INSIGHTS

What are biologics?

Biologics are medications that are produced from living organisms and are used to treat a wide variety of conditions. Since biologic drugs include components derived from humans, animals, or microorganisms by using biotechnology, they are typically more complex compared to chemical drugs.

Biologics have been consistently outpacing chemical drugs over the past decade. In 2022, 7 out of the top 10 pharmaceutical drugs sold globally were projected to be biologics. By virtue of offering a more targeted treatment as compared to chemicals and their potential in discovering cures for untreatable or difficult to treat diseases, biologics are expected to continue to grow at 10% annually, double the rate of chemical drugs.

Increased demand for contract manufacturing of biologics

Biologics contract development and manufacturing organizations (CDMOs) stand to be key beneficiaries of this rapid growth in the biologics market. A significant portion (~70%) of the biologics manufacturing capacity is currently held by the large biopharmaceutical innovator companies. Larger CDMOs hold a lion’s share of the capacity available with independent service providers and only 5% of the overall capacity is available with small and mid-sized CDMOs. While there is a significant supply-demand mismatch at an industry level, the supply shortage is even more acute at the preclinical and clinical stages of development. An increasing share of biologic products in the pipeline is being sponsored by smaller, emerging biotech companies who are likely to want to work with CDMOs rather than setting up their own capacity.

Inflection point for biosimilars

Biosimilars are biologics that are highly similar to an existing biologic that has been approved. With biologics worth $185B in annual sales approaching loss of exclusivity by 2030, the biosimilars market is expected to grow rapidly. For example, Humira, AbbVie’s blockbuster drug for rheumatoid arthritis, which topped $20B in revenue in 2021, is set to lose patent protection in 2023 and at least eight biosimilars are expected to launch in the US in 2023 alone.

Focus on controlling healthcare spends in developed markets has led to a favourable regulatory landscape for biosimilars, with US approvals having risen over 8x in the last five years. Affordability constraints in emerging markets have played a key role in increasing biosimilar penetration where biosimilars are available at deep discounts to the innovator brand. Harmonized regulatory pathways where product approvals across emerging markets can be obtained efficiently and within shorter development timelines compared to developed markets, make India and emerging markets attractive geographies for biosimilars.

Enzene: the business

We have been tracking the broader biologics segment in India for several years, seeking disruptive technologies, products and management teams. Enzene Biosciences Ltd. (‘Enzene’) is an innovation-driven biotech company, a subsidiary of Alkem Laboratories Ltd. (leading Indian pharmaceutical company with a market capitalization of $4.8B, engaged in the development, manufacture and sale of pharmaceutical and nutraceutical products in India and global markets).

Enzene operates two synergistic business models:

a)    Contract development and manufacturing services to biotechnology companies globally with a growing number of US and European customers

b)    Out-licensing of a captive pipeline of biosimilars to pharmaceutical companies who commercialize these products across India and global markets

Four reasons why Enzene stood out?

• They are one of very few players globally to have developed a fully integrated continuous manufacturing platform which can deliver >5x higher yields compared to conventional batch manufacturing
• Their cutting-edge infrastructure and R&D capabilities in Pune is in line with global standards
• They have an attractive pipeline of 18 biosimilars with 4 products already commercialized and credible marketing partners across India and global markets
• The leadership team has extensive domain knowledge in biologics with a deeply entrenched culture of innovation across the organization

Enzene is building a differentiated platform in a landscape which is relatively scarce on quality biomanufacturing capabilities.