Home Cryptocurrency Biosimilars Are Saving America $1 Billion Per Month

Biosimilars Are Saving America $1 Billion Per Month

by WOOWinvest
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Biosimilars Are Saving America $1 Billion Per Month

The United States has largely refused to regulate drug prices in any meaningful capacity. That results in Americans paying significantly more for medicines than global peers.

According to an analysis from Public Citizen, the top 20 best-selling drug products generated $158 billion in global revenue in 2020. Sales in the United States contributed $101 billion, or 64%, of that total. The nation comprises 4.3% of the global population.

It’s not all bad news. The United States has one of the most developed markets for biosimilars, which are copycat versions of complex biological drugs. They’re not technically called “generic drugs” because they’re not exact copies of the innovator product, but investors can think of them that way. They certainly have the same impact: Greatly lowering drug prices.

Strong regulatory support and sky-high drug prices have led to rapid biosimilar uptake in recent years. These copycat products are now saving the US health care system over $1 billion of drug spending each month. Considering many drug developers large and small are investing in the space, individual investors may want to become familiar with the opportunity.

Biosimilars Are Crushing It

Look across the landscape and you’ll notice drug developers are significantly more bullish on biosimilars than many investors.

Amgen (AMGN) generates roughly $2 billion in annual revenue from global biosimilars sales. It expects to double that by 2030. Novartis (NVS) plans to spin off its generic drug business Sandoz, which generated full-year 2021 revenue of $9.6 billion. The biopharma division achieved sales of $2.1 billion, which largely comprises biosimilars.Coherus BioSciences (CHRS) has one biosimilar product on the market today, but has earned regulatory approvals for two others that will launch soon. Management thinks the business can generate at least $1.2 billion in full-year 2026 revenue across four different drug products. For perspective, the business may generate only $230 million in full-year 2022 sales.

This isn’t blind optimism, either.

In the three-year period from 2020 to 2022, three blockbuster products lost patent exclusivity and became eligible for biosimilar competition, according to analysis from McKinsey. A blockbuster drug is one that generates at least $1 billion in annual revenue. These three products generated less than $10 billion in combined annual sales.

Now compare that to what’s just over the horizon. In the three-year period spanning 2023 to 2025, there are 14 blockbuster drugs losing patent exclusivity with combined sales of nearly $60 billion. Another 29 blockbuster drugs will be exposed to biosimilar competition in the second half of the decade.

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The biggest-ever opportunity opens in 2023. The world’s best-selling drug, Humira from AbbVie (ABBV) , will be forced to compete against up to 10 biosimilar products. Seven copycats of the autoimmune therapy have already earned FDA approval. Capturing even a fractional market share will lead to riches.

Humira is expected to generate full-year 2022 revenue of nearly $19 billion in the United States alone. If competitive drug pricing reduces the opportunity 75%, then it would still be worth nearly $5 billion per year. If a biosimilar product captures 10% of the reduced market opportunity, then it would generate roughly $475 million in annual revenue. It’s worth pointing out this back-of-the-envelope calculation is very conservative. Most analysts and companies currently expect the market opportunity to shrink “only” 40% to 50%.

Europe may provide a preview of what’s to come. Regulators allowed biosimilars of Humira to launch in late 2018. Within two years five different copycats had launched, including three that captured at least 16% market share based on prescription volume. AbbVie saw its market share shrink to “only” 41% in early 2021 – and had to significantly lower selling prices to boot.

Amgen’s Amgevita is the most successful biosimilar in Europe. It will be the first Humira biosimilar to launch in the United States when it hits the market in January 2023. In fact, the brand is so successful the company is barely changing the branding, calling it Amjevita domestically.

The next batch of competition will launch in mid 2023 when four more biosimilars hit the market. That includes Yusimry from Coherus BioSciences, which has invested in dedicated manufacturing for its biosimilar. The company has set a goal of capturing at least 10% market share, although it can scale manufacturing volumes to grab 20% of market share if needed.

Two more biosimilars will launch in fall 2023. Although they’ll be a little late to the party, the market opportunity has plenty of room for competition. These latecomers are also from Sandoz and Pfizer (PFE) two experienced biosimilar developers with ample resources.

Don’t Sleep on Biosimilars

Biosimilars have been largely dismissed by investors. To be fair, they did stumble out of the gate.

Although the first copycat biologic launched at the beginning of 2017, biosimilars provided almost no benefit to how much Americans spent on drug products for the next 30 months. Increased competition and awareness helped these medicines finally start delivering on their potential in the beginning of 2019 – and they haven’t looked back since.

Case in point: Biosimilars helped Americans save $15 billion in drug spending in the four years from 2017 to 2021. That will grow to over $12 billion in 2022 alone. The savings will grow even more when Humira faces competition next year.

Therefore, investors may want to shed their cautious outlook for this important group of medicines. Many drug developers are leaning on biosimilars as an important source of growth for the rest of the decade. Perhaps your portfolio could, too.

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