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How This Historic FDA Approval Benefits Viatris

By Kody Kester – Aug 4, 2021 at 8:21AM

Key Points

  • Viatris's and Biocon's Semglee is the first biosimilar "interchangeable" insulin drug to receive approval from the FDA.
  • Cost-related medication non-compliance, mounting political pressure, and the safety profile of Semglee were the major factors.
  • The approval should help Viatris to snag a couple hundred million dollars of annual revenue away from Sanofi's Lantus.

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Here's what the FDA's approval of Semglee, from Viatris and Biocon, means for the former.

U.S. biopharmaceutical company Viatris (VTRS -1.03%) and its partner, Indian biopharma Biocon, announced on July 28 that the U.S. Food and Drug Administration (FDA) had approved their biosimilar insulin drug, Semglee, as an "interchangeable biosimilar" -- a direct alternative to Sanofi's (SNY 1.03%) blockbuster insulin drug, Lantus.

Semglee is the first interchangeable biosimilar insulin product approved by the FDA. It's expected to launch some time before the end of this year, according to Viatris. While that company hasn't provided exact details on the pricing of Semglee compared with that of Lantus, GoodRx notes that biosimilars launched in the U.S. have typically been anywhere from "10% to 37% cheaper than biologics."

Aside from the science establishing Semglee as an effective biosimilar, what prompted the FDA to approve this drug? And what's the potential revenue upside for Viatris?

A patient discusses treatment options with their doctor.

Image source: Getty Images.

Mounting bipartisan outrage toward pharma

In a politically charged climate such as that of the U.S., it's rare to find bipartisan support on much of anything.

One of the few things that Americans of varying political viewpoints seem to agree on is their concern about rising prescription drug costs.Recent polling from the Kaiser Family Foundation (KFF) supports this point, with nearly 8 out of 10 American adults surveyed saying "the cost of prescription drugs is unreasonable."

The World Health Organization estimates that medication non-compliance accounts for up to 25% of annual hospitalizations in the U.S., so perhaps the most concerning takeaway from KFF's public opinion research regarding prescription drug costs is the fact that about 3 out of 10 American adults reported not taking their medications in the past year due to cost.

It seems fair to suggest that bipartisan political rhetoric -- and the massive strain on the healthcare system resulting, in part, from cost-related medication non-compliance -- has put pressure on the FDA to approve biosimilars that have been proven as safe as biologics. It's a meaningful way to reduce pharmaceutical costs to the average American.

Viatris will steal meaningful sales from Sanofi

Before we delve into the revenue that Viatris' Semglee could reasonably take away from Sanofi's Lantus, it's important to note that the FDA's iconic approval of Semglee is a vote of confidence in the safety profile of the drug.

Considering that the drug will, in all likelihood, be at least somewhat cheaper than Lantus and has been proven just as safe, my prediction is that many doctors and patients will end up making the decision to switch from Lantus to Semglee.

Taking into consideration that Lantus generated just more than $1 billion in U.S. revenue in 2020, there is a potentially huge market for Semglee in the U.S.

Assuming that approximately 25% of U.S. patients currently being prescribed Lantus switch to Semglee at a 20% cheaper cost (roughly the midpoint of GoodRx's data for biosimilar pricing versus biologics), Viatris' drug would generate $200 million in annualized revenue by early next year.

Better yet for Viatris, the company is eligible for exclusivity for 12 months from the date it launches the drug commercially, which will help to establish it in the market before competition emerges and pricing comes under some pressure.

Finally, it's worth noting that the FDA's interchangeable biosimilar approval for Semglee will benefit Viatris in the U.S., as the company has "exclusive commercialization rights in the U.S., Canada, Australia, New Zealand, the European Union and European Free Trade Association countries," whereas Biocon Biologics possesses "exclusive commercialization rights for Japan and certain emerging markets," according to Viatris. The two companies share co-exclusive commercialization rights in all other parts of the world not outlined by the collaboration agreement above.

A boost for Viatris and a signal of what's ahead

Although $200 million in additional annualized revenue represents just over 1% of analysts' total 2022 revenue forecast for Viatris ($17.4 billion), I believe it is reasonable to expect that the FDA's announcement will lay the groundwork for similar approvals in the future aimed at controlling pharmaceutical costs while still ensuring medication safety.

Viatris also has a number of biosimilar products in the pipeline, including one for AbbVie's (ABBV 0.07%) aesthetics and neuroscience blockbuster drug Botox that's it's currently developing with Revance Therapeutics (RVNC 1.00%), and another partnership with Biocon on a biosimilar for Sanofi's insulin drug Toujeo (this and Semglee are just two of the 11 biosimilars that Biocon and Viatris are co-developing for global markets). This cheaply valued company has a lot of potential success ahead.

Kody Kester owns shares of Viatris Inc and AbbVie. The Motley Fool recommends Viatris Inc. The Motley Fool has a disclosure policy.

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