According to reports, Pfizer plans to spend $15 billion on a new and more elite class of generic drugs, which are complex but also expensive versions of expensive biotech drugs already in existence.
The company announced yesterday that it plans to purchase Hospira for $17 billion, which equates to $90 per share. In addition to buying what is perceived to be biosimilars, which will create a better source of revenue in the future, Hospira’s debt will be absorbed.
As stated by Dimitri Drone, PricewaterhouseCooper pharmaceutical consultant, this is where growth is, making it an outstanding opportunity.
Biosimilars are different types of generic drugs that will replicate high-dollar and more complex drugs that are known as biologics. Until now, there has been little demand for these drugs in the US. What makes biologics unique is that they are made using living cells. As such, precision copying is impossible. This is why this new class of drugs is called biosimilars opposed to generics.
Although this appears to be a great opportunity with significant potential for making money, experts still do not know how long the market will demand biosimilars. For years, these drugs have been available through Hospira and other companies in Europe and other countries but not in the US. The problem is that no approval has been granted by the US Food and Drug Administration (FDA).
However, an advisory panel to the FDA suggested a close copy of Amgen’s drug Neupogen made by Sandoz, which is part of Novartis, be approved. If that particular biosimilar gets approval, it could open doors for other biosimilars to enter the US marketplace.
With approval in the US only being a matter of time, a number of larger drug companies have been developing biosimilars to include Hospira, Amgen, and Teva. While these drugs work incredibly well, far better than generics, they are costly.
As an example, Humira, which is a commonly used drug for treating rheumatoid arthritis could cost as much as $5,000 per month. Another example is Neupogen, which has become a popular treatment for cancer, could run upwards of $3,000 a month.
The market of biosimilars has potential to be highly lucrative. These drugs would be offered to patients at a reduced price compares to the more expensive drugs they mimic. However, compared to generics, the price of biosimilars will be significantly more.
To enter this market, Pfizer is paying a huge price. If things turn out as planned, Pfizer will recoup the investment but some analysts are concerned that biosimilars are simply not a good match for the business model that Pfizer has created.