THOUSAND OAKS, Calif.—Sharing a belief that the developmentand commercialization of biosimilar products will not follow a pure brand orgeneric model—and will require significant expertise, infrastructure andinvestment—Amgen and Parsippany, N.J.-based Watson Pharmaceuticals Inc. willcollaborate to develop and commercialize, on a worldwide basis, severaloncology-related antibody biosimilar medicines. These products are expected tobe sold under a joint Amgen/Watson label.
Under the terms of the agreement, Amgen will assume primaryresponsibility for developing, manufacturing and initially commercializing theoncology antibody products. Watson will contribute up to $400 million inco-development costs over the course of development, including the provision ofdevelopment support, and will share product development risks. Watson willinitially receive royalties and sales milestones from product revenues. Thecollaboration will not pursue biosimilars of Amgen's proprietary products.
"Our efforts will include direct financial contribution aswell as in-kind development services—for example, work performed at EdenBioDesigns and through our Salt Lake City-based R&D and manufacturingfacility," notes Paul Bisaro, president and CEO of Watson.
In addition, Watson will contribute its expertise in thecommercialization and marketing of products in highly competitive specialty andgeneric markets, including to help effectively manage the lifecycle of thebiosimilar products, which are expected to begin with a more brandedfeel—because they will need to be marketed more heavily than traditionalgeneric drugs—and then move toward a more traditional generic model.
"Likely Amgen will be more involved in commercialization inthe early years of products reaching the market, when they are likely to be ofa more branded nature, and Watson will be more involved as they trend moretoward becoming of a traditional generic nature," according to Bisaro. "Jointlabeling with both companies' names involved makes it easier for products tomove from one company to the other and for contributions to shift toward oraway from one of the partners, offering flexibility in an uncertain market withan uncertain future."
"The pairing of Amgen's 30 years of experience in biologicstogether with Watson's substantial generics and specialty pharmaceuticalexperience and complementary commercial and distribution capabilities providesgreat potential for worldwide patient access to high quality oncologybiosimilar medicines," said Robert A. Bradway, president and chief operatingofficer at Amgen, in the news release about the deal. Bradway is set to becomeCEO of Amgen in late May. "Biosimilars provide an exciting long-term growth opportunityfor Amgen. We have a dedicated team to leverage existing capabilities andcapacity and drive the success of the collaboration."
Watson's decision to partner with Amgen was a prudent one,Bernstein Research analyst Ronny Gal wrote in an investor note.
"Watson picked as blue-chip a partner as they come, withdeep pockets, science and regulatory expertise. It probably got less of thepie, but odds are higher that the products will make it to the market and gainsome market traction … generic companies are used to operating on much shorterinvestment cycles and are generally more fiscally conservative. Watson is beingprudent—settling for the 'bird in the hand' early in the development of thebusiness," Gal wrote.
Zacks Investment Research, which gives Watson an"Outperform" recommendation and a Zacks #2 Rank (Buy rating) in the short run,pointed out in an investor note that the month leading up to the Amgen deal waseventful, with Watson—along with partner Antares Pharma Inc.—announcing theU.S. approval of topical oxybutynin gel 3 percent. That same month, Watsonannounced the launch of its generic version of Teva Pharmaceutical IndustriesLtd.'s LoSeasonique, for the prevention of pregnancy, as a part of a settlementagreement between the two companies.
In addressing the Amgen deal specifically, Zacks wrote inthe investor note, "We believe that this deal will help expand Watson Pharma'sbiosimilar and generic portfolio, which will help drive the company's long-termgrowth."
Bisaro says that the collaboration came about because bothparties were looking for markets in which they could develop and marketbiosimilars, and their different market perspectives meshed well.
"We'd done a fairly substantial analysis on those(biosimilar) products, including the competitive landscape, and had spent timeover approximately the past 15 or 16 months talking with potential partners whowere at least proposing to have such products in their portfolios," Bisaro saidin conference call to investors. "We came across Amgen just about the same timethey came across us … and I think what we found was that we can createflexibility and a mutual view on how we'll develop these products, with a clearsense of the advantages from both sides as to what we brought—and that pulledus together pretty quickly."