Since production of biologics takes place inside of cells, manufacture of biologics requires specialized knowledge and infrastructure; as such, development of biologic therapies is very capital intensive.
Despite the capital intensity of biologic drug development, companies big and small have invested significant resources developing new biologic therapies because they represent a proverbial “magic bullet” that can be used to treat previously incurable ailments such as breast cancer and lymphoma.
In addition, revenues and margins from biologics are staggering. Seventy-four percent, or US$28.5 billion of Roche’s 2016 global pharmaceutical sales, are due to nine monoclonal antibodies.Gross margins on most blockbuster biologic therapies are above 95%.
The major reason biologics can generate such revenues and margins is that they are standard-of-care treatments for their disease area, and they enjoy patent protection.
Despite the high revenues these therapies have generated in the past, they are still too expensive for many patients around the world.
IPO in Taiwan
J.P.Morgan estimates that through 2020, biologics generating a combined US$55 billion in revenue will lose patent exclusivity, leading to a massive opportunity for a new class of therapies called biosimilars, which hold the promise of decreasing the price and increasing accessibility of lifesaving blockbuster biologic products.