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US tax rules scuttle merger, while the US' second biosimilar wins FDA approval
It clearly depends on where you sit at to which news item is more significant: Pfizer’s proposed $160-billion merger with Allergan probably makes a lot of investment bankers and Wall Street analysts sad; meanwhile, the news that FDA has approved the second US biosimilar, Inflectra (infliximab-dyyb, in FDA’s “proper name” convention) should cause some worry at the Janssen Biotech unit of J&J, which markets the originator drug, Remicade.
Inflectra has been approved for multiple indications: Crohn’s disease; ulcerative colitis; rheumatoid arthritis; ankylosing spondylitis and two types of psoriasis. Remicade has been a $6+-billion/yr blockbuster drug for Janssen, on the market since 1998. Pfizer, whose newly acquired business unit, Hospira, will market the drug in the US, notes that it’s the first monoclonal antibody biosimilar approved in the US. (Zarxio, from Sandoz, was the first US biosimilar, but is not a mAb.) Inflectra is manufactured by Celtrion Inc., based in South Korea.
Normally, when a branded drug (which Inflectra is, despite being a biosimilar) is introduced, the manufacturer makes a host of accommodations to get it in the hands of prescribers and pharmacies; the first approved generic version of conventional (non-biologic) drugs employ an almost militaristic launch with rapid-delivery mechanisms at wholesalers—every day the generic is on the market represents a sizable revenue opportunity for the generic manufacturer, until other generics show up and prices drop. But Pfizer’s statement on the Inflectra approval notes that “while launch timing for Inflectra will ultimately depend on a number of factors such as marketplace dynamics and intellectual property considerations, we are continuing with the preparation of our launch plans for 2016.”
You can’t blame Pfizer and Hospira management for being a little distracted. Hospira was acquired last year in between the time that Pfizer’s bid for merging with the UK’s AstraZeneca fell apart, mostly due to AZ’s reluctance and strong disapproval from UK economic authorities, and when the bid for Ireland-based Allergan fired up. Both proposed mergers were propelled by the tax inversion potential of moving Pfizer’s official HQ offshore, with substantial tax benefits to be had. This week, however, the US Treasury Dept. has tightened its restrictions on these inversions, so Pfizer gave up.
In a statement, Pfizer CEO Ian Read said that “Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies,” and added that “we plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016, consistent with our original timeframe for the decision prior to the announcement of the potential Allergan transaction.” This plan has been bruited about for several years, and press speculation was buzzing whether that will be the actual next step. Pfizer is also on the hook for a $150-million payment to Allergan as a cancellation fee.
To be fair to the Inflectra brand management, there might not be such a rush to get the product on the market, since it’s not clear how soon another biosimilar version of Remicade could show up. There are about a dozen Remicade biosimilars in various stages of development or review around the world, according to IMS Health. The Inflectra announcement is also notable for how Pfizer identified the product as “biosimilar infliximab,” rather than FDA’s “infliximab-dyyb,” indicating the lack of consensus around FDA’s proposed naming convention. The choice is not trivial; ultimately, doctors might be prescribing Inflectra by name, but have that substituted for by another infliximab product, and federal reimbursement of infliximab might become the same whether the product is Remicade, Inflectra or some other infliximab version. For the record, FDA noted that Inflectra is not “interchangeable”—which has a specific meaning under current guidance—for Remicade as yet.