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New math on biosimilars sends a chilling message to Lonza/Teva team

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Late last year Lonza and Teva ($TEVA) sent a chill down the backs of an emerging group of developers working on biosimilars--those follow-on therapies that are expected to take the price of aging biologics down a peg or two as they lose patent protection. At the time the two companies said they were halting a late-stage program for a Rituxan knockoff so they could better understand regulatory pathways.

But in remarks over the weekend, Lonza CEO Richard Ridinger told Finanz und Wirtschaft that the grinding halt was forced by a variety of factors--all of which spell more trouble for biosimilar development efforts.

It's not clear if this business model, which we acted on in 2009, still works today," Ridinger told reporters, according to Reuters. Four years ago, he added, it looked like you could develop a knockoff biosimilar for a mere $105 million. But costs have evidently soared, or at least the reality of mounting a full, late-stage trial required by regulators has set in. And the new math, in a world where late-stage studies often cost hundreds of millions of dollars to complete, requires a lengthy gut-check.

"I would like absolute clarity before we make a large investment," says Ridinger. "The quality of decisions is more important than speed."

What's becoming increasingly clear is that the equation of low risks and big rewards seen just a few years ago has changed radically as big companies like AbbVie ($ABBV) promise to defend blockbuster drug franchises like Humira along every patent front--some 200 opportunities in Humira's case. Merck ($MRK) has essentially given up on biosimilar development, partnering with a joint venture of Biogen Idec ($BIIB) and Samsung, which has had its own setbacks to report. Now risks are multiplying as upfront costs jump, the simple reality when the FDA is increasingly clear that it wants to see an abundant amount of pivotal data for these new products. And every setback will add billions of dollars in added profits for these franchises, which clearly face a much different post-patent future than traditional meds.

Another clear conclusion: No one stops a Phase III study unless the program is as good as dead. And this Rituxan knockoff looks, at best, like it's on life support. 

- here's the story from Reuters

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