January 20, 2009 / 8:13 AM / 10 years ago

UPDATE 3-Teva and Lonza link to tap biosimilar drugs market

* Teva, Lonza form alliance to make generic biotech drugs

* Move underlines growing interest in field by major firms

* Joint venture to start up in first quarter 2009

(Adds analyst saying Enbrel, Rituxan could be targets)

By Ben Hirschler

LONDON, Jan 20 (Reuters) - Israel’s Teva Pharmaceutical Industries (TEVA.TA), the world’s biggest maker of generic drugs, is joining forces with Swiss-based Lonza LONN.VX to exploit the emerging market for so-called biosimilar medicines.

The two companies said on Tuesday they had formed a strategic partnership to become a leading global provider of biosimilars, or generic versions of biotechnology drugs.

Their joint venture — to develop, manufacture and market a portfolio of products — is expected to commence activities in the first quarter of 2009.

Financial details of the agreement were not disclosed.

Shlomo Yanai, Teva’s chief executive, said biosimilars were a major growth driver for Teva, and Lonza was “an ideal partner” given its experience in manufacturing antibodies and other complex biotech drugs for pharmaceutical companies.

Bernstein analyst Ronny Gal agreed, arguing the combination of Lonza’s large manufacturing base and Teva’s drug development capability meant the joint venture had a complete platform.

Teva and Lonza did not specify which products they intended to copy but Gal said he suspected they were primarily targeting Amgen (AMGN.O) and Wyeth’s WYE.N rheumatoid arthritis drug Enbrel and the cancer drug Rituxan, or MabThera, from Genentech DNA.N, Biogen Idec (BIIB.O) and Roche ROG.VX.

Biosimilars are viewed as a promising new market, given the pent-up demand for cheaper versions of extremely expensive biotech drugs, some of which are coming to the end of their patent life.

HOT AREA

In Europe, the first such biosimilars have already been approved and on the market.

The United States, the world’s biggest and most lucrative pharmaceuticals market, is still discussing a regulatory pathway for follow-on biotech treatments but the new Obama administration is expected to push for their introduction.

“There is no doubt that biogenerics has become very sexy with the beginning of the government of Barack Obama and Democratic control in both houses of Congress,” Yoav Burgan, an analyst at Israeli brokerage Leader Capital Markets, said in a note to clients.

“It’s possible that in 2009 we will finally see the hoped-for creation of a regulatory path for approving biogeneric drugs in the United States.”

Burgan said the Lonza tie-up reinforced Teva’s commitment to biosimilars, following the purchase of CoGenesys and Pliva’s biogeneric activities, the latter being part of its acquisition of Barr.

Teva’s shares were 0.9 percent higher by 1230 GMT while Lonza added 0.6 percent.

Because they are complicated to manufacture, biosimilars are expected to enjoy higher margins than conventional “small molecule” generic drugs — a fact which means some branded drugmakers are also interested in making them.

Merck & Co (MRK.N) announced a big push into biosimilars last month and other big drug companies, such as Eli Lilly (LLY.N) and AstraZeneca (AZN.L), have also recently expressed interest.

The growing interest from major players is set to ratchet up the pressure on companies such as Amgen that rely on older biotech drugs, which are likely to be the first generic targets. (Additional reporting by Tova Cohen in Tel Aviv; Editing by Jon Loades-Carter and Elaine Hardcastle)

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