Hanwha Biologics CEO Paul Coleman On Developing Biosimilars In Korea: An Interview With PharmAsia News (Part 2 of 2)

The former Biogen Idec exec sits down to talk about Hanwha’s biosimilars strategy and pipeline, and why its deal fell apart with Merck to develop a biosimilar of Enbrel.

SEOUL – South Korea's Hanwha Group is betting on the country's biotechnology industry as a major area of growth. The conglomerate announced in 2009 that its Hanwha Chemical Corp. and Dream Pharma Corp. units would together form Hanwha Biologics to develop biosimilars. With assets reaching $100 billion and revenues of $41 billion, the group has deep pockets to make a significant push into biosimilars.

The company is focused on therapies to treat autoimmune diseases and oncology. It began working on biosimilars in 2007, and has invested more than $22 million in a large-scale manufacturing center in Osong, outside of Seoul (Also see "Hanwha Of S. Korea To Invest Heavy In Biotech Industry" - Scrip, 31 Mar, 2009.).

But Hanwha flew under the radar of industry stakeholders until June 2011, when it surprised many by partnering with Merck & Co. Inc. to develop and commercialize Hanwha’s HD203, a biosimilar of Amgen Inc.’s rheumatoid arthritis blockbuster Enbrel (etanercept), in all markets except Korea and Turkey (where Hanwha retained rights). Under the deal, Hanwha received an undisclosed upfront payment and was eligible for technology transfer and regulatory milestones. At the time, the Korean company told PharmAsia News the total deal value could reach $720 million (Also see "Merck Lands Late-Stage Enbrel Biosimilar In Deal With South Korea's Hanwha" - Scrip, 14 Jun, 2011.).

Hanwha submitted a marketing application for HD203 to Korea FDA in the summer of 2012, after conducting Phase I and Phase III clinical trials in Korea. The company anticipates approval this year. If approved, the product could be the second biosimilar to be sold in Korea after the July 2012 approval of Celltrion Inc.’s Remsima, a biosimilar of Johnson & Johnson ’s blockbuster tumor necrosis factor blocker Remicade (infliximab) (Also see "Korea’s Celltrion Looks To Help Patients Pay For Remicade Biosimilar" - Scrip, 4 Sep, 2012.).

But it hasn’t always been a smooth ride. The deal with Merck ended abruptly in December 2012, with Hanwha announcing in a stock filing that the licensing deal was terminated. Although Hanwha provided few details, many speculated that Merck ended the relationship after Amgen received an additional patent for Enbrel in the U.S. (Also see "Quick Take: Merck Terminates Enbrel Biosimilar Deal With Korea’s Hanwha" - Scrip, 20 Dec, 2012.).

Hanwha CEO Paul Coleman met PharmAsia News recently at company headquarters in Seoul to discuss Hanwha’s biosimilars strategy and the termination of the Merck deal.

Coleman, a native Irishman, joined Hanwha Biologics in January 2011 as its chief operating officer, and was appointed CEO in March 2012. Previously, Coleman held several senior management positions at U.S. biotech bellwether Biogen Inc. as VP - Manufacturing; VP- Business Development, Europe; and VP - Government Affairs, International. He also held a number of senior management positions at Parexel International Corp. including posts in Europe, the Middle East and Southeast Asia. He holds a doctorate and master’s degree from Harvard University and undergraduate and master’s degrees from Trinity College, Dublin, Ireland. Part one of this interview appeared here: (Also see "Hanwha Biologics CEO Paul Coleman On Developing Biosimilars In Korea: An Interview With PharmAsia News (Part 1 of 2)" - Scrip, 15 May, 2013.).

Hanwha Biologics CEO Paul Coleman

Source: Hanwha Biologics

For Part 1, see: (Also see "Hanwha Biologics CEO Paul Coleman On Developing Biosimilars In Korea: An Interview With PharmAsia News (Part 1 of 2)" - Scrip, 15 May, 2013.).

PharmAsia News: What is it that makes Korea such a frontrunner in biosimilars, with companies like Celltrion, Samsung Bioepis Co. Ltd. and Hanwha?

Paul Coleman: I've asked this question to myself as often as you might imagine. I don't think that Korean scientists are any smarter than other scientists. I think it is something embodied in a Korean word called tuhon. And the idea is, nothing is impossible; there is always a way. And we, meaning the collective we, will not stop until we find it.

That's not to disrespectfully say that the West gives up. But there is a difference here. I see it among the members here, and it's not about putting time in. But there's something attitudinal about the importance to a Korean to successfully complete something so that either the person that they report to or the organization they're in, is successful. I see it myself. I happen to be the CEO, and because I have this position, the organization sort of gathers around me. And it forces success because the organization at any level doesn’t want to see me fail. Now, I have the same issue to the chairman. So the board rises depending on where you are, the whole collective just moves up.

PharmAsia News: As a Westerner running a Korean company, have there been any challenges that surprised you?

Coleman: I'm the only Western executive in the headquarters and so I'm physically different, and I'm also attitudinally different. It's a good day every day because the challenge is enormous, both on the good side but some days on the difficult side. But it's a challenge for everyone.

The challenges are much the same as you'd find in any business that you have to run. The surprise is not maybe so much a surprise. My experience now after two and a half years has taught me one thing, and that is festina lente, you make haste slowly. As a Westerner, I would be anxious to push very fast, pali, pali – bang, bang, bang. I mean, it has to be done. But the manner in my doing it has turned to accommodating a process.

“We took a strategic decision that we would respect the Korean market because we live here, but our true commercial value is in the advanced markets of the EU and the U.S., and Latin America.”

Now, some days the process isn't actually as efficient as it should be. And I try to insert a little bit of my attitude to it. And so now, while it is certainly not a hybrid, there are points of it which are different. And we sit as sort of a little island inside the Hanwha group because, one, there is no biologic background, two, there is no Westerner. And so, I have tried to develop a slightly different culture while staying within the respect of the land for culture. And, you know, I'm still here.

PharmAsia News: Are there advantages as well?

Coleman: The advantage is the level of achievement in the amount of time given to do something is much greater than the West. I've worked for American corporations and European corporations for all my previous life. And the comparison I would make is that people work very hard in those environments, but they also waste a lot of time. They just waste time unnecessarily and they still think they're working hard. Here, people work hard. They sort of modulate the time they need to pull back and forth, but they don't let up on the accelerator. They just continue to push.

So, there isn't what I call down time, like you would have in the States or Europe, where people would feel entitled to say, "Oh, gee, I've had a hard day today."

There is also a clear hierarchy in place, and if I was to advise anyone who was coming here from the outside I would say, “Don't come here to change the hierarchy because you won't.” Nor should you expect to. I have this phrase that I learned many years ago in Iraq, which is, “If you don't understand the ground you stand on, you won't understand the people.” You have to understand the ground, because the ground comes up through your feet, through to your head. So, don't try to change the ground, but understand how to live on the ground. And that's been my modus operandi all my life in the countries I've lived in.

But there is what I call a bicameral management process here, kind of a two-chamber. You have the operating process, which is like myself. I'm the CEO of a company and I'm responsible for driving the goals and performance of that company. And those goals and KPIs are all agreed upon in all the normal management processes to the headquarters.

The headquarters is an entity, which is a couple of hundred people, which is a monitoring group, a management group, a support group, an intrusive group, a "what are you doing?" group, a "report to me what you're doing" group. But it's also a money group, because it is the holder of the chaebol's money. And so, the operating CEOs need to report and be mindful of the fact that, while they are running the business, they're doing so on behalf of the headquarters, which is the group, whose major shareholder is the family. And everything flows. So, unlike my world elsewhere where I had a boss and that boss had a boss, and it was all linear, despite the fact that I'm the CEO, I have multiple bosses who are not organizationally in the same level but they hold very influential situations that I need.

“Any company such as ours that is on the first wave of biosimilar applications is put through the eye of a needle.”

And so, I will sit here at this table or at other tables in the building and there'll be several headquarters men. And they will be all at various levels. And they will be extremely respectful and nice, but they will want answers about things, which under a Western context, you'd say, "Excuse me? Why would you want to know that? And why do you question that?"

Also, because I don't speak Korean from a business point of view – I speak a little Korean conversationally because I've learned some – you live in a slight bubble of invisibility. Because when the conversation, as it does oftentimes, goes into Korean, you feel like Lot's wife. You're sitting there like a statue. And there is this sort of Tower of Babel language around you.

And it takes a certain level of confidence to believe that you're being told the story. Now, I'm very fortunate that my colleagues provide me very good and very accurate direction. But that has built up over time.

PharmAsia News: What markets outside of Korea is Hanwha targeting for biosimilars?

Coleman: Through the partnering process, we took a strategic decision that we would respect the Korean market because we live here, but our true commercial value is in the advanced markets of the EU and the U.S., and Latin America, specifically Brazil, to begin with. And any of the partnerships we've had, we've basically given global rights with maybe one or two carve-outs. But really, 80% of the value of what we do is in the top five EU markets or in the U.S.

PharmAsia News: Do you plan to file for approval first in Korea and then the U.S. and EU?

Coleman: Ironically, in the Enbrel situation, our application for approval is with KFDA because the Phase III trial was begun here. In the Herceptin case, we chose not to do the trial in Korea. We went to Europe for Phase I because the strategic view here is that most partners will accept Korean data as supportive, but they won't regard it as pivotal. So, our strategy would actually be to go to the advanced markets first. Now, I know other companies, like Celltrion, have taken a different strategy. I wish them well.

PharmAsia News: We wanted to ask about Celltrion, particularly given the news that the company’s founding chairman plans to sell his stake in the company. What do you make of that? (Also see "Celltrion CEO Cites Pfizer, J&J and Sanofi As Potential Buyers For Biosimilars Business" - Scrip, 18 Apr, 2013.)

Coleman: What do I make of it? The short answer is, I don't know. My more reflective answer is, I think it's an unusual move by a CEO who holds such significant stake across the three [units] – 30% in Celltrion, 35% in Celltrion Pharma and 50% in Celltrion Healthcare. I mean, that's extraordinary. From a confidence-in-the-company point of view, I think there's something going on. And again, it's not for me to speculate, and they're a member of the industry here and they're a key player on KOSDAQ, and so I wouldn’t make any remark that could be misconstrued. But it's just an unusual position to take, I would say.

PharmAsia News: Celltrion’s Remsima received approval in Korea, and the regulators allowed extrapolation to indications for J&J’s Remicade that were not studied in the clinical trials for the biosimilar. Is extrapolation part of your strategy?

Coleman: Yes. One of the things with biosimilars, when we met with the regulatory agencies in Europe, we very carefully and very clearly asked their views around the extrapolation issue. And it depends really on the indication, particularly in the oncology area. I think it's more conservative in terms of the more life threatening and the more life-ending diseases, which tend to have a higher barrier on extrapolation. But something like rheumatoid arthritis, we've found very open opinions from the regulators around extrapolation.

PharmAsia News: In September 2012, Hanwha filed for approval in Korea for your biosimilar of Amgen’s Enbrel. If approved, Hanwha’s HD203 could be the second biosimilar to be sold in Korea, following Celltrion’s Remsima. When do you expect approval?

Coleman: A lot is dependent on timing from the regulators, but later this year. What we're finding is that the regulators are extremely busy, even though they’ve moved them all down to the Osong area to this new facility. I would say in the last year, while officials have been extremely helpful and extremely cooperative, actually getting on the calendar is proving more difficult.

PharmAsia News: Does the Korean regulatory review staff have the experience necessary to review some of these complex biologics and biosimilars?

Coleman: It's an evolving experience. Yes, I'd give them credit for their ability, but I think there are two things at play. Biologics is a very new area, and there are not enough experienced reviewers who have come to the table. So, we're finding that when we go and talk about things, we have to go back another time to clarify because it hasn’t been quite understood. But I give them great credit. KFDA only really started in 1995, it's a young agency. And in an industry where the government has said by 2020, in the biosimilars case alone, that 20% of the global biosimilars will come out of Korea, you can imagine the pressure that's been placed inside an agency to say, “let's get this done.”

PharmAsia News: In the U.S., the biosimilars pathway is still evolving, and there have been no submissions for approval yet. Are you playing a waiting game to try and enter that market?

Coleman: Right, it's a staging process. I was just talking about this yesterday, and any company such as ours that is on the first wave of biosimilar applications is put through the eye of a needle. And that's understandable because agency regulators should protect the public safety. The issue is more that the conservatism leads to a certain paralysis of decision making.

And, of course, the innovators are doing what you would expect. They're trying to place those barriers at enormously unreachable levels, such as citizen petitions to block access to information. I was speaking at a conference in Sungdong on Wednesday, and made the remark that the debate about whether biosimilars will really be an industry is both vacuous and past.

And you know, if anyone who hasn’t woken up and smelled the coffee, look at the generics area. I'm sure, 80 to 85% of the meds dispensed in the States are now generic.

PharmAsia News: Globally, cost-containment measures are certainly putting the screws on companies, and in Korea, on the one hand, the government is pushing Korean companies to not focus on generics and to focus on innovative products. But at the same time, they’ve introduced these price cuts and it looks like they are going to do a second layer of cuts based on volume. What is your take on the pricing issues here in Korea?

Coleman: I made the point at this conference the other day, and said, "If there are any Ministry of Health officials in the audience, I would make a plea to you to look at your policy around biologics, because you don't probably mean to do this, but you actively discriminate against the use of biologics in this country," because of the way the reimbursement tree happens.

PharmAsia News: What’s the fallout for individual products?

Coleman: Well, the fallout is where the tree comes down to the number of patients that actually can have access. And once that tree is there, you’ve got the non-reimbursable and the reimbursable, and the non-reimbursable is always the majority. The reimbursable are those who have the wealth to pay, and that's a cadre which is very small. It's large in number but it's small in percentage. If you're in a non-reimbursable assignment and your out-of-pocket is 20% of a biologic that costs $40,000 or $50,000 a year, it means you're not going to get the drug.

I made this point on Wednesday, and said, “For a country whose advancement in 25 years from a dictatorship to the 14th largest economy in the world is extraordinary. But the area that has actually made it is your human capital. And what do you do with your human capital when they get older? You decide to not sustain them. You decide to basically give them the cheap option.” I said, "If you do that, your human capital will dissipate."