AmerisourceBergen Corporation the “Pony to Ride” for Biosimilar Opportunities, Says UBS

March 16, 2015

By Riley McDermid, BioSpace.com Breaking News Sr. Editor

AmerisourceBergen Corp. will be the “pony to ride” for biosimilar opportunities in coming years, said a biotech analyst with UBS Monday, as Wall Street begins to digest the effects of last week’s approval of America’s first biosimilar drug.

Analyst Steven Valiquette wrote in a note to investors Monday that ABC may have the greatest leverage to U.S. biosimilars with around $65 billion biologics in five years, as the company upgraded its rating on the stock from neutral to buy.

Swiss drugmaker Novartis AG won approval from the U.S. Food and Drug Administration (FDA)for the nation’s first biosimilar drug March 6, after the FDA said the company could now sell its white blood cell drug Zarxio, a knockoff of Amgen’s blockbuster treatment Neupogen, or filgrastim.

“Following the first FDA approval of a biosimilar drug in the U.S. market a week ago, we have now conducted a 'deep dive' analysis into the biosimilar opportunity set for the next five years, and conclude that among all of the companies in our pharma supply channel coverage (drug distributors, PBMs, retail drug chains and LTC pharmacies), ABC will likely have the greatest earnings per share leverage,” wrote Valiquette.

“As such, we believe ABC is 'the pony to ride' to capture upside related to the estimated $65 billion in biologics that may face biosimilar competition during 2015 to 2019," said. "We raise our EPS estimates for each year in this period and establish a new price target of $118.”

Biosimilars, which are made inside a living cell, are always uniquely different in composition, which differentiates them from generic drugs, which are exact replicas of other drugs. They have been widely available in Europe since 2006, but the FDA was only granted the right to review and approve them when Obamacare was passed in 2010.

That leaves ABC poised to capitalize on new market opportunities, with a pipeline ripe for biosimilar innovation, said UBS.

“We believe ABC's annual EPS leverage to biosimilars during 2015 to 2019 will be $0.06, $0.27, $0.09, $0.35, and $0.23, respectively,” said Valiquette.

“This is based on our view that biosimilars will capture of around 40 to 50 percent prescription market share from original brand biologics (much more conservative than typical ~85-90 per prescription share captured by traditional ANDA generics), and we assume around 35 percent price discounts from original brand biologics," he wrote. "We then believe that ABC will have around 50 percent share of biosimilar prescription through the 'clinic' channel, and assume 5 percent incremental net margins on biosimilars versus original brand biologics.”