faces an incredibly steep uphill climb and frankly, a perilous journey. As the venture ascents up toward the top of its targeted markets, numerous and dangerous risks unexpectedly appear in front of the venture at any given point during the ascent.

Those individuals working at Coherus must be ready for a precarious, marathon of a climb, and not all the prerequisite business conditions and elements are currently available for the next climb. They will need considerable capital, sponsors and some angels along the way, and mix into the recipe for success a near perfect execution, scientific serendipity and some amount of luck.

However, they achieved a material milestone in Europe and now the United States—the FDA’s second biosimilar approval of its UDENCYA biosimilar product. Moreover, overall market, political and societal forces may be moving in their favor, which will help them during the next stages of precarious biosimilar development to commercialization journey. Upon perusing many market forecasts, quite a few talented minds in consulting, investment banking and the healthcare industry project considerable biosimilar growth in the years to come. If Coherus can raise the necessary capital, continue to execute, steer clear of new patent thickets and avoid getting knocked out of the game by any number of oppositional forces, they face a big future.

 

Author

Daniel O’Connor  

Mr. O’Connor has spent nearly 20 years providing technology and services to the clinical trials and health technology industry. An entrepreneur, he has been instrumental in building a few different ventures focusing on FDA 21 Part 11 enterprise document management, technology-enabled patient recruitment services, clinical document and safety data exchange, as well as population health and community care coordination for at-risk populations. Mr. O’Connor has built a comprehensive research site data base and intelligent clinical research site news curation engine with TrialSite News. He earned his combined MA and JD from the University of California (Los Angeles and Hastings College of the Law).

 

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