With a slew of biotech drugs losing patent protection in the next five years, a slew of generic drug companies must be falling over one another as they jump into the market, right?
New Worry for Aging Biotechs: Patent Expirations
Wrong! While no one doubts the enormous opportunity for generic drugmakers, analysts say few are preparing to enter the market.
That's because biotech drugs tend to be more complex to manufacture than other pharmaceuticals, and the regulatory pathways for getting them approved aren't as clear-cut as for other kinds of drugs. Drugs are usually chemicals to block or enhance biological processes, while biotechnology drugs and vaccines are typically complex, modified proteins -- essentially living matter falling under the "biologics" category.
So the generic drug industry, which has grown rapidly by making generic equivalents of small-molecule drugs, faces substantial challenges in producing generic biotech drugs, analysts say.
"It's the early days, but it could be an extraordinary opportunity for generic drugmakers," says Elliot Wilbur, a
analyst. "Most of the big generic drug companies haven't capitalized on this."
But the barriers appear high, for now. For one thing, generic drugmakers will have to prove that their products are "bioequivalent" to existing biotech drugs, a formidable regulatory and manufacturing challenge. And they will have to do that without infringing on biotech company patents, which typically cover both the molecule, and the complex methods for making them.
Two companies that have made inroads into the generic biotech market are
, says Wilbur. CIBC rates both stocks buy and does no underwriting for either company.
"There's currently no regulatory pathway for obtaining bioequivalence for a generic biotech drug," says Wilbur. "It's a real limiting factor, but that is expected to change."