Roche and Novartis AG Gear Up to Battle Over Biosimilars
May 31, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Swiss companies Novartis and Roche appear to be heading into battle over biosimilars. Biosimilars are biologic drugs that are almost identical to an original drug, but manufactured by a different company, typically at a lower price.
Novartis has been undergoing some major changes lately, such as its recent split of its pharmaceutical division into two separate units, drug development, and oncology. It has also been considering selling off its shares of Roche’s voting stock. Between 2001 and 2003, Novartis picked up about one-third of Roche’s stock, which is currently valued at about $14 billion, or about six percent of all Roche shares.
It’s been evaluating ways of unloading the stock, including selling it back to Roche. In earlier talks, Novartis’s chief executive officer, Joe Jimenez, indicated he would want a premium price for the shares. On May 25, however, he indicated he would consider selling it without requiring a premium.
Part of the strategy behind the sale is tied into the biosimilars markets.
In September 2015, Novartis launched the first U.S. biosimilar, Zarxio, a biosimilar to Amgen ’s Neupogen. A month later, Jiminez indicated the company was expecting to file 10 more biosimilars in the next three years.
One of those is a biosimilar to Roche’s blood cancer drug Rituxan, which is expected to receive European approval soon. Rituxan brought in $7.1 billion last year for Roche, and Novartis wants a piece of the action.
Roche isn’t resting on its success, however, and plans to launch Gazyva, which argues is an improvement over Rituxan.
Reuters wrote today, “This clash illustrates the Basel drugmakers’ starkly different strategies. Beyond its own new drug portfolio, Novartis has a big side bet that cheaper ‘biosimilars’ from its Sandoz generics unit can grab rivals’ profits, while Roche has limited its focus to new drugs to counter such incursions.”
“Does that thinking reflect at all about the Roche stake? Obviously, it certainly does,” said Jiminez in a conference call last week, noting that he would send out “one of the best and most-potent oncology sales and medical forces” to sell rituximab, Rituxan’s generic name, as early as next year in Europe.
On May 27, Roche announced positive results from the Phase III GALLIUM trial in patients with previously untreated follicular lymphoma, the most common type of slow-growing non-Hodgkin lymphoma (iNHL), comparing Gazyva/Gazyvaro plus chemotherapy followed by Gazyva/Gazyvaro alone against MabThera/Rituxan plus chemotherapy followed by MabThera/Rituxan alone. The results showed the Gazyva/Gazyvaara combination significantly cut the risk of the disease getting worse, or death, compared to the MabThera/Rituxan treatment.
In response to questions regarding the biosimilars to Rituxan, Dan O’Day, head of Roche pharmaceuticals, told Reuters that this study “is a perfect example of our commitment to maintain our focus on developing innovative medicines for people facing difficult diseases.”
Meanwhile, Jiminez indicated that its biosimilars will probably sell at discounts as high as 75 percent compared to the originals. Reuters points out that this appears to be a trend in Europe, with Pfizer/Celltrion’s Inflectra, a biosimilar to Johnson & Johnson and Merck & Co 's Remicade for rheumatoid arthritis and Crohn’s disease, being sold at steep discounts. Which essentially means that Novartis expects to make up in volume what it will lose on price.
Getting rid of the Roche shares now while they’re worth $14.1 billion might be part of the plan, if Novartis’s encroachment into Roche’s markets cause its stock to drop. Also, after buying GlaxoSmithKline ’s oncology assets last year, Novartis may want to diversify its holdings out of oncology.
“The decision to divest its Roche stake is partly motivated by biosimilar dynamics,” Seamus Fernandez, an analyst with Leerink, told investors, according to Reuters.
Also, Roche has expressed an interest in “bolt-on” acquisitions up to $5 billion or larger. $14.1 billion would definitely help make that happen.
And, to further complicate matters, it’s entirely possible Roche will head to court to stall or stop Novartis from launching its ritixumab biosimilar. Xarxio only hit the U.S. market after a legal battle with Amgen. Jiminez noted last week that it is no longer government approvals that are the biggest obstacle to biosimilar approval in the U.S., it’s legal action.
“You’re seeing less regulatory time, more blocking,” Jiminez said. “Eventually, as the legal battles are won, you’re going to see a good business in the U.S. with biosimilars.”