Since Sandoz’s Zarxio (filgrastim) became the first biosimilar agent to be approved through the Food and Drug Administration’s (FDA) streamlined pathway for biosimilars in March this year, other signs have emerged that the biosimilars pipeline could be shortening as it continues to run, flush with new products, Aaron “Ronny” Gal, PhD, told a gathering of biosimilars stakeholders at the recent Biosimilars 20/20 conference held in Philadelphia. Gal is a senior analyst with the investment research organization Sanford C. Bernstein & Co.

In the wake of Zarxio’s approval, Gal said, he expects to see other filgrastim biosimilars receive FDA approval by the end of 2017, depending on the legal and regulatory process.

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Five market forces will influence the development of biosimilars in the coming years, said Gal. They include reasonable manufacturing costs, a less obstructive regulatory path, development of data on adoption of existing biosimilars, a growing number of competitors, and a favorable profitability profile.

Manufacture made easier

“It is reasonably clear that the capital expenditures and manufacturing costs of biosimilars have dropped dramatically in the past 20 years and are no longer a barrier for most biosimilars,” Gal said. Manufacturing costs for biosimilars now stand, on average, at around $200 per gram of product manufactured or less, he said, and those lower costs coupled with higher prices mean higher margins.

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Companies entering the biosimilars space have taken three paths to obtain manufacturing capacity, Gal said.

Large reference drugmakers in the generic markets — a group that includes companies like Amgen, Pfizer, Novartis, and Merck — are using excess capacity, because their existing products are providing high yields.

Well-funded biosimilars companies are building their own capacity, usually on a smaller scale than the large innovators would employ or by using what he called “disposable” manufacturing. Their other approach is to rent capacity from companies with an excess, such as the former arrangement between Teva and Lonza or the existing cooperation between Human Genome Sciences Inc. and Hospira.  

“Capital expenditures costs are also lower today for biosimilar manufacturers, because they do not need to satisfy the entire global market. Reaching 20% to 25% of the market will do,” Gal said. Further, sponsors of biosimilar agents do not have to be in the lowest-cost position, “as long as they are within 1.5 times the cost of innovator drugs,” he said.  

But once producers of biosimilars make the capital investment in manufacturing capacity, they do need to be flexible enough to use the same facility to make multiple products, and they need to keep their carrying costs low when the facility is underused, he said.