Merck Lands Late-Stage Enbrel Biosimilar In Deal With South Korea's Hanwha

SEOUL - Merck & Co. has become a leader in the race to bring a low-cost version of Amgen's rheumatoid arthritis blockbuster Enbrel (etandercept) to the market after gaining rights to a late-stage biosimilar version of the biologic developed by South Korea's Hanwha Chemical Corporation.

The companies announced a partnership June 13 in which Merck will develop and commercialize a biosimilar form of Enbrel, HD203, in all markets except Korea and Turkey, where Hanwha has retained marketing rights.

In exchange, Hanwha receives an undisclosed upfront payment, and is eligible for milestones related to technology transfer and regulatory progress, as well as tiered royalties on sales. Although financial terms of the deal were not disclosed in the official release, Hanwha Chemical spokesman Kwon HyukBum confirmed to PharmAsia News that the total potential cost of the collaboration to Merck is $720 million.

"We hope that we are able to sell the biosimilar in the global market beginning sometime in 2015, depending on the situation of patents in each country," Kwon said. "The total $720 million includes an upfront payment, milestone payments and sales royalties we will receive from Merck."

Although Merck declined to confirm that figure, Merck BioVentures President Michael Kamarck said in an interview that the deal is heavily back-end loaded. Nonetheless, the financial arrangement is "symbolic of what we do see, which is the huge opportunity that Enbrel will provide in the biosimilar space," he said.

Merck has assembled a pipeline of biosimilar drugs since announcing the formation of Merck BioVentures in December 2008 (Also see "Merck’s Ambitious Plans For Follow-On Biologics" - Pink Sheet, 15 Dec, 2008.). The company has revealed plans only for a couple of products, however, including a granulocyte colony-stimulating factor referencing Amgen's Neupogen (filgrastim) and a pegylated version referencing Neulasta (pegfilgrastim). Earlier plans to develop a biosimilar version of Amgen's erythropoiesis stimulating agent Aranesp (darbepoetin alfa) were scrapped in 2010, given emerging safety issues with the class. Merck continues to stand by its goal of having five biosimilars in Phase III by the end of 2012 and says it is mainly interested in harder-to-replicate monoclonal antibodies, including Enbrel.

The rheumatoid arthritis drug, however, is believed to be the target of many biosimilar drug makers, though they have kept their pipelines closely guarded secrets. Enbrel is a hefty revenue generator in an expensive and crowded class of drugs, with a first patent expiration in the U.S. coming in 2012. The tumor necrosis factor inhibitor, approved for multiple auto-inflammatory conditions, generated sales of $3.54 billion in 2010. Pfizer Inc. owns rights to the drug outside the U.S.

Both A Biosimilar And Brands In the Anti-TNF Space

Interestingly, Merck is a big player in the branded anti-TNF space, marketing a leading competitor to Enbrel, the anti-TNF Remicade (infliximab), as well as its successor Simponi (golimumab), both of which it gained rights to through the 2009 acquisition of Schering-Plough. Merck markets the drug in the U.S. and select international markets, while Johnson & Johnson Inc. owns most ex-U.S. rights. The two companies recently settled a dispute over the rights to those drugs, which arose in the wake of Merck's acquisition of Schering. The resolution calls for J&J to take over additional rights to Remicade and Simponi beginning July 1 in key international markets .

Worldwide sales of Remicade were $4.6 billion in 2010, J&J reported. Remicade has a lengthy marketing history, but has lost ground to competitors, including Abbott's Humira (adalimumab) because of its less convenient formulation (a once-monthly intravenous infusion) and a slightly higher risk of adverse reactions like infection.

Nonetheless, Remicade is an important brand to Merck and the launch of a lower-priced biosimilar version of Enbrel would be a noteworthy competitor that could further erode Remicade sales. Merck is opting to get a slice of that market instead.

"Although the products are somewhat competitive, they also have their own space in the marketplace," Kamarck said of the two drugs. "We believe there is plenty of space in the RA marketplace for both Remicade and a biosimilar Enbrel, and that is the business model we have going forward."

Hanwha's Drug Is Best And Latest, Merck Says

Merck had already been developing its own biosimilar version of Enbrel, Kamarck said, but switched gears to in-license the Hanwha compound because the South Korean firm's version is more advanced. It has demonstrated similarity to the originator molecule on analytic parameters and in pharmacokinetic/pharmacodynamic studies. A Phase III trial has started.

The biosimilars Phase III trial, according to clinicaltrials.gov, will enroll 300 patients and is expected to run until June 2012. The primary outcome is equivalence between HD203 and Enbrel in rheumatoid arthritis patients by comparing ACR20 after 24 weeks of treatment. Secondary outcome measures include the efficacy of ACR20, ACR50 and ACR70 and safety and immunogenicity between the two groups.

"We were really excited when we discovered the Hanwha molecule was head and shoulders the best molecule that we had looked at, and in addition, it was the furthest along in terms of its clinical development," Kamarck said.

First Profit For Hanwha's Biosimilar Business

The contract with Merck runs from 2011 to 2024, Hanwha's Kwon said, and sales from the deal would constitute the first profit Hanwha would generate from its new biosimilars business after it shifted its focus from petrochemicals to biosimilars.

Turkey is excluded from the Merck deal because of a deal Hanwha signed last year with Turkey for sales of the biosimilar in the country, Kwon said.

Hanwha Chemical is also seeking to develop "several anti-cancer biosimilars and other anti-cancer new products," he said, for which the company will be seeking global sales partners, he added. Kwon would not disclose details on the products in Hanwha's pipeline.

South Korea has emerged as a hotbed of biosimilar drug development. The country's frontrunner in the space is Celltrion Inc., which is already partnered with several drug makers on biosimilar drug development. Celltrion signed an initial agreement with Hospira Inc. handing over U.S. and European rights to its biosimilars in 2009 (Also see "Korea's Celltrion In Deal With U.S.-based Hospira For Biogeneric Sales; M&A Hinted At" - Scrip, 12 Oct, 2009.).

Meanwhile, Kwak Jin-Hee, an analyst with Eugene Investment & Securities, said in a June 13 research note that Hanwha is taking a different path than Celltrion in the biosimilars market.

"The latest deal (with Merck) confirmed that Hanwha is entering the biosimilars business through the license form, rather than operating its own biosimilars plant like Celltrion," she wrote. 'This will help Hanwha to reduce the risk in the biosimilars sector in which achieving sales partners is important."

But getting a biosimilar monoclonal antibody to market in the U.S. won't be a straightforward path. FDA - after gaining the right to approve biosimilar drugs as part of a healthcare reform package in 2010 - has yet to release any broad guidelines. The agency is, however, meeting with drug makers and discussing appropriate regulatory paths forward. FDA publicly disclosed that it has received eight pre-IND and IND applications for biosimilar products at a May 31 advisory committee meeting (Also see "Biosimilars: Eight Is Already More Than Enough For FDA" - Pink Sheet, 1 Jun, 2011.).

"It's hard to project exactly what timeline the molecule will have," Kamarck acknowledged, though he said Merck will engage in discussions with both U.S. and European regulators as soon as possible. He said FDA has thus far provided "great feedback" in early discussions.

Merck's Aggressive Korea Strategy

Among Big Pharma, Merck has been one of the most bullish about the Korea market, which has grown to the point that IMS Health no longer includes the country in its "pharmerging" construct.

Earlier this month, Merck announced it was expanding a co-marketing deal with Korea's Hanmi Pharmaceutical for its ARB/CCB combination that pairs amlodipine with Merck's losartan.

Merck signed a deal with Hanmi in 2009 to co-market Hanmi's combination product, sold by Hanmi as Amosartan and by Merck as Cozaar XQ, marking the first time that a multinational company co-marketed a drug developed in part by a South Korean drug manufacturer (Also see "Merck And Korea's Hanmi Build On Cozaar Deal From One Country To More Than 30, And More Could Be On The Way" - Scrip, 10 Jun, 2011.).

And in April, Merck signed a memorandum of understanding with the Korean government pledging to invest almost $200 million in the country on R&D initiatives over the next five years. Although light on details so far, the deal includes a commitment by Merck to help Korea pharma companies make inroads into overseas markets (Also see "Merck Signs Wide-Ranging MOU To Help Beef Up Korea's Global R&D Capabilities" - Scrip, 4 Apr, 2011.).

Amgen Not Cowering To Patent Pressure

For its latest biosimilars deal with Hanwha, patent challenges still exist for Merck. The healthcare reform statute laid out a lengthy legal process for challenging and negotiating patent expirations between biosimilar manufacturers and originator companies. Many on the biosimilar side have been displeased with the process, which they claim favors brand companies.

Merck - historically a brand drug company - says it has no plans to engage in patent challenges on the biosimilar front. How the company will be at the forefront of the space and its ability to separate entirely from the litigation hurdles is uncertain. "That will be part of the evolution of this business," Kamarck maintained.

Moreover, Amgen has long-term hopes for Enbrel and isn't about to bow down gracefully. During an analyst meeting April 21, CEO Kevin Sharer spoke about the 2012 patent expiration for Enbrel, a patent that covers manufacturing, and reassured investors that Enbrel is covered by a broad patent estate that extends to 2025.

"We believe that we will enjoy IP protection well beyond 2012, and we've demonstrated through time that we have both the will and the skill to defend our intellectual property, and we intend to do that with Enbrel" Sharer said.

- Jessica Merrill ([email protected]) and Peter Chang ([email protected])