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7 Drug Stocks to Consider as Biosimilars Pick Up Pace

Interest in biosimilars has picked up considerably with Pfizer, Inc.'s PFE announcement this week regarding its plans to launch a biosimilar version of Johnson & Johnson's blockbuster drug, Remicade, in late November.

What are Biosimilars?

A biosimilar is a biologic product whose approval is based on evidence that it is highly similar to an approved biologic, known as the reference product. Moreover, there should be no clinically meaningful differences between the biosimilar and the reference product where safety and effectiveness is concerned.

While biosimilars have been available in the EU for quite a while, they are a new entrant in the U.S. where a regulatory pathway was implemented recently.

Sandoz, a Novartis AG NVS company, was the first to gain approval for and launch a biosimilar in the U.S. The company launched Zarxio (filgrastim-sndz), a biosimilar version of Amgen Inc.'s AMGN Neupogen last year.

The second biosimilar to gain approval in the U.S. was Pfizer and Celltrion's Inflectra (infliximab-dyyb) with the reference product being Remicade.

This was followed by the FDA approval of biotech giant Amgen's Amjevita (adalimumab-atto). Amjevita is approved for use in all eligible indications of the reference product, Humira (adalimumab), which is used for a wide range of inflammatory diseases.

Biosimilars Set to Change the Competitive Landscape

The market for biosimilars is huge and highly lucrative. Several blockbuster biologics including Humira and Lantus will lose patent protection by 2020. Biosimilars are expected to reduce healthcare costs and provide a large number of patients with access to much needed biologic treatments. According to new research released by the IMS Institute for Healthcare Informatics earlier this year, increasing acceptance of biosimilars across different therapeutic areas plus an active pipeline of 56 candidates are expected to lead to total savings of about $110 billion to health systems across Europe and the U.S. through 2020.

The report further says that by 2020, biosimilars will start competing with biologics that currently have annual sales of $50 billion. About 30 companies are developing biosimilars of 16 molecules - most of the biosimilars in development are for reference products like Remicade, Enbrel (etanercept), Rituxan (rituximab) and Humira (adalimumab).

What about Formulary Coverage?

Biosimilars are also gaining acceptance across formularies. CVS Health announced that biosimilars and follow-on biologics will be a key part of its 2017 standard formulary strategy, replacing higher cost drugs within the categories. The company said that its formulary list will include Zarxio, replacing Neupogen, to decrease the risk of infection in patients receiving treatment for certain forms of cancer, and the follow-on product Basaglar, replacing Lantus, for the treatment of diabetes.

Meanwhile, UnitedHealth Group will be moving Basaglar from Tier 3 to Tier 1 effective Apr 1, 2017. Basaglar is expected to enter the market in mid-December. Sanofi's Lantus SoloStar and Lantus Vials will remain on Tier 3 until Mar 31, 2017 after which they will be excluded. Zarxio will be on Tier 2. Pharmacy benefit manager Express Scripts said that the basal insulins category may be reassessed later in the year to reflect anticipated product launches.

Stocks to Consider

With biosimilars picking up pace, it makes sense to zero in on companies that are in the biosimilars business. Here is a mix of pharma, generic and biotech stocks that should benefit from the biosimilars opportunity especially given the current scenario of increased political, media and public pressure on drug pricing, the growing interest in developing biosimilars and the potential of biosimilars to reduce healthcare costs.

Sandoz, a Novartis company, has a strong presence in the biosimilars market being the first to launch a biosimilar (Omnitrope) in the EU way back in 2006, in Japan (Somatropin BS S.C., 2009) as well as in the U.S. (Zarxio, 2015). Earlier this year, Sandoz announced that it will launch 5 biosimilars of major cancer and immunology biologics in key geographies by 2020. Some of the biosimilars that Sandoz is working on include biosimilar versions of Enbrel, Humira, Neulasta, Remicade and Rituxan - these biologics generated global sales of approximately $43.6 billion in 2015. Novartis is a Zacks Rank #3 (Hold) stock.

NOVARTIS AG-ADR Price and Consensus

NOVARTIS AG-ADR Price and Consensus | NOVARTIS AG-ADR Quote

Pfizer also has a strong presence in the biosimilars market. The acquisition of Hospira significantly expanded Pfizer's biosimilar capabilities and gave the company access to Hospira's lucrative biosimilar portfolio of both marketed and pipeline assets. The company has three marketed products in Europe and several programs including four in late-stage development (Rituxan, Humira, Herceptin, and Avastin). The Zacks Rank #3 stock will be launching Inflectra in late November and has decided to price it at a 15% discount to the current wholesaler acquisition cost of Remicade.

PFIZER INC Price and Consensus

PFIZER INC Price and Consensus | PFIZER INC Quote

Merck & Co., Inc.MRK has an agreement with Samsung Bioepis for the development and commercialization of multiple biosimilar candidates in certain partnered territories. Earlier this year, Merck announced the filing of a Biologics License Application (BLA) for SB2 (infliximab), a biosimilar version of Remicade. Moreover, Merck recently launched a website to provide clarity on and increase awareness about biosimilars. Merck is a Zacks Rank #2 (Buy) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

MERCK & CO INC Price and Consensus

MERCK & CO INC Price and Consensus | MERCK & CO INC Quote

Cambridge, MA-based Momenta Pharmaceuticals Inc.MNTA is a biotech company with a focus in three areas - complex generics, biosimilars and novel drugs for autoimmune diseases. The most advanced biosimilars in the company's pipeline include M923 (reference drug: Humira) and M834 (reference drug: Orencia). The Zacks Rank #3 stock has a collaboration agreement with Mylan for the development, manufacture and commercialization of six biosimilar candidates including M834.

MOMENTA PHARMA Price and Consensus

MOMENTA PHARMA Price and Consensus | MOMENTA PHARMA Quote

Although Amgen itself is a major target of biosimilar competition, the company has been quick to recognize the commercial potential of the biosimilars market and has already made significant progress in this field with quite a few late-stage biosimilar candidates in its pipeline. Last month, Amgen got FDA approval for its biosimilar version of AbbVie's multi-billion dollar drug, Humira. The Zacks Rank #3 stock is developing biosimilar versions of Avastin, Herceptin, Rituxan, and Remicade as well.

AMGEN INC Price and Consensus

AMGEN INC Price and Consensus | AMGEN INC Quote

Biogen Inc.BIIB is another biotech company that is working on bringing biosimilars to market. The Zacks Rank #3 stock is collaborating with Samsung Biologics for the development, manufacturing and marketing of biosimilars.

BIOGEN INC Price and Consensus

BIOGEN INC Price and Consensus | BIOGEN INC Quote

Israel-based Teva Pharmaceutical Industries LimitedTEVA is another company which is focusing on building its presence in the biosimilar market. Earlier this month, Teva signed up with Celltrion to commercialize a couple of Celltrion's mAb biosimilar candidates (reference products - Rituxan and Herceptin) in the U.S. and Canada. The deal also led to rumors that Teva may be interested in acquiring Celltrion. Teva is a Zacks Rank #3 stock .

TEVA PHARM ADR Price and Consensus

TEVA PHARM ADR Price and Consensus | TEVA PHARM ADR Quote

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PFIZER INC (PFE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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