Guest Column | October 13, 2020

Private Equity: A New Pillar For Biosimilar Development?

By Joseph Pategou

Good Investment road sign and coins dropping into bucket through a funnel

The first biosimilar medicine, Omnitrope, was approved in Europe by the European Medicines Agency (EMA) in 2006.1,2 Since then, the landscape has changed. The global biosimilar market is expected to reach $35.7 billion by 2025, from $11.8 billion in 2020, at a CAGR of 24.7 percent. The overall market is segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa. In October 2019, a report by the International Generic and Biosimilar Medicines Association identified four leading regions in numbers of approved biosimilars: 54 in Europe, 23 in the U.S., 18 in Japan, and 17 in Canada.4 This growth is attributed to factors such as the patent expiry of biologic products, the launch of new biosimilars, the rising incidence of chronic disorders, and the emergence of new market participants. The emergence of this market represents an interesting opportunity for private equity firms in the global healthcare landscape.

Private equity is an alternative investment class consisting of capital that is not listed on a public exchange. There are a number of private equity investment strategies; however, the most common today include leveraged buyouts, growth capital, and venture capital. Private equity is composed of funds and investors that directly invest in private companies or that engage in buyouts of public companies, resulting in the delisting of public equity. Private equity enables the creation of long-term value by serving as an agent of transformation for companies seeking future growth and positive impact. Private equity has been particularly valuable in driving crucial innovation in healthcare, especially in emerging markets. There are plenty of private equity investment strategies. Three of the most common are: leveraged buyouts, in which a company is acquired using a significant amount of borrowed money to meet the cost of acquisition; growth capital, which refers to equity investments, most often minority investments, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets, or finance a major acquisition without a change of control of the business; and venture capital investments, which provide financing to startup companies and small businesses that are believed to have long-term growth potential.

Drug development requires significant time and financial investments to bring a candidate through to regulatory approval and market launch, which is why private equity firms can play a critical role. While basic discovery research is funded primarily by governments and philanthropic organizations, late-stage development is funded mainly by pharmaceutical companies or venture capitalists.6 The period between discovery and proof of concept is considered extremely risky and therefore has been difficult to fund. Development of a biosimilar, for example, may take seven-plus years, at a cost between $100 million and $250 million, not including regulatory fees.

In recent years, we have begun to see increasing private equity investment in an attractive biosimilars market. Here are the biggest deals from the last two years that suggest there is growing willingness outside of government funding to invest in biosimilar development — especially in emerging markets.  

  • C-Bridge Capital (CBC Group) is a private equity firm, focused on growth and late-stage investment opportunities across the healthcare industry. In 2019, CBC Group and Samsung Bioepis signed a licensing agreement covering multiple biosimilar candidates from Samsung Bioepis, including Lucentis (ranibizumab), Soliris (eculizumab), and Herceptin (trastuzumab). CBC Group established a new biopharmaceutical company, AffaMed Therapeutics, which collaborates with Samsung Bioepis across a number of areas, including clinical development, regulatory registration, and commercialization in China.8
  • The same year, PAG, one of Asia’s largest independent alternative investment management groups, paid $540m for a 58 percent stake in Hisun's biosimilar subsidiary, Hisun BioRay. For CEO Haibin Wang, “PAG’s investment will support and accelerate the development of their pipeline and clinical trial progress, further strengthen our competitive advantage, and expand our footprint in the latest generation of innovative biologics and biosimilars.”9
  • In the past few years, biopharmaceuticals company Biocon attracted two private equity firms to its biosimilar business unit. True North and Tata Capital Growth Fund invested, respectively, $74.6 million to acquire a 2.44 percent stake and $30 million to acquire a 0.85 percent stake. The last deal values Biocon Biologics at an equity valuation of $3.5 billion and an enterprise valuation of $4 billion.10, 11
  • In 2018, Stada increased its presence in the biosimilar sphere by becoming the majority shareholder in Bioceuticals, a venture capital-funded organization created by Stada to carry out its biosimilar programs. Claudio Albrecht, the CEO of Stada, says the company “plans to invest more than $115 million which allows Stada to enter into a collaboration agreement with Xbrane Biopharma for the development of a ranibizumab biosimilar.”  Similarly, In November 2019, a new partnership was created between Stada and Alvotech for the commercialization of seven biosimilars in all key European markets and selected markets outside Europe. The initial pipeline contains biosimilar candidates aimed at treating autoimmunity, oncology and inflammatory conditions as well as ophthalmology for patients around the world. The originator products of the seven biosimilars currently generate $50 billion in sales globally.

Private equity activities are growing at a steady pace, and biosimilars represent an interesting investment opportunity in the face of a growing demand for high-quality and affordable drugs for a wide range of populations. With a total of $1.45 trillion in cash to invest at the end of 2019,12 the private equity industry has the power to bring this industry to another level.



About The Author

JosephJoseph Pategou is a consultant specializing in the pharmaceutical industry who has published more than 20 papers/articles in reputable journals, including Biosimilar Development, The Indian Economist,, and others. You can connect with and follow him on LinkedIn or Twitter.