Tools and Strategies for Launching a Successful
Generic in Today’s Ultra Competitive Environment
KATE KUHRT
BERLIN
SEPTEMBER 27, 2008
BEST OF TIMES…
• Population all over the world getting older
• Increase in the size of middle class in many
countries
• Governments and employers promoting use of
generic drugs in efforts to slow down increase in
health care spending
• Increased acceptance of generic drugs by patients
and physicians
• A number of blockbusters losing patent protection
…AND WORST OF TIMES
• Innovation drought
• ANDA backlog and authorized generics
• Pressure on prices and diminishing margins
– Government regulation
– Consolidation among wholesalers and retailers
– Increased competition
• Generic filings and approvals at all-time high
• A number of new entrants, many from India, often with access
to low-cost APIs
• Overcapacity in manufacturing
• Focus on market share rather than bottom line
• Authorized generics in the U.S.
ANDA APPROVALS BY INDIAN GENERICS
120
18
16
100
14
12
10
60
8
40
# Holders
# ANDAs
80
Tentative
Final
Holders
6
4
20
2
0
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
*Through August 15, 2007
Source: Newport Strategies’ Horizon Global system
2007 YTD FINAL ANDA APPROVALS BY
COUNTRY
Other; 20; 7%
Iceland; 6; 2%
Canada; 11; 4%
Switzerland; 13;
4%
USA; 116; 39%
Israel; 23; 8%
Germany; 25; 8%
*Through August 15, 2007
Source: Newport Strategies’ Horizon Global system
India; 85; 28%
ARE THE GENERICS INDUSTRT’S GOLDEN
YEARS OVER?
• Expectation that only the fittest will survive
• Coping strategies aimed at:
– Reducing cost
– Reducing risk
– Improving speed to market
– Differentiation
– Achieving critical mass
COPING STRATEGIES: CONSOLIDATION
• Consolidation expected to continue in pursuit of
– Top-line growth
– Opportunities in new markets
– Synergies
• Example: Barr’s acquisition of Pliva
– Biogenerics
– New dose forms
– Presence in emerging markets
– Access to API
• Result: Industry will likely be dominated by a handful of global
players plus many small, focused players
LEAGUE TABLES ARE CONSTANTLY SHIFTING
Sales $M
Focus
HQ
Teva
8400
Global
Israel
Sandoz
5960
Global
Austria
Hospira
3480
Global
US
Acquired Mayne
Barr
3000
Global
US
Acquired Pliva
Watson
2550
US
US
Acquired Andrx
Merck KGaA
2200
Global
Germany
ratiopharm
2000
EU
Germany
Actavis
1835
US
US
Lost Bid for Pliva
Stada
1400
EU
Germany
Sold US Business
Mylan
1260
Global
US
Ranbaxy
1170
Global
India
Perrigo
1024
US
US
Apotex
770
Global
Canada
Cipla
740
Global
India
Endo
650
US
US
Gedeon Richter
600
EU
Hungary
Krka
600
EU
Slovenia
550
Global
India
Dr Reddy’s
Purchase by Mylan expected to close H2 07
Majority stake in Matrix; Acquiring Merck KGaA
Acquired Betapharm
Source: TS Research
COPING STRATEGIES: GEOGRAPHIC
DIVERSIFICATION: EUROPE
• Recent Examples
–
–
–
–
–
–
–
–
Barr-Pliva
Mylan-Merck Generics
Hospira-Mayne
DRL-Betapharm
Matrix-Docpharma
Ranbaxy-Terapia
Aurobindo-Milpharm
Alkem close to buying two firms in UK and Germany
• Pros
– Counterweight to the U.S. market
– Some markets still focused on branded generic
– Rapid growth of pharma industry in E. Europe and Russia
• Cons
– Some markets as competitive as U.S.
– Generic uptake high at the expense of margins
COPING STRATEGIES: GEOGRAPHIC
DIVERSIFACTION: JAPAN
• Pros
– Japanese generics market seen as having a tremendous
growth potential
• Currently 5% by value, 17% by volume
• Cons
– Some still skeptical about actual market potential
• Difficult for foreign companies to do it alone
– Acquisitions, JVs, and marketing agreements provide
ready access to:
• Manufacturing
• Marketing
• Distribution relationships
COPING STRATEGIES: GEOGRAPHIC
DIVERSIFACTION: JAPAN
• Acquisitions
– Zydus Cadila acquired a 100% stake in Nihon Universal Yakuhin in April 2007
• Joint Ventures
– In November 2005, Ranbaxy increased equity stake in Nippon Chemiphar from
10% to 50%
• Marketing Agreements
– In August 2005, Lupin entered into a long-term marketing agreement with Kyowa
Pharmaceutical
– In March 2006, Hospira-Taiyo agreement to sell each other’s injection agents
• Additional companies to watch
– Continued speculation that Teva will eventually acquire a Japanese firm
– Rumors that one of the three large generics (Nichi-iko, Sawai, Towa) will come
under part ownership by a large multinational
– Torrent Pharma opened a fully-owned subsidiary in Yokohama in April 2006
– Dr. Reddy's considering setting up an office in Tokyo or Osaka
COPING STRATEGIES: BACKWARD
INTEGRATION INTO API
• Recent examples
– Mylan-Matrix
– Barr-Pliva
• Pros
– More control over cost and access to API
• Decreasing number of established API manufacturers still
independent due to M&A
– Different parts of the value chain may make money in different products
– Faster response times
• Cons
– No one plant can make all APIs required by a typical generic
– Making just enough for captive use often not economical
– Other dose companies wary of buying API from a competitor
COPING STRATEGIES: MOVING
MANUFACTURING AND R&D TO LOWERCOST COUNTRIES
• Applies to both API and dose
• Examples
–
–
–
–
–
–
–
Sandoz – multiple units in India
Teva – scientists in Faridabad, acquired Regent Drugs (JK)
Apotex – manufacturing and R&D facilities in Bangalore
Ratiopharm – R&D center in Goa
Stada – production sites in Russia, Vietnam (50:50 JV) and China
Perrigo – JV in China for ibuprofen
Actavis – API development facility and CRO in India
• Pros
– Abundance of scientists
– Cost savings
• Cons
– Language barriers
– Potential for intellectual property theft
– Quality control
COPING STRATEGIES: ALLIANCES WITH
COMPANIES IN LOWER-COST COUNTRIES
• Applies to both API and dose Manufacturing
• Examples
–
–
Alpharma-Shasun
• 2005 agreement for 10 finished dose products and undisclosed number of APIs
Actavis-Orchid
• 2007 agreement involving 9 cephs in Europe
• Development, manufacturing, and distribution agreement for 10 non-cephs in
the U.S.
• Pros
–
–
Cost savings
Access to a diverse talent pool
• Cons
–
–
–
–
Longer response time to changes in market dynamics
Potential delays due to regulatory issues
Potential loss of IP
Challenges with managing long-distance relationships
COPING STRATEGIES: SOURCING API
FROM LOWER-COST COUNTRIES
• Examples
– Teva, Apotex, Watson has been sourcing from India for years
– Indian companies increasingly sourcing out of China
• Pros
– Cost savings
– Many qualified API sources to choose from
• Cons
– Many API sources with limited track record
– FDA inspections more lax overseas?
– Language barrier
– QA costs
– Potential shortages due to stricter enforcement of local
environmental laws
Number of Corporate Groups
COPING STRATEGIES: SOURCING API
FROM LOWER-COST COUNTRIES (cont)
+33
120
104
Change from 2006
100
+7
74
80
India
China
60
40
+2
18
20
25
+4
+2
-1
17
8
0
Established
Less Established Potential Future
Source: Newport Strategies Horizon Global ™
COPING STRATEGIES: FOCUS ON NICHE
PRODUCTS
• Examples
– Ranbaxy, DRL eyeing Bradley Pharmaceuticals
(dermatology)
• Pros
– Less competition
– Margins in difficult formulations likely to remain higher
• Inhaled products, certain injectables, controlled release
• Cons
– Even $20M products attracting interest
– If multiple generics get involved, may not recoup
investment
– Costly barriers to entry for certain products
COPING STRATEGIES: INNOVATION
• New formulations
– Andrx – Altoprev (controlled-release lovastatin)
– Ranbaxy – Riomet (metformin oral solution)
• New molecules
– Best known examples: Pliva – Zithromax (azithromycin), Teva –
Copaxone (glatiramer)
– Ranbaxy expects to be the first Indian pharma co to launch a new NCE
(exp. 2011)
• Pros
– Potential for big returns during patent and exclusivity period
• Cons
– Original R&D very expensive and risky: It may take 1000s of failures
before a successful NCE
– Possible reimbursement issues and higher marketing costs for “generic
plus” products
COPING STRATEGIES: PARAGRAPH IV
PATENT CHALLENGES
• Pros
– Generic companies can make a considerable amount of
money during the 180-day exclusivity period
– First-to-market generic company often maintains a big
market share even after the end of the exclusivity
• Cons
– Expensive and risky
– Authorized generics and shared exclusivity reduce the
potential payoff from the initial 180 days
PARAGRAPH IV PATENT CHALLENGES
• As of September 7, 2007, challenges on products
encompassing
– 341 unique brand names
– 282 unique molecules or molecule combinations
– 48 unique dose forms
• In 2006, 27 molecules (or new combinations) first were
exposed to patent challenges
• So far in 2007, 17 molecules (or combinations) have seen
their first patent challenges
Source: FDA, Newport Strategies Horizon Global ™
TOP 10 COMPANIES BY NUMBER OF
PATENT CHALLENGES
Group
Teva Pharmaceutical Industries Ltd
Mylan Laboratories Inc
Apotex Inc
Novartis AG
Dr Reddy's Group
Barr Laboratories Inc
Ranbaxy Laboratories Ltd
Watson Pharmaceuticals Inc
Sun Pharmaceutical Industries Ltd
Par Pharmaceutical Companies Inc
Country
Number
Israel
70
USA
29
Canada
29
Switzerland
27
India
27
USA
25
India
23
USA
18
India
15
USA
15
Source: Newport Strategies Horizon Global ™
IMPORTANCE OF API IN PATENT
CHALLENGES
• Risk of supplier failure is high for companies involved with patent
challenges
– Even one day of delay can cost the company FTF status
• Risk is also high for API manufacturers
– Generics may settle with innovators or do deals with other
generics who use other API sources
– If dose company is backward integrated into API, may switch to
internal API source when convenient
– If development starts too early, product may be withdrawn from
market
• Backward integration into API may provide crucial advantages
– Coordinated API and dose development
– Coordinated regulatory submissions
– Speedy addressing of any issues
– Improved knowledge of polymorphs
INDIAN COMPANIES (*) ARE CLEARLY BASING
THEIR PARAGRPH IV STRATEGY ON
BACKWARD INTEGRATION
80
70
60
50
40
30
20
10
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# of Moledules Involved in PIV Challenge
90
DMF Held by PIV Filer
Newport
Strategies Horizon Global ™
No DMF HeldSource:
by PIV
Filer
COPING STRATEGIES: SOPHISTICATED
PRODUCT SELECTION
• Companies need to pick products for development very carefully
– It is not enough to look at sales data!
Targeting
L – 8 years
Evaluation
L – 7 years
Deal
Making
L – 6 years
Formulation
Dev’t
Registration
& Review
Launch
L – 18 months
Data Needs during Product Selection
• Sales
• Dose Form and Strength
• Patents, Patent Challenges
• Labeling
• Chemistry, Synthesis
• Data Exclusivity
• Market Exclusivity
• Approvals
• API Sources
• Company Data
• Manufacturing Capabilities
• Bioequivalence
• Stability
• Pharmacodynamics
• Toxicity
• Country Regulations
• Pack Pricing
• Reimbursement
Launch
COPING STRATEGIES: SOPHISTICATED
PARTNER SELECTION
• Companies need to pick partners and acquisition
targets carefully
Data Needs during Partner Selection
• Product portfolio
• Product pipeline
• Geographic reach
• Financials
• Regulatory experience
• Manufacturing capabilities
• Patent portfolio
• Patent challenge experience
• Approvals
• Backward/forward integration
• Current alliances
• Location
TOOLS TO TH RESCUE!
• Access global market, intellectual property and product info
• Predict key data in advance (e.g. competitiveness, generic
launch date)
• Flexible, fast searching across multiple, exacting criteria
• Identify early, viable source of API supply and backup
sources
• Spot in- and out-licensing capabilities
• Identify potential partner companies with multiple, exacting
criteria
• Keep a watchful eye on potential acquisition targets and track
competitors
THANK YOU!
Kate Kuhrt
Newport Strategies
Thomson Reuters
215 Commercial Street
Portland, Maine 04101
USA
+ 1 (207) 871-9700 x26
[email protected]