Amgen Gets a Step Closer to a Multibillion-Dollar Market

Source: Amgen.

Biotech Goliath Amgen reports that it and its biosimilars partner Allergan have taken a step closer to an eventual FDA filing for approval of their generic knock-off to the multibillion dollar cancer drug, Avastin.

Similar, but less expensiveIn 2011, the two companies teamed up to develop four biosimilars that could eventually capture billions of dollars in market share away from top-selling biologic medicines, including Avastin, which is manufactured by Roche Holdings.

In phase 3 trials, Amgen and Allergan's biosimilar ABP 215 proved that it works similarly to Avastin, both in terms of outcomes and reported adverse events.

The finding helps clear the way toward an eventual abbreviated filing with the FDA and if the FDA eventually approves ABP 215 as a biosimilar to Avastin, it could present a significant revenue opportunity for Amgen and Allergan because sales of Avastin, which first notched the FDA green light all the way back in 2004, total an eye-popping $3.3 billion through the first six months of 2015.

Because biosimilars that have already hit the market in Europe are capturing a significant share of the market and prices for biosimilars, which are expected to be 30% less than the brand-name drug, are more profit-friendly than traditional generic drugs, which are often priced at discounts of 80% to the brand-name drug, ABP 215 could become a top seller.

Practicing patienceIt will still be a while before ABP 215 can reach the market because the U.S. patent protecting Avastin doesn't expire until 2019 and patents protecting Avastin from biosimilars in Europe don't expire until 2022.

However, since Amgen and Allergan are already reporting positive phase 3 trial results for their Avastin biosimilar, they seem to be perfectly positioned to be among the first drugmakers to launch an Avastin biosimilar and that first mover advantage could allow them an opportunity to establish ABP 215 as a favorite option among prescribers before competing Avastin biosimilars can be launched. Overall, up to 15 different Avastin biosimilars are under development, including one fromPfizer courtesty of its $17 billion acquisitionof Hospira earlier this year.

Although there's going to be a lot of players angling to wrestle away scripts from Avastin, the market could support multiple players. Unfortunately, non-small-cell lung cancer is the leading cause of cancer death in both men and women and in the U.S. and EU, a combined half a million new cases of the cancer are diagnosed every year.

Looking aheadBecause 68% of all newly diagnosed cases of NSCLC occur in patients over 65 and 10,000 baby boomers turn 65 daily, the number of people likely to require treatment for this cancer is likely to grow, rather than shrink, over the next 10 years.

Absent the approval of a low cost biosimilars such as Amgen and Allergan's ABP 215, demand for NSCLC therapy could have a big negative impact on healthcare spending. According to the National Cancer Institute, an estimated $14.7 billion per year will be spent caring for NSCLC patients by 2020, Since a good chunk of that spending will be for medicines like Avastin, which costs $4,429 monthly, or more, according to the Memorial Sloan Kettering Cancer Center, investors won't be the only ones eagerly awaiting approval for this biosimilar.

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Todd Campbellhas no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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