Merck Serono/Dr. Reddy's Biosimilars Deal Includes Co-Commercialization In U.S.

In most of the world, Germany's Merck Serono will have exclusive rights and India’s Dr. Reddy's will receive royalties on the oncology biosimilars which will be developed as part of the collaboration; but in the U.S. and select emerging markets, the Indian company retains co-commercialization rights.

Merck Serono SA and the Indian generics company Dr. Reddy's Laboratories Ltd. are to collaborate on the development of a portfolio of biosimilar anticancer products, principally monoclonal antibodies, according to a joint June 6 announcement.

As part of the collaboration, Dr. Reddy's will lead early product development and complete Phase I development of potential anticancer biosimilars. On completion of Phase I, Merck Serono will take over manufacturing and lead further clinical development. All R&D costs will be shared between the two companies.

Upon approval, Merck Serono will have exclusive rights to commercialize the products globally and will pay Dr. Reddy's royalties, with some key exceptions. These exceptions include the U.S., where Merck Serono and Dr. Reddy's will co-commercialize the products on a profit-sharing basis; select emerging markets, where marketing rights will be co-exclusive; or certain markets where Dr. Reddy's keeps exclusive rights. Dr Reddy's markets numerous generic products in the U.S.

Dr. Reddy's already markets several biosimilar anticancer products in India, including a biosimilar version of Roche's Rituxan (rituximab), which several other major pharmaceutical companies have targeted – Sandoz International GMBHhas a biosimilar rituximab in Phase III, and Teva Pharmaceutical Industries Ltd. and Pfizer Inc. have their versions in Phase I/II (Also see "Post Biocon, Pfizer Pushes Forward On Biosimilar MABs" - Pink Sheet, 21 May, 2012.).

However, Merck Serono declined to comment on the first products it expects to develop in collaboration with Dr Reddy's, or the timing of approval submissions – Rituxan's patent protection in Europe is expected to expire in some countries in late 2013 and in the U.S. in 2015.

Complementary Expertise

Merck Serono and Dr. Reddy's say they have complementary expertise: Merck Serono already develops and markets biologics such as the multiple sclerosis therapy Rebif (interferon beta-1a), while Dr. Reddy's, a major global generics manufacturer headquartered in Hyderabad, India, already markets four biosimilars in India and a handful of other markets.

The two companies believe the collaboration's risk-sharing arrangement is the right approach to the emerging biosimilars market, because they will share know-how and the risks and rewards of biosimilar development.

For Merck, moving into the biosimilars field makes sense because the company has extensive experience in developing and manufacturing branded biologics, which account for around 60% of its sales, principally Rebif and the anticancer monoclonal antibody Erbitux (cetuximab), a company spokesman said.

Another catalyst for the move, from Merck's point of view, is the spare capacity at its biologics manufacturing facility in Switzerland, after the European Medicines Agency turned down lung cancer as an additional indication for Erbitux in November 2009.

The agreement with Dr. Reddy's only includes anticancer MAbs, so does not preclude agreements on biosimilars being made in other therapeutic areas by either company in the future, the spokesman said.

The agreement with Merck may bring forward some of Dr. Reddy's expectations for its biosimilars development. It previously estimated that it would be able to scale up its biosimilar business in emerging markets in fiscal years 2013 to 2017, and would gain traction in Western Europe and the U.S. beyond fiscal year 2017 (Dr. Reddy's fiscal year 2012 ended on March 31, 2012).

It already markets four biosimilar products in India and in a small number of emerging country markets – filgrastim (a generic version of Amgen Inc.'s Neupogen), rituximab (Roche's Rituxan), darbepoetin alfa (Amgen's Aranesp) and pegylated filgrastim (Amgen's Neulasta).

A String Of Disappointments

Merck Serono has been evaluating new areas of activity ever since a string of late-stage failures in its product pipeline led to the appointment of new management and a review of its business (Also see "Merck KGaA Turns To Outsider Oschmann To Head Pharma Unit" - Pink Sheet, 13 Dec, 2010.).

The disappointments included an oral multiple sclerosis product that was rejected by regulatory authorities, and led to the announcement of an efficiency program to save €300 million by 2014, which will include job losses and the closure of the former Serono headquarters and R&D site in Geneva, Switzerland (Also see "Merck KGAA Begins Transformation Effort By Closing Geneva Site" - Pink Sheet, 25 Apr, 2012.).

The company is not considering major portfolio divestments or transformational acquisitions before the completion of the efficiency program in 2014, although it will continue to make bolt-on acquisitions, Merck said in a May 15 statement.

[Editor’s note: This story also appeared in “The Pink Sheet” DAILY, June 6, 2012.]