Big Pharma No Threat to Biotech Yet

The biotechnology industry and its investors need not worry yet about Big Pharma's push to make copycat versions of the top-selling biotech drugs.

A whole host of things have to go right before drugmakers like Merck(MRK Quote) or Novartis(NVS Quote) can compete in the biotech arena. For starters, Congress has to pass legislation creating a regulatory pathway that will allow drugmakers to sell so-called bio-generics or bio-similars.

But I don't see Congress as the biggest challenge. The real hurdle for drugmakers will be perfecting the manufacturing process for these biologic copycats. Talk to manufacturing experts from companies like Genentech(DNA Quote), Genzyme(GENZ Quote) or Amgen(AMGN Quote) and they'll tell you that making biologic drugs is a tough thing to do. And expensive.

It took these companies years to figure out how to cultivate and genetically engineer living cells so that they produce the proteins and antibodies that can later be filtered and refined into successful drugs like Avastin or Myozyme or Aranesp. By comparison, most drugs sold by Big Pharma are manufactured relatively easily from synthetic chemicals.

It's a simplistic analogy, but I think of the manufacturing process for biologic or biotech drugs like making beer or wine. Small changes to the recipe, or even to outside conditions like time or temperature, can result in different-tasting end products. The same goes for biotech drugs, and sometimes these variations can have negative effects.

The Food and Drug Administration is going to be very sensitive to these changes, to make sure that patients aren't prescribed a drug that is ineffective or unsafe. In fact, U.S. regulators already take a very tough line.