Soup to Nuts Replay

Almost one year ago, I wrote about Epirus Biopharmaceuticals, Inc., a Boston-based start-up, that is developing a line of biosimilar drugs, the first being a biosimilar for Remicade™, an anti-inflammatory antibody sold by Janssen. Here’s that post from July 4, 2013, with an update at the end.

Although there’s a little voice inside my head telling me to get a life, I thought I would peck out another blog posting about a business model for bringing affordable pharmaceuticals profitably (or at least with a positive cash flow) to underserved markets. The model I have doodled about in previous posts involves a company providing a high-value, but non-novel/off-patent biopharmaceutical drug (or vaccine) that is manufactured in a relatively low-cost manner and sold in volume with a modest mark-up, possibly to public sector buyers (e.g. government health agencies) and/or subsidized by multinational donors. In the post, “Generics Play” (September 2011), I noted the Indian generic companies like the mid-tier pharma, Cipla, and the biotech, Biocon, are developing such “biosimilar” drugs and building manufacturing capacity. In a follow-up the next week (“Biosimilar Fever”), I wrote about the multi-national pharmaceutical companies’ interest and investment in developing biosimilars for the major markets of the US/EU/Japan and that, thanks to industry lobbying, the US FDA proposed a challenging approval path, making the EU market a better target for the biosimilar makers since the European Medicines Agency (EMA) has based its approval on the less-rigorous concept of proving “interchangeability.”

As for the manufacturing factors in the model, in “More Grease on the COGs” (December 2011), I noted that GE Healthcare, a multi-billion dollar division of GE, and the M+W Group, a multi-billion dollar German engineering and construction firm, announced that they had formed “a strategic alliance aimed at overcoming the lack of key biopharmaceuticals, especially in emerging nations … [and] will assist countries worldwide to become self-sufficient in the manufacture of vital biopharmaceuticals such as vaccines, insulin and biosimilars.” To me, this alliance indicated the partners had concluded that middle-income countries are serious about becoming pharmaceutically independent and were willing to commit multi-hundreds of millions of dollars. I also noted in a posting after BIO 2012 (“See Change”) that GE Healthcare seemed to be complementing its super-scale factory option by buying a local (Marlborough, MA) company, Xcellerex, for its flexible, modular, and relatively inexpensive biomanufacturing system. Finally, in my post, “Discount Drugs” (May 2012), I wrote about the $2 billion launch of Samsung Biologics (by a company better known for its consumer electronics) and wondered if the company will apply biomanufacturing efficiencies analogous to those that allow $50 smart phones and also where it may find those new process efficiencies.

All of the above activity is evidence for big corporations (except for Biocon, which is India’s largest biotech) adopting a non-major market biosimilar business model, but none of these players has made a product and gotten it approved, let alone generated revenue, in a non-major market. So I’ve been on the lookout for validation in the form of a venture-capital-backed start-up with an explicit mission statement of developing biosimilars for the non-US/EU/Japan, rest-of-world markets, and recently found one: Epirus Biopharmaceuticals, Inc. (Epirus).

Epirus was apparently in stealth mode as “fourteen22, Inc.” and based in San Francisco in 2011-12 and now is located in an office in the Prudential Building here in Boston. Epirus’s approach, which it has nicely branded as In Market, For Market™, is to “combine new technologies and strategies to address macroeconomic trends in emerging environments in order to deliver biosimilar products to patients” (Approach). The new technologies are the single-use, disposable techniques and equipment that enable lower-cost, customizable biomanufacturing (branded as SCALEÔ), and the new strategies are to contract with local/regional pharma companies, with the encouragement and possibly financial support of local governments, to enable testing, regulatory approval, and sale of biosimilars in regional markets. As described in the company fact sheet (Fact Sheet), the company “is focusing on a range of emerging markets, including, Brazil, Turkey, Russia, MENA [Middle East, North Africa], and the ASEAN [ten countries of southeast Asia] markets,” but notably not India and China. The financial rationale behind this soup-to-nuts approach with partners (product candidate through manufacture, testing, and approval) is that it sidesteps the regulatory and launch hurdles of the major market countries, shares the cost/risk with the partners who know the local markets (and regulators), and results in opportunities for selling multiple, regional contracts/licenses and for governmental subsidy. For the company customers, the upside is increasing their manufacturing capability, product development experience, and eventually revenues in a regional market.

Epirus has an impressive management team and investment (unspecified amount) from three top notch firms: 5AM Ventures, Montreux Equity Partners, and TPG (Texas Pacific Group) Biotech. The seven senior managers have had roles in multiple biotech/pharma companies each with lots of manufacturing and product development experience (I may know one, Mark Melville, who was with Wyeth Biopharma/Andover when I did business development for that group). The board member representing TGP Biotech is Geoff Duyk (our paths intersected when he was an assistant professor at Harvard Medical School and I did tech transfer there) who has also been involved in another start-up for emerging market pharmaceuticals, moksha8. The company has also made impressive progress on its lead product, a biosimilar for RemicadeÒ, an anti-inflammatory antibody sold by Janssen, that is in a Phase III trial, announcing in January the successful completion of a Phase I bioequivalency trial in the UK (News). The company expects to launch this product and another unnamed protein therapeutic in 2014 and has four preclinical products (Capabilities). Although the company has no partners for any of its products, it claims it is “in active discussions for regional partnerships in certain markets.”

I wondered how Epirus, a virtual company, had sufficient personnel to manage its own product development and market those products and its biomanufacturing platform globally (and wondered about the source of its product candidate and platform). Epirus lists five corporations as “technology partners” who “help us deliver the EPIRUS Biopharmaceuticals solution to market. Our partners have expertise in product development, infrastructure design and manufacturing,” although the nature of the relationships is not clear, i.e., who is paying whom. One of the partners is GE Healthcare, probably the source of the manufacturing platform via its Xcellerex acquisition. I am assuming that these partners have granted Epirus agency (a right to represent), but the idea of negotiating a geographically-specific, product/platform, technology support and transfer deal with multiple parties one of which may be an autocratic government and satisfying multiple suppliers makes my head spin. Clearly, deal-making in emerging markets can be complicated (see the recent product and tech transfer agreement between Protalix and the Brazilian Ministry of Health, Protalix press release), so I look forward to Epirus’s first deal.

Update: since the start of 2014, Epirus has:

  •  signed a deal with Ranbaxy, the India-based division of the Japanese pharma, Daiichi Sankyo, for commercial rights to BOW015 (its lead product) for a “broad range of territories including India, selected South East Asian market, North Africa, and several other markets” (January 8 press release);
  • raised an additional $36 million and brought in new investors and announced it plans to go public through a merger with a Nasdaq-listed company, Zalicus (to be completed this summer) (April 16 press release);
  • announced Phase III results for BOW015 that showed similar, if not slightly superior, efficacy in comparison to Remicade (June 11 press release); and
  • apparently is no longer presenting on its website the approach I cited above, to wit, to “combine new technologies and strategies to address macroeconomic trends in emerging environments in order to deliver biosimilar products to patients”. My guess is that the management thought that this theme will be difficult for public investors to understand and buy into.

 

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