Biosimilar Tipping Point: Five Questions For Henlius CEO
Executive Summary
Now valued at close to $3bn, Henlius is one of the largest biotech unicorns in China. CEO Scott Liu sat down with Scrip in an exclusive interview to discuss biosimilar development in China, emerging market expansion plans, and its venture into immuno-oncology combo strategy.
Shanghai Henlius Biotech Inc. is at the forefront of biosimilar development in China, where biologics are expected to grow rapidly driven by reimbursement expansion and pricing negotiations. With a large pipeline consisting of anticancer and rheumatoid arthritis biosimilars, the company is also venturing into innovative biologics development with its own immuno-oncology combinations.
The Shanghai-based firm, backed by Fosun International Ltd., recently announced a plan to raise $156m through the issuance of 25 million new shares, bringing the total valuation of the company to $2.95bn. It raised around $190m earlier this year and has been eyeing an IPO in Hong Kong.
In a sit-down interview at the company’s headquarters, CEO Scott Liu discussed its affordable innovation strategy, biosimilars in China, and emerging market expansion plans.
1. Affordable Innovation
Affordability is a key issue facing developers of biologics in China, where a lack of insurance coverage has led to a extremely low rate of usage.
.
Undeterred, Henlius is deploying a multifaceted strategy to realize its pursuit of "affordable innovation". "There are several ways to do that. First, our R&D is done via multiple platforms and in-house, so there is no need to outsource. And we have economic scale. With four to six investigative new drug [IND] filings each year, we can achieve efficiency in both time and project management," Liu told Scrip in the interview.
"Secondly, manufacturing. Using one-time use production procedures, our cost is 30% less. We also produce culturing materials ourselves, thus reducing the cost by 75%, and fixed capital investment by 50%. With over dozens of products in the R&D pipeline, among which six are in the late stage, we are building an innovative biologics on the base of biosimilars," he added.
"Lastly, success rate. Our bio-better has a success rate of 70-80% due to our fast-follower model, because our targets are already proven to be effective. It’s well known that originator biologics are highly priced due to high failure rates. The fast-follower model can reduce the cost of failure, increasing the success rate from 10-15% to 60-70%."
2. Policy Leading To Innovation Opportunities
Henlius started developing biosimilars in China from 2010, when a few others also entered the area. For its four biosimilars, including HLX01 (rituximab) and HLX04 (bevacizumab), each of the originators are selling over $7bn per year. Now, the window for biosimilars in China is closing, Liu said, especially for companies which entered the arena after 2014 or 2015.
China recently accepted new drug approval application for Guangzhou-based Bio-Thera Solutions’s BAT1406, a biosimilar to AbbVie's Humira (adalimumab), while Henlius’s biosimilar adalimumab, HLX03, is at the Phase III clinical stage.
The company's most advanced product is HLX01, a biosimilar to Roche's MabThera, which is pending approval at China‘s National Medical Products Administration.
From 2014, Henlius also started developing innovative new drugs and Liu said the decision was driven by the overall environment and steps to encourage new drugs in China. Since 2014, the government has issued dozens of new policies to spur innovation and support the entry of new drugs to the market.
The Shanghai firm has several in-house products, lead by a combination of its PD-L1 inhibitor HLX10 with its HLX04 biosimilar bevacizumab for solid tumors.
3. Emerging Markets Expansion
Staying one step ahead of the regulatory curve is putting Henlius ahead of the pack, Liu said. For instance, the company started following EU standards from the beginning, and in 2010 began to comply with a revised pharmacopoeia to be implemented in 2015.
Following EU standards also gives the company an easier entry to emerging markets in Eastern Europe, the CEO pointed out. Expanding overseas is one goal that the company is actively pursuing and it has so far identified 16 markets for concerted moves, including Poland, Ukraine and the Philippines among others.
Unlike some of its counterparts in South Korea and India, Henlius early on made the decision to leave the US market alone, due to regulatory changes, and to focus instead on emerging markets.
US legislation in the form of the Biologics Price Competition and Innovation Act, which is aimed largely at protecting original biologics' patents, has also inadvertently deterred biosimilar development in Liu's view. The so-called “patent dance” and rules on biosimilar naming have enhanced the executive’s belief that there are better opportunities for Henlius other than the US market.
To this end, in 2017 Henlius signed a licensing deal with Jacobson Group to market HLX02, a biosimilar to Roche's Herceptin (trastuzumab), in Hong Kong and certain ASEAN markets. The product is currently in a Phase III study in China for breast and gastric cancer.
In June this year, Henlius granted exclusive commercial rights to Accord Healthcare to commercialize HLX02 in 53 countries in Europe, the Middle East and North Africa (MENA) region. The deal also included the UK, France, and some Commonwealth of Independent States markets.
4. China Biosimilar Market Tipping Point
Despite the challenges, China offers a lucrative opportunity for biosimilars and the breakthrough point is coming, Liu maintained in the interview. One of the driving forces is reimbursement, which will expand the volume.
China also has its own strengths which include having a large domestic market whose size exceeds that of the EU and South Korea combined, emphasized the executive.
In addition, along with the expanded use of original anticancer biologics including Herceptin and Avastin, physicians are more ready to embrace biosimilars, Liu noted.
On top of this, entering 2018 and in a bid to expand patient access, the Chinese government initiated several pricing negotiations and included a number of high-priced anticancer drugs in its national reimbursement drug list. (Also see "China Vs. Cancer: Seven Companies Given Price Cuts, Roche Gets New Approval" - Scrip, 21 Aug, 2018.)
However, the biggest single selling point for biosimilars in China, emphasized Liu, remains the cost; he pointed out that the prices of such products are expected to be 50% lower than that of original Humira.
5. Quality
To be able to ride the predicted coming wave of biosimilars in China, developers must ensure product quality and have a sound life cycle management strategy, Liu stressed.
Chinese biosimilar developers are generally strong in R&D but not manufacturing, somewhere they should learn from their South Korean counterparts, he suggested. Several Korean biosimilar companies including Samsung Bioepis Co. Ltd. and Celltrion Inc. have successfully entered the demanding EU market.
To prepare for its overseas expansion, Henlius has already gone through some 20 inspections, Liu noted.
Meanwhile, life cycle management is key because the biosimilar competitor field for large-selling products has already become crowded, and latecomers must decide on what areas they pursue, he concluded.
From the editors of PharmAsia News.