Teva's future in biosimilars shady as Lonza ends expensive JV
This article was originally published in Scrip
Teva Pharmaceuticals and Lonza have hit the end of the road with their biologics joint venture, with Lonza citing costs as a main factor. The discontinuation leaves a huge question mark hanging over Teva's future plans for its biosimilars program, with some pundits wondering whether they might exit the scene completely.
The companies claim to have come to a mutual agreement to end the JV to "enable both companies to better advance their own strategies," but the trigger seems to have been a strategic review conducted by Lonza. A company spokesperson said, "Following the sale of our Performance Urethanes business at the end of 2012, we continued in the first half to review our business portfolio. We conducted a strategic review of the Teva-Lonza Joint Venture and together with Teva we decided to discontinue the joint venture between our two companies."
Dr Stephan Kutzer, COO of Lonza's Pharma and Biotech Market Segment, said that in the company's assessment it found "those investments in biosimilar[s] will require more capital than initially planned and will also take more time to reach the market." Lonza revealed in its 2Q results that it expected to save CHF150m ($162m) by dissolving the JV, which it will most likely use to pay down debt.
Scrip sensed earlier this year that there may be trouble brewing when Teva failed to mention the high profile development of a biosimilar version of Roche/Biogen Idec's MabThera/Rituxan (rituximab), a key part of the Teva-Lonza joint venture, in a 20F filing with the US SEC. At the time, Teva told Scrip that it had no new updates and that the project was active (scripintelligence.com, 22 February 2013).
The collaboration, established in 2009, was focused on the development, manufacturing and marketing of biosimilars, among which rituximab had the highest profile. The rest of the projects the JV was working on remain undisclosed.
What next for Teva?
Teva told Scrip that it had no additional comment at this time, leaving questions about what it plans to do next.
Datamonitor Healthcare lead analyst Giles Somers suspects that there is reason to suppose there is a bigger picture behind this news.
It cannot be ruled out that Teva might be about to pull out of the biosimilars space altogether. While this does not seem wholly likely given that many people are still predicting there is big money in biosimilars (scripintelligence.com, 21 November 2012), and most would expect generics giant Teva to be at the forefront of development, there is a case for conjecture.
As Mr Somers points out, in biosimilars if you are not the best, sometimes you might as well be nobody, and Teva has been beaten to the regulatory finish line in Europe by small Korean company Celltrion (along with Hospira), which got its biosimilar monoclonal antibodies Remsima and Inflectra, versions of Johnson & Johnson's/Merck & Co's Remicade (infliximab), approved in June (scripintelligence.com, 28 June 2013).
Mr Somers speculates that Celltrion's approval showed there would be other competitors in the space "and lower profits for all," which could be a turn-off for Teva. Teva has always claimed that the biosimilar market and the accompanying regulatory hurdles are very difficult: Celltrion has proved that even if that is true, they are not insurmountable. Perhaps Teva sees now as the time to cut its losses.
Less drastically, it may simply be that Teva no longer saw value in partnering with Lonza. Presumablyit teamed up with Lonza in the first instance because it did not feel its own manufacturing capabilities were enough to progress in the space alone.
But it apparently baulked at pouring more cash into the JV.
It may be interested in moving production elsewhere. Teva could be considering a shift away from expensive western manufacturing sites in favor of Chinese or Indian manufacturing. Or else, it might be thinking about an acquisition in an emerging market. It is possible, Mr Somers believes, that the companies had originally thought that, being a branded biologic manufacturer, Lonza could get away with the higher cost of western manufacturing but have now realized that success in biosimilars may require being more cost-effective.
Impact on other players
Of course, the end of Teva/Lonza's rituximab program is cause to celebrate for some, both for other biosimilars developers and Roche/Biogen Idec. For the big pharma originators of rituximab, one big threat to their brand has been removed, buying them a bit more sales breathing space.
Equally, for the other companies involved in rituximab biosimilar trials, a formidable competitor now appears to be out of the picture. Companies known to have biosimilar rituximab trials ongoing include Celltrion/Hospira, Sandoz (Novartis), Boehringer Ingelheim, Dr Reddy's/Mylan, Pfizer and Samsung.
In the emerging markets, Intas, Reliance, Probiomed and Shanghai CP GuioJian have rituximab trials ongoing.
Other companies with rituximab programs whose stage of development are unknown include Daiichi Sankyo, Biocad, Curaxys, Biosidus and Viropro.
Meanwhile, Lonza is left working out how to try and cut its losses. It has likely built plants already; it told Scrip that it has made "accumulated investments" of CHF100m ($107.65m), and that it is "evaluating the options on how to utilize and exploit the assets in the future."