North America Equity Research
November 13, 2015
Biosimilars
Assessing Key Opportunities/Risks for This Highly Controversial Space
Pharmaceuticals
Chris Schott, CFA AC
Wendy Lin
Aditi Singhania, PhD
Dana Flanders, CFA
(1-212) 622-5676
christopher.t.schott@jpmorgan.com
J.P. Morgan Securities LLC
(1-212) 622-5350
wendy.l.lin@jpmorgan.com
J.P. Morgan Securities LLC
(1-212) 622-1267
aditi.singhania@jpmorgan.com
J.P. Morgan Securities LLC
(1-212) 622-1256
dana.c.flanders@jpmorgan.com
J.P. Morgan Securities LLC
See the end pages of this presentation for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Our Views on Key Biosimilar Controversies
„ We see biosimilars as a significant market over time with even modest penetration
translating to a significant commercial opportunity
„ Market Formation: Likely gradual as patient/payers/physicians adapt to new
alternatives
„ Starting with GCSFs and TNFs in 2015-2018
„ Uptake likely varies significantly by category
„ Regulatory: Expecting a number of approvals, particularly heading into 2016/2017
„ We see label extrapolation as likely for most agents
„ However, we see IP and commercial hurdles as potentially more significant/less
appreciated
„ Stocks Most Impacted In Our Coverage
„ Emerging manufacturers: CHRS, MNTA
„ Innovators facing competition: ABBV, MRK
2
Key Biosimilar Issues
IP Uncertainty Remains and Could Delay/Limit Biosimilar Competitors
ƒ Originators continue to build out IP around assets, which could impact launch timelines, development approaches
ƒ Uncertainty remains around the BPCIA patent resolution process and ensuing litigation
Regulatory Pathway Becoming Clearer, In Our View
ƒ Broadly speaking, we expect label extrapolation, but see physicians as data-driven
We Expect Market Dynamics to Vary by Therapeutic Category
ƒ We see a $20bn+ market in 2025, even assuming modest biosimilar penetration
ƒ While we expect a 30-40% pricing discount to brand, we could see increased volumes in some regions
ƒ We anticipate varied pricing/uptake by market and region, and based on therapeutic category
ƒ TNFs: We see uptake largely limited to new patient starts
ƒ GCSFs: We expect broader uptake given episodic treatment
Payers Clearly Focused on Biosimilars, but Ability to Switch Patients Remains Unclear
ƒ Increased commentary from payers around biosimilar opportunity. Likely see 1-2 biosimilars per product added to
formulary shortly after approvals
ƒ However, we see clear differences between asymptomatic diseases in primary care markets (where payers have
shown a significant ability to move share) and symptomatic diseases in specialty markets
ƒ We see initial focus on capturing new patients and on categories with rapid patient turnover
Who Are the Winner and Losers? We See Oppty for Large Biopharmas and Niche Players
ƒ Biosimilar development and commercialization requires significant commercial and complex analytical and
development capabilities
ƒ We see Novartis Sandoz, Pfizer, Amgen, and Merck/Samsung Bioepis with the broadest portfolios
ƒ Coherus represents a pure-play opportunity with 3 late-stage assets and an experienced management team
ƒ Momenta represents another more focused company with a broad earlier-stage portfolio
3
We Have Seen a Significant Increase in Focus on Biosimilars
„ We see an evolving biosimilars market with a number of products potentially
coming to market over the next 2-3+ years
„
Sandoz’s Zarxio (biosimilar Neupogen) recently launched in the US (Sept 2015)
„
A number of biosimilars have been filed with the FDA (biosimilars of Remicade, Epogen,
Neupogen, Neulasta, etc.) and we expect a number of phase III readouts over the next year
„ Pfizer/Hospira acquisition also increased investor focus on the market opportunity
We See a Number of Major Biologic Products Going
Off-patent Through 2020…
… Which Creates a Large Emerging
Biosimilar Opportunity
$60 B
2020: US
Lucentis
2019: US/EU Avastin,
US Herceptin
2018: EU Humira, US Remicade,
EU Neulasta
2016: US Humira, US Rituxan
$53bn $55bn
2020 Patent Expiries
$50 B
$45bn
2019 Patent Expiries
$40 B
$33bn $33bn
2018 Patent Expiries
$30 B
$23bn
2017 Patent Expiries
$20 B
2016 Patent Expiries
2015 and prior: EU Enbrel, EU Rituxan,
EU Herceptin, EU Remicade, US Neulasta,
US/EU Epogen, US/EU Neupogen
$10 B
Patent Expiries
through 2015
$B
2015
Includes drugs for which there are biosimilars being studied in the clinic.
2016
2017
2018
2019
2020
Includes US and ex-US opportunities. In terms of 2014 US and ex-US sales.
Source: Company reports, J.P. Morgan estimates.
4
We See a $20bn+ Biosimilars Market by 2025,
Even with Conservative Assumptions
„ Even assuming modest biosimilar penetration, we see a $20bn+ biosimilars
market by 2025
$100bn+ of Biologics Losing Patent
Protection
30% biosimilar penetration in US
40-50% penetration ex-US
30-40% Pricing
Discount to Brand
$20bn+
Biosimilars
Market
„ However, significant R&D and commercial investments might only support
biosimilar development for blockbuster drugs
Source: J.P. Morgan estimates.
5
Biosimilar Opportunities and Risks in Pharma
„ We see larger biopharma organizations and select niche players as the leaders
in the space
„ Biosimilar development and commercialization requires significant commercial,
complex analytical, and development capabilities
„ We see Novartis, Pfizer, Amgen, and Merck/Samsung/Biogen as the key large
players in the space
„ Coherus represents a pure-play with three late-stage assets
„ Momenta also developing a broad portfolio of assets. Celltrion and Pfenex
represent other pure plays in the space.
„ At the same time, we see several players exposed to biosimilar risk
„ AbbVie’s Humira (60% of 2015 sales)
„ Pfizer’s EU Enbrel (8% of sales)
„ Merck’s EU Remicade (6% of sales)
6
Biosimilar Opportunities and Risks in Pharma
Benefits Most from
Participating in
Biosimilar Opportunity
Coherus
3 biosimilar candidates
beyond phase I development.
Core Franchise
Most Exposed to
Biosimilar Risk
J&J (Remicade)
~9% of 2014 sales exposed
to biosimilar risk.
Novartis (Lucentis)
~4% of 2014 sales exposed
to biosimilar risk.
6 biosimilar candidates
beyond phase I development.
Celltrion
3 biosimilar candidates
beyond phase I development.
Samsung Bioepis
4 biosimilar candidates
beyond phase I development.
Amgen (Neupogen,
Neulasta, Epogen)
~39% of 2014 sales exposed
to biosimilar risk.
3 biosimilar candidates
beyond phase I development.
Merck (Remicade)
~6% of 2014 sales exposed
to biosimilar risk.
4 biosimilar candidates
beyond phase I development.
Pfizer (Enbrel)
~8% of 2014 sales exposed
to biosimilar risk.
Apotex
2 biosimilar candidates
beyond phase I development.
6 biosimilar candidates
beyond phase I development.
Boehringer Ingelheim
3 biosimilar candidates
beyond phase I development.
7
Roche (Rituxan, Avastin,
Herceptin)
~45% of 2014 sales exposed
to biosimilar risk.
AbbVie (Humira)
~63% of 2014 sales exposed
to biosimilar risk.
No
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Bo sung
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Co alta r Ing s
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Ap erus
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Current Biosimilars in Development
Neupogen (filgrastim)
Neulasta (pegfilgrastim)
Epogen (epoetin alfa)
Humira (adalimumab)
Enbrel (etanercept)
Remicade (infliximab)
Rituxan (rituximab)
Herceptin (trastuzumab)
Avastin (bevacizumab)
Lucentis (ranibizumab)
*
* *
*
US status is displayed when different from Europe. Enbrel's status in EU is displayed.
Products may be listed twice due to collaborations.
* Approved and marketed in Europe only.
Launched
Approved
Filing/Filed
Source: Company reports, www.clinicaltrials.gov, J.P. Morgan estimates.
Phase III Results
Phase III
Phase I
8
There Are a Number of Near-Term Biosimilar Updates
„ Rollout of biosimilar infliximab (Remicade) in major European markets
„ Rollout of Sandoz’s Zarxio (biosimilar Neupogen), which recently became the first
approved/launched biosimilar in the US
„ Awaiting FDA regulatory action on biosimilar versions of Remicade, Epogen,
Neupogen, and Neulasta
„ Expecting a number of phase III readouts/filings over next 6-18 months
„ Watching various ongoing patent litigation (AMGN/Sandoz, AMGN/Apotex,
ABBV/AMGN, JNJ/HSP-Celltrion, ABBV/CHRS, etc.)
Source: J.P. Morgan estimates.
9
Biosimilar Controversies: Overall Regulatory Path
Becoming Clearer
10
Regulatory Path Becoming Clearer
„ Biosimilar approval likely requires a PK/PD study, and in most cases, a clinical
phase III head-to-head non-inferiority study
„ We see the majority of development risk mitigated with a successful phase I
PK/PD study
„ Several EU approvals over the past few years and the first US approval in 2015
„ We see Neupogen/Neulasta, Epogen, and the TNFs as the primary initial
biosimilar targets
„ Broadly speaking, we expect regulators to allow label extrapolation where the
mechanism of action is similar across indications
„ Closing watching TNFs in the US on this front
„ We do not expect interchangeability in the near term
11
We Expect Label Extrapolation in Most Cases
„ Broadly speaking, we expect label extrapolation in most cases
„ FDA and EMA allow label extrapolation with reasoning that the method of
action is similar in the different disease states
„ Many players, including several large biopharmas, are only conducting large
phase III trials in one indication
12
However, Label Extrapolation Remains Unclear Where The Drug Is
Used in Vastly Different Markets
„ There are several situations where extrapolation remains unclear, particularly
when a drug is used in vastly different markets
„ Remicade: While the EMA approved biosimilar Remicade for all indications
based on data in rheumatoid arthritis, Health Canada was concerned that
ADCC might play a role in Crohn’s and ulcerative colitis (UC) and did not
approve the biosimilar for these indications
„ Recent Inflectra/Remsima efficacy data in Crohn’s and UC in Hungary
should help alleviate these concerns
„ Delayed AdCom panel in the US may reflect wait for data to support
extrapolated indications
„ Biosimilar Rituxan represents another controversial situation, where it remains
unclear whether data in RA will be sufficient for approval in oncology
13
Even With Extrapolation, Uptake May Be Challenging Without Data
„ While we expect label extrapolation, we see physicians as data-driven
„ Until recently, Inflectra (biosimilar Remicade) did not have clinical data in GI
indications (Crohn’s and UC), and was facing some resistance from European
gastroenterologists despite having the indications on the label
„ This should not impact uptake in tender markets or in markets with strong
payer influence
„ Several biosimilar players have mentioned potentially conducting smaller
clinical studies in additional indications for commercial reasons
„ Based on our conversations, physicians prefer to have data in their disease-
state, but would generally consider data in a the toughest-to-treat disease state
as sufficient and would not see a lack of data in a particular indication as
necessarily a deal-breaker
14
FDA to Announce Labeling Guidelines
„ FDA expects to announce labeling guidance later this year
„ What data will be included and what will not?
„ How different will a biosimilar’s label be to the originator molecule’s?
„ Label is important, because data detailed to doctors must be included in the
insert
„ Label could allow biosimilars to differentiate from one another
15
INN Naming Conventions Remain Unclear
„ It remains uncertain whether biosimilars will use the same INN (e.g. filgrastim)
as the innovator molecule
„ Biosimilar companies want to use the same generic INN, but originators say it’s
important to have different names for post-marketing safety analysis
„ Zarxio is tentatively named filgrastim-sndz (in-line with WHO recommendation)
pending a comprehensive FDA draft guidance
„ FDA recommending each biosimilar have a unique suffix, but debating whether
the suffix should be meaningful or random
„ Europe supports using the same INN as the originator molecule
„ However, we expect companies to develop “brand” names for the biosimilars
to better enable selling and marketing efforts
„ i.e. “Zarxio”
Source: Hospira Company Presentation at J.P. Morgan Healthcare Conference 2015.
16
We Do Not Expect Interchangeable Biosimilars in the Near Future
„ Interchangeability guidelines remain unclear in the US
„ FDA plans to issue interchangeability guidance in the “near future,” which will
likely involve switching studies
„ It will be interesting to see how interchangeability intersects with label
extrapolation: will biosimilars be interchangeable across all indications?
„ The EU does not allow biosimilars to be substituted at the pharmacy level
„ Although the EU uses the term ‘interchangeable’ to describe biosimilars,
substitution is not allowed without the agreement of the prescriber
„ We do not expect interchangeable biosimilars in the near future
„ While Sandoz had data from switching studies for Zarxio, the FDA did not ask
them to file for interchangeability
Source: Hospira Company Presentation at J.P. Morgan Healthcare Conference 2015.
17
Biosimilar Controversies: Legal/IP Hurdles
Represents An Underappreciated Risk To
Biosimilar Introductions
18
IP Represents a Key Uncertainty
„ Biosimilar manufacturers face a wide range of outstanding IP as they seek to
bring products to market
„ Unlike the small molecule Orange Book, which lists the products and the
patents that could potentially delay the approval of a generic drug, the Purple
Book currently lists only the products and not the applicable patents
„ Biosimilar companies must therefore rely on their own internal legal
assessments of the originator’s relevant patents
„ Such assessments may remain largely untested until the biosimilar company
files for 351(k) biosimilar regulatory approval, which then triggers a stepwise
patent resolution process created under the BPCIA
All Possible
Formulations
Source: J.P. Morgan estimates.
Formulations that
don’t infringe on patents
19
Originators Continue to File Additional IP
„ Originators continue to file patents, posing additional challenges to company’s
approach market formation
„ Likely will not have full clarity on IP until patents are issued
„ The ability to work around this IP will likely be a key factor, in our view, and we
will continue to watch for additional clarity around the IP and around different
companies’ abilities to navigate around these patents
„ For example, Humira IP estate includes ~150 issued patents and ~50 pending
applications, of which formulation and composition patents represent half
„ AbbVie has patented a number of formulation permutations, including the
current formulation as well as extensions, as well as the use of Humira in all of
its indications
„ Further line extensions, reformulations or combination work represent
potential lifecycle management tools for innovators
„ E.g., AbbVie has a new formulation (lower pain) that is approved in the EU and
pending in the US. AbbVie is also filing a device enhancement and is developing
a delivery enhancement.
Source: J.P. Morgan estimates.
20
AbbVie’s Humira Patent Estate Highlights
21
Source: AbbVie Investor Presentation 10/30/2015
Uncertainty Remains Around the BPCIA and Litigation Process
„ Following a 351(k) BLA application, the BPCIA lays out a ~250-day process through
which the originator and biosimilar player negotiate which patents will then be litigated
„ Of note, litigation is independent of the FDA process, and there is no 30-month
stay or treble damages
„ Along these lines, an originator would need to seek an injunction to stop a
biosimilar from launching
„ The FDA is not authorized to deny biosimilar approval based on a failure of the
biosimilar company to disclose the application to the originator
„ In Amgen vs. Sandoz, Court ruled in favor of Sandoz, suggesting biosimilar
companies have the option whether to participate in the BPCIA patent exchange
process
22
BPCIA Timeline
Within 20 days, the biosimilar company must disclose
the biosimilar BLA to the originator.
The companies then have 15 days to negotiate which
patents (if any) will be litigated.
The biosimilar applicant then has 60 days to respond
(including the option to raising its own list of potentially
relevant patents it wishes to defend against).
20 days
60 days
60 days
60 days
15 days
The originator has 60 days to provide the biosimilar
company with a list of potentially relevant patents.
FDA accepts biosimilar BLA.
Source: Company reports, FDA guidelines.
The originator then has 60 days to
respond to the biosimilar applicant’s
positions.
23
30 days
The originator must bring
any infringement suit within
30 days.
Learnings From Recent/Ongoing Litigation
„ Amgen v. Sandoz:
„ Court ruling suggests biosimilar companies have the option whether to
participate in the BPCIA patent exchange process
„ However, Court ruled that in this case, Sandoz must give 180 days of
commercial marketing notice after approval of the biosimilar, not before
„ Several experts have suggested that this ruling might be specific to this fact
pattern (i.e., that Sandoz did not engage in the patent exchange process)
and expect potential updates in future cases…
„ Other cases:
„ AMGN v. Apotex and JNJ v. HSP/Celltrion: In both cases, the biosimilar applicant
engaged in the patent exchange process
„ JNJ v. HSP/Celltrion: Celltrion began the patent exchange process, but
terminated early to force Janssen to litigate
„ AMGN v. Apotex: Also involves ‘138 manufacturing patent, which Coherus has
said it does not infringe
24
Patent Litigation Timelines
„ Traditional Patent Litigation Timeline ~4-5 years
„
A District Court ruling generally occurs within 3-4 years
„
An appeals process would take another year
District Court Ruling ~3-4 years
Appeals Process ~1 year
„ Inter Partes Review (IPR) Timeline: ~2.5 years
„
PTO makes decision whether to accept a petition within 6 months and a review process
would then take a year
„
An appeals process would take another year
Petition Accepted ~6m
IPR Review ~1 year
Appeals Process ~1 year
„ Without an at-risk launch, patent litigation and/or an IPR review could add 2.5-5
years to a potential launch date even if the IP is found invalid
„
e.g., Without an at-risk launch, it is unlikely Humira biosimilars would enter the market before
mid-2018
25
We Expect Commercial Market Dynamics to Vary
by Category/Region
26
We Do Not Expect the Biosimilar Market to Develop Overnight
„ Biosimilars represent a new paradigm in the market and the pace of rollout and
ultimate penetration of these products remain far from certain
„ We anticipate varied uptake and pricing by market and region based on the
individual characteristics of the originator product
„ Broadly speaking, we expect relatively gradual launches but see the success of
biosimilars as a matter of “when” not “if”
„ We see payers as highly incentivized to move patients to biosimilars
„ We believe physicians are willing to start new patients on approved biosimilars
„ Comfort with biosimilars will likely only grow over time
27
We See a $20bn+ Biosimilars Market by 2025,
Even with Conservative Assumptions
„ Even assuming modest biosimilar penetration, we see a $20bn+ biosimilars
market by 2025
$100bn+ of Biologics Losing Patent
Protection
30% biosimilar penetration
in the US
40-50% biosimilar
penetration ex-US
30-40% Pricing
Discount to Brand
$20bn+
Biosimilars
Market
28
We Expect a 20-40% Pricing Discount in the US
„ Biosimilar pricing remains controversial, but a number of industry sources
point to a roughly 20-40% pricing discount to brand in the US
„ Biosimilar pricing in the US will depend on negotiations with payers
„ Innovator rebate structures could factor into biosimilar discounts as well
„ Biosimilar development and operating expense is more costly than small
molecule generics, which should support healthy pricing
„ Biosimilar development requires more R&D investment due to clinical trial
requirements
„ Since biosimilars are unlikely to be interchangeable, they require sales
infrastructure
„ However, we see biosimilars generating brand-like gross margins due to
improvements in manufacturing processes
29
European Markets Generally Seeing 25-45% Discounts
„ European biosimilar pricing depends on market structure:
„ Markets with national tenders generally seeing a 30-40% discount
„ These markets include Poland, Norway, and Hungary
„ Select tenders seeing greater drops in price
„ Markets where hospitals and plans make buying decisions have seen a ~25%
discount
„ This category includes many of the larger Western EU markets
„ Free markets have seen roughly 20-30% discounts
„ We expect to see an immediate step-down in price for the originator drug for
markets that reference-price
30
Interestingly EU Biosimilars Have Driven Volume Gains As Well
„ With lower-priced biosimilar versions of filgrastim (Neupogen) available, we
have seen an increase in treatment consumption, particularly in developing
European markets
„ Along these lines, we would not be surprised to see increased volume for
other biosimilar markets
G-CSF and TNF Markets Likely to See Biosimilar Adoption
250%
200%
150%
100%
50%
0%
-50%
Source: Company reports.
31
We See 4 Factors that Drive Biosimilar Adoption
„ Patient criticality: Less acute conditions likely more open to biosimilar usage
„ Rapid feedback: Doctors are more likely to prescribe biosimilars if there is rapid
feedback as to the safety and efficacy of the drug
„ Payer influence: Products with more payer influence (vs. physician influence) will
likely see faster biosimilar uptake
„ Size of end market: Payers likely to focus attention on large, expensive therapeutic
categories
G-CSF and TNF Markets Likely to See Biosimilar Adoption
32
Source: Coherus S-1.
What Role Will Payers Play in the US?
Factors Increasing
Payer Influence
Factors Against Payer
Influence
‡ Biologic sales have grown rapidly
over the past decade (>$220bn in
2017), representing a burden to
payers and creating a strong
incentive for biosimilars
‡ There may be higher thresholds to
switch patients with difficult-totreat/ critical conditions
‡ Physicians may be unwilling to
switch stable patients
‡ Clinical data thus far suggest
biosimilars have similar profiles to
the originator molecules
33
Anti-TNFs: Biosimilar Adoption Likely Driven by New Patient Starts
„ We anticipate that biosimilars will get many of the new patient starts
“Obviously for new starts we'll be very aggressive to get them to the biosimilars.”
- Dr. Steven Miller, Express Scripts CMO at 2015 Analyst Day
„ However, we believe it would be very difficult (at least at first) to switch stable
patients to a biosimilar
„ Much of the TNF market consists of patients who have been stable on the
specific drug for multiple years
„ Based on conversations with physicians and payers, we believe it would be
very difficult to switch these patients off therapy in the first few years of
biosimilars
„ Although several biosimilar players are running studies where patients on the
originator drug switch over to a biosimilar, doctors may require longer-term
results
“There are other diseases in which it seems to be very particular to their drug and the FDA will probably frown
upon doing switching. So when you have Crohn's for instance, Crohn's may be very particular and once the
patient is stable on a particular product, you may very well want to keep them on that product.”
“We will look at each and every product and look at the opportunities of is it appropriate to switch him or not.”
- Dr. Steven Miller, Express Scripts CMO at 2015 Analyst Day
Source: Express Scripts 2015 Analyst Day.
34
Anti-TNFs: The European Experience
„ Hospira/Celltrion’s Inflectra/Remsima (biosimilar Remicade) launched in ~20%
of European markets last year and more broadly in February 2015
„ Expect reference pricing in France, Spain, Austria, Belgium
„ Generally seen roughly 30% discounts in most markets, with steeper discounts
in some specific markets (Norway, Finland)
„ In the early biosimilar markets, Merck has generally seen some erosion of
dynamic patients and very strong retention of existing patients, which
represents a majority of the market
35
Anti-TNFs: Potential Humira Commercial Defense
“Obviously, there’s a commercial strategy that underpins how we plan on reacting in a biosimilar world.”
- Richard Gonzalez, AbbVie CEO at Barclays Healthcare Conference 2015
„ AbbVie has referenced a commercial strategy around the Humira franchise in
a biosimilar world
„ Humira’s high volume is a competitive advantage, particularly in a category
when the vast majority of patients are stable, chronic users
„ Because of the high volume, AbbVie could offer a rebate that is advantageous
to payers, even when compared to biosimilars with higher discounts but lower
volume
„ As a result, AbbVie could potentially negotiate to stay in preferred status or on
formulary
„ In addition, we estimate that >40% of Humira usage is outside of RA and
psoriasis, which could limit biosimilar uptake
„ To our knowledge, biosimilar companies are only running phase III trials in
rheumatoid arthritis and psoriasis
„ Even if biosimilars are awarded a full label, we see doctors as data-driven, and
see clinical data as key to uptake in additional indications
Source: Company presentations.
36
Anti-TNFs: Humira New Formulation Provides Additional Protection
„ AbbVie has filed a new formulation with the FDA and EMA, and continues to
work on a new device
„ Filed patents suggest novel formulations could involve room temperature-
stable formulations, less injection-site reactions, higher doses, and needleless
devices
„ We are watching for updates on the new formulation, which could be approved
in 2H 2015
„ It remains unclear to what extent the new formulation improves the patient
experience, how much of the population AbbVie will be able to convert, and
how well the formulation will help protect the Humira franchise
37
G-CSFs: We Expect Significant Biosimilar Penetration
„ Unlike with TNFs, we expect broad uptake of G-CSF biosimilars
„ G-CSFs are used episodically, and physicians/payers appear more
comfortable switching patients
“Now, there are certain biosimilars in which I don't really care if it's going to be AB-rated because it's episodes
of care. So you take a white cell stimulator- when you have low white cells, it's a unique episode; I can put you
on any biosimilar for that episode of care.”
- Dr. Steven Miller, Express Scripts CMO at 2015 Analyst Day
„ Other factors also suggest broad uptake for the class:
„ G-CSFs are distributed through the hospital channel, where cost-focused
GPOs have a significant share of voice
„ A substantial portion of the market is reimbursed through Medicare Part B,
where physicians have additional cost incentives to switch to biosimilars
Source: Express Scripts 2015 Analyst Day.
38
G-CSFs: The European Experience
„ In Europe, filgrastim (Neupogen) biosimilars have captured >50% share of the
short-acting G-CSF market and >75% of the filgrastim market within 5 years of
launch
„ Sandoz’s Zarzio has >30% volume share in Europe, more than Neupogen
„ In addition, we have seen increased volume of G-CSF usage with the lower
price
Source: Hospira Company Presentation at J.P. Morgan Healthcare Conference 2015.
39
G-CSFs: Granix US Launch Trends
„ Teva’s Granix (tbo-filgrastim) was approved in 2012 as a novel biologic (under
the 351(a) pathway)
„ Granix generated $125mm in LTM sales, according to IMS
„ Priced at a roughly 25% discount to Neupogen, and has ~25% market share
„ Not eligible for indication extrapolation and is only approved for reducing
neutropenia in non-myeloid malignancy patients receiving myelosuppressive
chemotherapy
This image cannot currently be displayed.
Source: Hospira Company Presentation at J.P. Morgan Healthcare Conference 2015.
40
G-CSFs: Part B Reimbursement Should Support Uptake
„ CMS recently finalized Part B reimbursement guidelines around biosimilars
„ “ASP+6” reimbursement policy supports initial uptake
„ Until an ASP is available, Medicare will reimburse the biosimilar at 106% of
biosimilar’s WAC
„ After an ASP is available, Medicare will reimburse the biosimilar at 100% of
biosimilar’s ASP + 6% of reference product’s ASP
„ Single J-code for all biosimilars (but distinct from the originator)
„ Single J-code (billing code) for biosimilars means all biosimilars will be
reimbursed at the same rate
„ Experts see this limiting competition and slowing price dynamics
„ It remains to be seen whether physicians are willing to generate less margin for
a higher quality product
Source: Express Scripts 2015 Analyst Day.
41
We See Large Biopharmas and Niche Players
Likely Most Successful
42
There Are a Range of Biosimilar Players
Source: Company reports and J.P. Morgan estimates.
43
Large Biopharmas, Niche Players Most Likely to Be Successful,
In Our View
„ Biosimilar development and commercialization requires significant commercial
and complex analytical and development capabilities
„ We see larger biopharma organizations and select niche players as the leaders
in the space
„ We see Novartis, Pfizer, Amgen, Merck/Samsung Bioepis with the broadest
portfolios
„ Coherus represents a pure-play with several late-stage assets
„ Momenta represents another more focused company with a broad portfolio
„ In addition, we see management capability and dedication around IP as a key
differentiating factor
„ Biosimilar companies must formulate around unclear existing and new IP
„ We would not be surprised to see some biosimilars delayed due to IP issues
around formulation and manufacturing
Source: J.P. Morgan estimates.
44
We See Novartis and Pfizer with the Broadest Portfolios
„ Sandoz leads in a number of biosimilar categories
„ Currently markets two biosimilars (Zarzio/Neupogen and Binocrit/Epogen) in
Europe
„ Currently markets only approved biosimilar in the US (Zarxio/Neupogen)
„ 4 additional biosimilar candidates in phase III development, including biosimilar
versions of Neulasta, Humira, Enbrel, and Rituxan
„ With Hospira, Pfizer has a range of biosimilars in development
„ Marketing Inflectra/Remicade, Nivestim/Neupogen, Retacrit/Epogen in Europe
„ Awaiting panel and FDA decision on Inflectra/Remicade and Retacrit/Epogen in
the US
„ 4 additional biosimilar candidates in phase III development, including biosimilar
versions of Herceptin, Rituxan, Avastin, Humira
„ Several assets are partnered with Celltrion
Source: J.P. Morgan estimates.
45
In Addition, We See a Number of Other Large Biopharma Players
„ Amgen has three biosimilar candidates in phase III development, including
versions of Humira, Herceptin, and Avastin
„ Several oncology molecules are partnered (including versions of Herceptin,
Avastin, Rituxan, and Erbitux)
„ Merck partnered with Samsung Bioepis (Samsung/Biogen JV) on four late-stage
assets
„ SB4 (biosimilar Enbrel) and SB2 (biosimilar Remicade) are filed in the EU
„ SB5 (biosimilar Humira) positive phase III data recently disclosed
„ SB3 (biosimilar Herceptin) in phase III development
„ Boehringer Ingelheim has three assets in phase III
„ Includes versions of Rituxan, Humira, and Avastin
Source: J.P. Morgan estimates.
46
Pfizer: Broad Portfolio of Assets
Key Themes
„
Biosimilars in Development
We see Pfizer as a biosimilars leader with a broad
range of biosimilar candidates in development
„
Internal portfolio includes several phase III assets
(trastuzumab, rituximiab, bevacizumab, etc.)
„
Hospira acquisition brought several late-stage
assets, including Inflectra, Nivestim, and Retacrit,
which are currently marketed in Europe
„
Several of these products are partnered with
Celltrion, including Inflectra
„
Pfizer also exposed to EU Enbrel LOE (~8% of
revenues) in 2015
Name
PF-05280014
PF-05280586
PF-06438179
PF-06439535
PF-06410293
Inflectra/CTP13*
Nivestim
Retacrit
PF582*
Originator Molecule
trastuzumab (Herceptin)
rituximab (Rituxan)
infliximab (Remicade)
bevacizumab (Avastin)
adalimumab (Humira)
infliximab (Remicade)
filgrastim (Neupogen)
epoetin alfa (Epogen)
pegfilgrastim (Neulasta)
ranibizumab (Lucentis)
Development Stage
Phase III (US/EU)
Phase III (US/EU)
Phase III (US/EU)
Phase III (US/EU)
Phase III (US/EU)
Marketed (EU), Filed (US)
Marketed (EU), Phase I complete (US)
Marketed (Europe), Filed (US)
Phase I complete (US/EU)
Phase I (US/EU)
*Partnered asset.
Strengths & Challenges
Strengths
Challenges
‡ Pfizer has one of the broadest biosimilar portfolios, with
versions of 8 drugs beyond phase I development, and 3
biosimilars marketed in Europe
‡ Larger Pfizer organization exposed to biosimilar risk
(particularly EU Enbrel) and may have conflicted priorities
‡ Global Established Pharma business unit focused on
biosimilars and generics business
Source: J.P. Morgan estimates.
47
Merck: Several Late-Stage Assets Partnered with Samsung Bioepis
Key Themes
Biosimilars in Development
This image cannot currently be displayed.
„
„
Merck has 4 biosimilar candidates in phase III
development, partnered with Samsung Bioepis
„
Partnership is in territories that do not compete with
Merck’s innovative biologics
„
Merck’s responsibilities are purely commercial;
Samsung and Biogen collaboration driving R&D,
legal, and manufacturing
„
Merck will book sales and split profits with Samsung
Bioepis
Watching EU Remicade (~6% of sales) erosion
„
Expecting reference pricing in several markets
„
Thus far, generally seeing 30-45% biosimilar
discounts and some erosion of dynamic patients
Strengths & Challenges
Strengths
Challenges
‡ Several late-stage assets in development
‡ Merck organization exposed to biosimilar risk (particularly
EU Remicade) and may have conflicted priorities
‡ Purely a commercial investment, so Merck’s R&D focus
remains centered on innovative medicines
‡ Merck only owns rights in territories that do not compete
with Merck’s innovative biologics
‡ Collaboration with Samsung Bioepis in 2013 required a
relatively modest investment
Source: J.P. Morgan estimates.
‡ All products are partnered with 50% of profits due to
Samsung Bioepis
48
Coherus: Pure-Play with 3 Late-Stage Assets
Key Themes
Biosimilars in Development
This image cannot currently be displayed.
„
„
Three biosimilar candidates in late-stage development
„
CHS-1701 (biosimilar pegfilgrastim) on track for
1Q16 US filing
„
CHS-1420 (biosimilar adalimumab) currently being
studied in BLA-enabling psoriasis study
„
CHS-0214 (biosimilar etanercept) is partnered with
Baxalta; we have seen successful phase III data in
psoriasis and await RA data in 1Q16
Management team brings considerable experience in
biologic development and manufacturing
Strengths & Challenges
Strengths
Challenges
‡ Fully levered to and focused on biosimilars
‡ May be at a commercial/legal disadvantage against larger
players
‡ Experienced management team with a focus on protein
manufacturing and outstanding patents
Source: J.P. Morgan estimates.
49
Coherus: CHS-1701 BLA-Enabling Data
„ BLA-enabling CHS-1701 PK/PD results generally positive, meeting PD
endpoints and demonstrating PK profile in-line with Neulasta literature
„ There was some abnormalities in one of the Neulasta arms, causing the study to
miss the AUC PK endpoints
„ The PK profile for CHS-1701 was consistent with the other Neulasta group and
with Neulasta literature
„ Importantly, FDA did not recommend a repeat study and Coherus believes it
remains on-track for a 1Q16 filing
PK Profile In-Line with Published Neulasta Profile
PD Profile Achieves Biosimilarity
50
Source: Company reports
Momenta: Emerging Player with Deep Early-Stage Pipeline
Key Themes
„
Biosimilars in Development
Partnered with Baxalta on M923 (biosimilar
adalimumab)
„
Recently entered phase III BLA-enabling study
„
Baxalta sees potential 2017 filing / 2018 launch
Name
M923*
M834
M511
Development Stage
Phase III (US/EU)
Pre-clinical
Pre-clinical
*Partnered asset.
„
A number of additional molecules in earlier
development, including biosimilar candidates of
Orencia and Avastin
„
Company’s strategy is to use technological capabilities
to analytically characterize and develop biosimilars
with “fingerprint-like” similarity to the originators
„
Originator Molecule
adalimumab (Humira)
abatacept (Orencia)
bevacizumab (Avastin)
Longer term, focused on developing interchangeable
biosimilars
Strengths & Challenges
Strengths
Challenges
‡ Largely levered to and focused on biosimilars (portfolio also
includes generic Copaxone and several novel drugs in
development)
‡ May be at a commercial/legal disadvantage against larger
players
‡ Strong technical capabilities and a focus on analytical
characterization
Source: J.P. Morgan estimates.
51
Specialty Pharma Biosimilar Players
Mylan: Several Assets Partnered with Biocon
Strengths
‡ Launched biosimilar trastuzumab in India
Weaknesses
‡Limited experience with large molecule
development/manufacturing
‡ Portfolio includes 6 assets, of which management expects
3 to be in phase III development in 2015
‡ Experience with patent litigation
Teva: Seeking Near-term Biosimilar Strategy
Strengths
Weaknesses
‡ Products are largely “third-wave” biosimilars
‡ Experience developing complicated large-molecule
therapeutics
‡ May have limited manufacturing capacity
‡ Management expresses interest in and focus on biosimilars
‡ Patent litigation experience
Source: J.P. Morgan estimates.
52
Potential for Additional Business Development Activity
„ We have recently seen several significant transactions and partnerships
„ Pfizer’s acquisition of Hospira was driven in part by biosimilars
„ Baxalta’s partnerships with Coherus, Momenta
„ Pfenex’s partnership on biosimilar ranibizumab (Lucentis)
„ We would not be surprised to see additional deals:
„ [Regarding biosimilars] “Any option in business development is open, it could be
an acquisition, it could be a joint venture, it could be a co-development, we’re
very open, we’re looking for the right asset, for the right partner, but where we
can be a real player in the market in five to six years.”
- Siggi Olafsson, President and CEO Global
Generic Medicines, Teva, 4Q14 Earnings Call
Source: J.P. Morgan estimates.
53
BIOSIMILARS 101
54
What Are Biosimilars?
„ Biosimilars are follow-on molecules that are “highly similar” to previously
approved biologic products
„ Essentially they are “generic” versions of complex biologics, instead of small
molecules
„ Unlike small molecules, biologics are structurally very complex
Source: Coherus Investor Presentation, J.P. Morgan Conference 2015.
„ As a result, we see the biosimilar market behaving very differently from the
small molecule generic market
„ Market will likely have higher barriers to entry, requiring sophisticated
technology and larger, longer investments
„ Which will likely result in fewer competitors and relatively stable pricing
„ Biosimilars are unlikely to be interchangeable at first
55
Biosimilars vs. Small Molecule Generics
Traditional Generics
Biosimilars
Branded Drugs
Length of Development
1-4 years
~8 years
10+ years
Cost of Development
$1-5mm
~$100-200mm
>$800mm
Interchangeable at the pharmacy
Unlikely to be interchangeable,
at least at first
Not interchangeable
Label extrapolation
Yes, no clinical study required.
Unclear, but likely yes
No
Sales and Marketing
Low cost, because of
interchangeability
Requires promotion if not
interchangeable, but payers
will likely have a share of voice
High
Many, largely commoditized
Several
Few, well-differentiated
~10-50%
~60-80%
100%
Interchangeability
Competitors
Pricing (% of brand)
56
The Biosimilar Opportunity Is Arriving
„ We see biosimilars as an important emerging market
„ We expect to see a wave of biosimilars introduced to the US and European
markets over the next-10 years
„ Developed markets have recently created regulatory pathways through which
biosimilars can be approved
„ We see a number of biologic patent expiries through 2020
„ Biosimilars likely represent a substantial revenue opportunity
„ Biologic sales have grown rapidly over the past decade, and IMS expects
biologics to account for over $220bn in annual sales by 2017
„ Payers appear highly incentivized to support the uptake of biosimilars
57
The Biosimilar Opportunity Is Arriving
Biosimilar Opportunity
The US created 351(k) biosimilar pathway in
2010 with the Biologics Price Competition and
Innovation Act (BPCIA) which was passed in
the Affordable Care Act.
We calculate that major branded biologic
products with a total of ~$100bn of global sales
have either lost patent exclusivity or will do so
through 2020
EMA established a similar framework in 2005,
and many markets around the world have
adopted similar guidelines
58
Biosimilar Development: A Good Value Proposition, but with
Unique Challenges
„ While biosimilar development requires more time and investment than small-
molecule generics, we see biosimilars as a good value proposition
„ Much of the development risk is mitigated before costly phase III trials with only
20% of the investment
„ At the same time, biosimilars present a different set of challenges, including the
ability to analytically recreate a biosimilar without infringing on the originator’s IP
„ There are 5 key steps to biosimilar drug development:
Most of the risk is mitigated
with ~20% of the investment.
Source: J.P. Morgan, Coherus Investor Presentation at J.P. Morgan Healthcare Conference 2015.
59
Molecule Selection/Pre-Clinical Development
„ Protein sequencing represents the first step in biosimilar development
„ Biosimilars must precisely match the amino acid sequence of the originator’s
molecule
„ Publicly available data can be unreliable so companies often have to sequence
the molecule in-house before designing the cDNA used to synthesize the
biosimilar
„ Matching the glycosylation profile is critical to achieving biosimilarity
„ Parts of the glycosylation pattern are critical for biological function and
the pattern affects the PK/PD and safety/efficacy profile
„ Unlike the amino acid sequence, glyclosylation varies and is
dependent on the cell line and growth conditions
„ Intellectual property poses challenges
„ Many originators have a significant body of formulation
and manufacturing process IP, and biosimilars must
work around these patents
Source: J.P. Morgan, Coherus Investor Presentation at J.P. Morgan Healthcare Conference 2015.
60
Pivotal Phase I PK/PD Study
„ Following successful pre-clinical studies, biosimilar candidates begin pivotal phase I
PK/PD trials
„ Regulatory agencies have established requirement for Cmax, AUC0Æt, AUC0ƒ:
„ For each parameter, the FDA requires that the ratio of the biosimilar to the
originator molecule must be between the 80% and 125% confidence interval
CHS-0214 Phase I PK/PD Data Demonstrated 98% Correlation
Source: J.P. Morgan, Company presentations and press releases.
61
Phase III Confirmatory Safety and Efficacy Study
„ Following successful PK/PD studies, biosimilar candidates are tested against the
originator molecule in a confirmatory safety and efficacy study
„ Endpoints for phase III studies vary and depend on the specific therapeutic
indications studied and previous clinical trials of the originator molecule
„ These studies are bioequivalent trials, and depending on the size of the initial trials
with the originator, can be quite large
„ However, only a single phase III trial is required, so the overall development costs
are considerably less than that of an innovative molecule
Examples of Phase III Endpoints
Originator Drug
Examples of endpoints
pegfilgrastim (G-CSF)
Duration, incidence of neutropenia
etanercept (TNF)
ACR20 (RA), PASI-75 (plaque psoriasis)
epoetin alfa
Change in Hb levels
trastuzumab
pCR
bevacizumab
ORR
Source: J.P. Morgan, Company presentations and press releases, Clinicaltrials.gov.
62
APPENDIX: BIOSIMILAR PORTFOLIOS
63
We see Novartis and Pfizer with the Broadest Portfolios
Novartis (Sandoz) Biosimilar Portfolio
Omnitrope
Zarzio/Zarxio
EP2006
Binocrit
HX575
GP2015
somatropin*
filgrastim (Neupogen)
LA-EP2006
GP2017
GP2013
pegfilgrastim (Neulasta)
adalimumab (Humira)
rituximab (Rituxan)
epoetin alfa (Epogen)
epoetin alfa (Epogen)
etanercept (Enbrel)
PreClinical
Ph. I
US/EU
EU
US
EU
US
US('29)
EU('15)
US('15)/EU('18)
US('16)/EU('18)
US('16)/EU
Ph. III
Filing
Panel
Approval
Marketed
Est. 7/15 Primary Completion (Pso), enrollment complete
Est. 12/16 Primary Completion (RA), 12/17 (FL)
Estimated major patent expiration in paranthesis if not yet expired.
*Not approved as a biosimilar in the US.
Pfizer Biosimilar Portfolio
PF-05280014
PF-05280586
PF-06438179
PF-06439535
PF-06410293
Inflectra
CTP13
Nivestim
Retacrit
PF582
PreApproval Marketed
Clinical
Ph. I
Ph. III
Filing
Panel
trastuzumab (Herceptin) US('19)/EU
Est. 10/16 Primary Completion (mBC), 4/16 (Neoadj)
rituximab (Rituxan)
US('16)/EU
Est. 11/16 Primary Completion (FL), RA Ext Data 3/16
infliximab (Remicade)
US('18)/EU
Est. 6/16 Primary Completion
bevacizumab (Avastin)
US('19)/EU('22)
Est. 7/17 Primary Completion
adalimumab (Humira)
US('16)/EU('18)
Est. 3/17 Primary Completion (RA)
infliximab (Remicade)
EU
infliximab (Remicade)
US('18)
Panel Delayed
filgrastim (Neupogen)
EU
filgrastim (Neupogen)
US
epoetin alfa (Epogen)
EU
epoetin alfa (Epogen)
US
pegfilgrastim (Neulasta) US('15)/EU('18)
ranibizumab (Lucentis) US('20)/EU('22) Est. 12/15 Primary Completion, enrollment complete
Estimated major patent expiration in paranthesis if not yet expired.
Grey denotes duplicate products in earlier-stage development.
Source: Company reports and J.P. Morgan estimates.
64
There Are a Number of Other Large Biopharma Players
Amgen Biosimilar Portfolio
ABP 501
ABP 215
ABP 980
ABP 710
ABP 798
ABP 494
PreClinical
Ph. I
adalimumab (Humira)
US('16)/EU('18)
bevacizumab (Avastin)
US('19)/EU('22)
trastuzumab (Herceptin) US('19)/EU
infliximab (Remicade)
US('18)/EU
rituximab (Rituxan)
US('16)/EU
cetuximab (Erbitux)
US ('16)
Ph. III
Filing
Panel
Approval Marketed
Phase III data reported in both Pso and RA
Phase III data reported
Est. 6/16 Primary Completion
Estimated major patent expiration in paranthesis if not yet expired.
Samsung Bioepis/ Merck Biosimilar Portfolio
SB4
SB2
SB5
SB3
PreClinical
Ph. I
etanercept (Enbrel)
EU('15)
infliximab (Remicade)
EU
infliximab (Remicade)
US('18)
adalimumab (Humira)
US('16)/EU('18)
trastuzumab (Herceptin) US('19)/EU
Ph. III
Filing
Panel
Approval
Marketed
Est. 3/16 Primary Completion
Estimated major patent expiration in paranthesis if not yet expired.
Boehringer Ingelheim Biosimilar Portfolio
BI 695500
BI 695501
BI 695502
rituximab (Rituxan)
adalimumab (Humira)
bevacizumab (Avastin)
PreClinical
Ph. I
US('16)/EU
US('16)/EU('18)
US('19)/EU('22)
Ph. III
Filing
Panel
Approval Marketed
Est. 10/15 (RA), 12/15 (FL) Primary Completion
Est. 3/16 Primary Completion
Est. 8/17 Primary Completion
Estimated major patent expiration in paranthesis if not yet expired.
Source: Company reports and J.P. Morgan estimates.
65
Coherus Represents a Pure-Play with Late-Stage Assets
„ We see Coherus as a pure-play with 3 assets in BLA-enabling studies
Coherus Biosimilar Portfolio
CHS-1701
CHS-0214
CHS-1420
pegfilgrastim (Neulasta)
etanercept (Enbrel)
adalimumab (Humira)
PreClinical
Ph. I
US('15)/EU('18)
EU('15)
US('16)/EU('18)
Ph. III
Filing
Panel
Approval Marketed
BLA-enabling study complete, 1Q16 exp. filing
Data disclosed in Pso, RA data expected 1Q16
Est. 5/16 Primary Completion
Estimated
major patent
expiration
in paranthesis
if not yet expired.
Source: Company
reports
and J.P.
Morgan estimates.
„
CHS-1701 (pegfilgrastim) and CHS-1420 (adalimumab) are wholly owned
„
CHS-0214 (etanercept) is partnered with Baxter; Coherus receives double-digit royalties
„ Management team brings considerable experience in biologics development
and manufacturing, including:
CEO Dennis Lanfear (key process and product development leader at Amgen)
CMO Barbara Finck (named inventor on several Enbrel patents at Immunex)
CSO Alan Herman (started Amgen’s analytical research department)
CTO Peter Watler (significant process science experience)
66
Small-Cap Biosimilars-Focused Competitors
„ Coherus is a pure-play with 3 assets in BLA-enabling studies
Coherus Biosimilar Portfolio
CHS-1701
CHS-0214
CHS-1420
pegfilgrastim (Neulasta)
etanercept (Enbrel)
adalimumab (Humira)
PreClinical
Ph. I
US('15)/EU('18)
EU('15)
US('16)/EU('18)
Ph. III
Filing
Panel
Approval Marketed
BLA-enabling study complete, 1Q16 exp. filing
Data disclosed in Pso, RA data expected 1Q16
Est. 5/16 Primary Completion
Estimated
major patent
expiration
in paranthesis
if not yet expired.
Source: Company
reports
and J.P.
Morgan estimates.
„
CHS-1701 (pegfilgrastim) and CHS-1420 (adalimumab) are wholly owned
„
CHS-0214 (etanercept) is partnered with Baxter; Coherus receives double-digit royalties
„ Momenta has a deep pipeline of earlier-stage biosimilar candidates
Momenta Biosimilar Portfolio
M923
M834
M511
adalimumab (Humira)
abatacept (Orencia)
bevacizumab (Avastin)
PreClinical
Ph. I
US('16)/EU('18)
US ('19)/EU('17)
US('19)/EU('22)
Ph. III
Filing
Panel
Approval
Marketed
Estimated major patent expiration in paranthesis if not yet expired.
„
M923 (adalimumab) is partnered with Baxalta; Momenta receives high single digit royalties
„
Momenta also focused on gCopaxone and novel drug development
67
Disclosures
Companies Discussed in This Report (all prices in this report as of market close on 11 November 2015, unless otherwise indicated)
AbbVie (ABBV/$60.86/Overweight), Amgen Inc (AMGN/$156.86/Neutral), Coherus (CHRS/$28.44/Overweight), Merck & Co., Inc.
(MRK/$53.72/Overweight), Momenta (MNTA/$18.27/Not Covered), Novartis (NOVN.VX/SF87.50[12 November 2015]/Overweight), Pfizer Inc.
(PFE/$33.74/Not Rated)
68
Disclosures
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69
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General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively
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"Other Disclosures" last revised October 17, 2015.
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