Having already provided an overview of Sandoz’s broader trajectory in part one of our exclusive three-part interview, CEO Richard Saynor now delves further into the importance for the company of both its biosimilars and small-molecule generics businesses, discussing portfolio selection for biosimilars and explaining why the firm’s ambitions for small-molecule generics are not the same in Europe as they are in the US.
One of the enduring growth drivers for Sandoz has been its very first biosimilar, Omnitrope (somatropin) which continues to see “strong double-digit growth,” with the CEO suggesting earlier this year that this “ultimately speaks to the sustainability of biosimilars.”
“I had the pleasure of launching Omnitrope 15 years ago in Japan when I was first in Sandoz,” Saynor recalled. “It’s still growing 15 years after we launched it, and today we’re the largest supplier of human growth hormone – and I guess you wouldn’t even really think of it as a biosimilar anymore. It is a very attractive product. It’s a good product. It’s inherently sticky, because in a sense when patients start these products, they generally don’t want to switch, so until they’ve grown up, have reached adulthood.”
Saynor said he was “very cognizant of one of the reasons” for this success, noting that “the two main competitors in this space have chosen to redirect capacity to their GLP-1 supply. And clearly we’ve benefited. I don’t see that situation fundamentally changing any time soon. And even when they come back, I don’t think they’ll come back with a volume strategy. It’ll be more about patient access and supporting patient needs. So I think Omnitrope will continue to be an important part of our portfolio for many years to come.”
But “even when you look at things like adalimumab,” the CEO observed – referring to Sandoz’s biosimilar rival to mega-blockbuster Humira – “we launched in Europe four or five years ago, it was still growing in the mid-teens years after launch. And a lot of that growth wasn’t necessarily by winning share against competition. It was because the market was expanding, because as price points come down, patients were getting access to these drugs much sooner in their disease cycle.”
“I think you see that with a lot of biosimilars,” he said, “and certainly we’re seeing that now with things like natalizumab. I assume we’ll see a very similar dynamic with ustekinumab.”
Similarly, he suggested, “denosumab has a huge potential – again, bearing in mind, one of the main indications for denosumab is for osteoporosis. In Europe, most patients are offered bisphosphonates, they’re a horrible drug, but obviously a biologic is very expensive. As price points come down, the opportunity to expand that market over years is there.”
“So I think biologics, inherently because of that price point, are relatively restricted in use in a lot of markets. So the opportunity to grow them and then the incremental benefit to switch from say one biologic to another is much smaller than say, switching from a small molecule to a biologic in the first place.”
Not Putting All Biosimilar Eggs In One Basket
Asked whether higher-competition molecules like adalimumab and ustekinumab, with lots of other biosimilars players in the market, were still attractive compared to less competition-heavy products like natalizumab – with Sandoz’s Polpharma Biologics-partnered Tyruko version expected to face no other biosimilar competition for the foreseeable future – Saynor said “I guess it’s like a pension portfolio, isn’t it? You don’t want all your assets in one place.”
“I think both of them demonstrate different things,” he expanded. “A product like Tyruko is very technically complicated, not a particularly huge global market – it’s a few billion dollars. You need a REMS [Risk Evaluation and Mitigation Strategy] program, you need a JCV [John Cunningham virus] assay. So a complex project to manage and support. And I think again, it shows the strength of Sandoz in terms of that capability.”
“And then when you look at a drug like ustekinumab – ultimately we partnered with Samsung [Bioepis] on that product – but actually when you look at the most recent IQVIA data, we’re smashing it in Europe, it’s doing really, really well. I think partly because we already have the relationships because we’re already in that space. We’re one of the biggest immunology companies in Europe. We don’t need any more infrastructure. We have the relationship, we know how the channels work. So every market we’ve now launched, we’re in a leading position with that product. So I’m really pleased with that.”
Meanwhile, “adalimumab has done phenomenally well, certainly in Europe and in the US it’s a stellar performance. I think now we have about 80% share of the available biosimilar market today with I think 10 competitors. So again, I think it shows the focus, the execution and the hard work of our colleagues.”
“Clearly I want [Sandoz] to be the leading biosimilar company in the US, but I have no desire to be the leading generics company in the US.”
Turning to small-molecule generics, Saynor was clear that this part of Sandoz’s portfolio was still core to the company and would remain so going forward. “More than 75% of our business roughly is technically small molecules,” he pointed out. “It’s extremely cash generative. In a sense I see it as very complimentary to our large-molecule business. They have a different risk profile. You need both.”
“If you look forward, there are $400bn [in brands] that are coming off patents in the next 10 years – roughly 60% and growing are small molecules. Technically I would argue a GLP-1 is a ‘large small molecule’ as well. We’re getting into semantics a little bit, but most are chemically synthesized.”
Saynor was also quizzed on recent comments made during the firm’s last quarterly results call that the US generics operation was seen as more of a “a tactical business” for Sandoz.
“The point about the US is, just as we are the leading generics company in Europe, I wouldn’t see that aspiration in the US,” he explained. “I want to be much more thoughtful around the portfolio that we bring, particularly in the small-molecule business.”
“Clearly I want to be the leading biosimilar company in the US, but I have no desire to be the leading generics company in the US,” Saynor stated. “I think it’s too volatile, it’s frequently a race to the bottom, and I think there it’s [about] being very focused on the right assets.” As an example, he noted, “we launched iron ferumoxytol in the US, we recently launched paclitaxel.”
Sandoz would be “very thoughtful about the products that we bring to the [US] market, and that’s what’s really the difference,” he summarized. Whereas in Europe “we want as much coverage as practically possible.”
That said, Saynor did underline that the value of having a healthy US generics business went “beyond the sales numbers,” suggesting that “one of the reasons we built such a strong relationship with Cordavis [on biosimilar adalimumab] was because we were already present. We knew how they worked, they knew we were credible. We had an infrastructure.”
When it came to the coexistence of the biosimilars and generics businesses, “we sort of artificially think about the business in two halves and I understand why, but customers don’t think about it like that,” he observed. “They don’t buy products like that. You tend to buy them through channels depending on the drugs that you bring. And I think it played to our strength in the US market as a whole. So I think without that infrastructure I think we would’ve struggled. So I think it plays a dividend there.”
“Everyone thinks generics and biosimilars is easy, that it’s about being cheap and first – there are many other dynamics and ultimately the right infrastructure in the market is absolutely critical.”
Another topic addressed by Saynor was the company’s R&D spend and how it is allocated between both biosimilars and generics.
When Saynor started at Sandoz just over five years ago “we had eight projects in development for biosimilars,” he recalled. “Today we have 25 and clearly a large chunk of those we’ve launched. I think we had four biosimilars launched at that point. Now we have 11 biosimilars launched. So the depth and breadth of that pipeline has expanded significantly, and I’m very proud of that.”
“Yet at the same time,” he said, for generics “we’re still broadly covering about 80% and we’ve got over 400 projects in the small-molecule space as well. So I don’t think it’s either/or.”
“Again, there are synergies. I mean increasingly we’re talking about things like ADCs [antibody drug conjugates]. What’s an ADC? Well, basically it’s a small molecule and a biologic with a linker. I think we’re uniquely placed because of our strength in small-molecule chemistry and biological chemistry to combine those two things.” Moreover, “certainly things like regulatory and medical are a common resource, whether you’re finding a biologic or you’re finding a small molecule.”
The main “distorting fact” in terms of the greater R&D spend for biosimilars compared to generics was the Phase III trial costs for biosimilars, he said, “because you spend so much money on a Phase III trial, that’s where the bulk of the many hundred million spend goes: samples of the originator and running trials that scientifically aren’t that relevant, but still the bulk of regulators – they’re slowly changing – but the bulk of regulators still want.” And that question was “something really for the regulators” to address.
Asked whether easing registration requirements for biosimilars – such as the move hinted at by the European Medicines Agency to eliminate the need for comparative efficacy trials – would result in an explosion in terms of the number of biosimilars Sandoz would pursue, Saynor answered “I mean, clearly if it costs me $50m rather than $200m, I’d develop four times as many products.”
“Alright, then the next question is do I expect to see four times many competitors? Yes and no. These are still capital-intensive in terms of manufacturing, and technically complex. There are lots of companies that have one or two products, but then they struggle to go from clinical to commercial.” Because “the bit that everybody forgets,” he said, “is then when you get to market – and you’re seeing that with ustekinumab – you need an infrastructure in the market.”
“Everyone thinks generics and biosimilars is easy, that it’s about being cheap and first,” he suggested. But “there are many other dynamics, and ultimately the right infrastructure in the market is absolutely critical. And I think the combination of those few things, I think there are very few companies that really have got that – I guess the technical, medical, legal, and commercial capability – in one global organization.”
“There’s something like 45 biologics that I’m aware of where we see no biosimilar currently in development. That’s a huge opportunity.”
Finally, asked whether Sandoz was happy with its balance between in-house developed products and partnered assets like ustekinumab and natalizumab, Saynor said “again, it’s a bit like a pension. I mean you wouldn’t want all of everything in-house. We’ve got a number of projects that we do in-house, a number with strategic partners, and equally we’d also look at in-licensing.”
“Clearly the margin mix depends very much on the nature of the deals,” he noted. “If you in-license something, I have no R&D spend, so I clearly wouldn’t expect such a high return. But equally if I can leverage an infrastructure I’ve already got, it becomes accretive.”
“I think certainly on the big volume products, drugs like adalimumab being vertically integrated and a world leader in terms of supplying that product also has its benefit.”
“So I think it’s a mixture, and I think that’s the important thing. At the end of the day, there’s something like 45 biologics that I’m aware of where we see no biosimilar currently in development. That’s a huge opportunity. That’s billions and billions of dollars of opportunity – and some of those products have already come off-patent, and we see others where there may be relatively modest $2bn, $3bn, $4bn global sales that really we need to think about how we bring to the market.”
Again, it was regulatory costs that were the main barrier here, he highlighted.
“At $200m, it’s an expensive hobby.”
In the third and final part of this interview, Saynor discusses fresh opportunities on the horizon for Sandoz such as GLP-1s, ADCs and oligonucleotides.
