EU biosimilar embrace hits Roche’s Herceptin hard, but the pain is coming for AbbVie, J&J and more: report

During Roche’s third-quarter earnings conference call a week ago, pharmaceuticals chief Daniel O’Day insisted that the company could continue to grow sales “even in the worst case scenario” of biosimilar competition in Europe slashing demand for two of its cancer blockbusters, Herceptin and Rituxan.

Investors are getting a preview of what that worst case scenario looks like for breast cancer stalwart Herceptin. And it’s not pretty, said Bernstein analyst Ronny Gal in a note he distributed to investors Wednesday.

Herceptin biosimilars from Celltrion, Samsung Bioepis and Amgen have been on the market for about four months in the EU, but they’ve already captured 6% of the market, Gal reported. And Herceptin biosimilar adoption is accelerating, especially in the U.K. and Germany.

“Given that those are the two largest markets in Europe, we expect them to drive adoption quite quickly as we go through the next couple of quarters,” Gal said in a video posted online for investors.

Indeed, the biosimilar onslaught has barely begun, Gal warned. Roche is also bracing for biosimilar competition to Avastin in Europe, and all three cancer drugs will eventually see low-cost rivals in the U.S.

Then there’s AbbVie’s rheumatoid arthritis blockbuster Humira, which is under assault from four biosimilar rivals in the EU that just hit the market this month. Pfizer’s Enbrel and Merck’s Remicade, which also play in the RA market there, are suffering biosimilar pain, too, Gal noted.

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In fact, the rapid uptake of biosimilar Enbrel and Remicade in the EU could offer a good preview of Humira biosimilar adoption there, Gal said. Biosimilar versions of Remicade and Enbrel have captured a 60% and 40% share of the market, respectively. Some hint of how the Humira biosimilars are being received should come in the first quarter of next year, he said.

One big risk of all this competition, both to the originators of the products and their biosimilar rivals, is price erosion—and that’s definitely happening, Gal said. Prices have dropped 70% in the Remicade market in just over three years, and they’ve declined 46% in the Enbrel market in the two or so years since biosimilars launched.

Novartis executives noted during their earnings call on Oct. 18 that they’ve had “good uptake” in the EU of their Enbrel and Rituxan biosimilars, but they stopped short of guaranteeing that sales growth would accelerate significantly going forward.

“Obviously, the biosimilar penetration hasn’t maxed out, but at the same time, we do see some fighting back of the originator, and that generally is in the form of prices. So that gives some variability,” Richard Francis, CEO of Novartis’ generics unit, Sandoz, said.

In the U.S., biosimilar versions of Amgen’s Neupogen and Neulasta and Johnson & Johnson’s Remicade have yet to catch fire, Gal said in the video, despite an overall downward shift in prices. But he expects that to change, especially if products currently covered by Medicare Part B are shifted to Part D status.

Some private payers are also taking action to shift patients to biosimilars, which will likely drive adoption levels even higher, Gal said. He reminded investors of a recent move by UnitedHealthcare to block Remicade for new patients in Medicare Advantage plans. Earlier this month, the health plan behemoth gave preferred formulary status to two Remicade biosimilars, Pfizer’s Inflectra and Merck’s Renflexis.

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“We think [biosimilar] adoption will accelerate in … 2019 based on both the changing government policy and payers looking to affect change,” Gal said.

Roche, meanwhile, is trying to put the best spin possible on the situation as it prepares for biosimilar competition to slam its trio of cancer blockbusters in the U.S. starting next year. During the company’s earnings call, CEO Severin Schwan said he expects some impact on the branded drugs, but not the 60% to 70% biosimilar erosion seen in Europe.

And that prediction persists within the company “even with some potential additional activities with the administration of the U.S. government,” Schwan said.